Qualcomm and TDK announced the $3 billion partnership which will manufacture smartphone components alongside other wireless communication devices.

After the announcement shares in Japanese company TDK were up 5.5% on the Tokyo Stock Exchange, writes Aditya Kondalamahanty for the International Business Times.

Qualcomm Inc., TDK Corp. Announce $3 Billion Joint Venture

Qualcomm-TDK joint venture eyes market growth

Chipmaker Qualcomm is set to invest $1.2 billion in the venture, which will see TDK spin-off its design and manufacturing assets along with related patents. According to a statement released on Wednesday, the joint venture will be based in Singapore.

San Diego, California-based Qualcomm will own 51% of the joint venture, which will be called RF360 Holdings. The statement reveals that Qualcomm will have the option to require TDK’s stake at a later date.

The joint venture is expected to add to Qualcomm’s non-GAAP earnings per share within one year. TDK said that the transferred business employed 4,200 employees with a run rate of around $1 billion in annual sales. It is thought that the deal will close by early 2017.

Qualcomm aims to simplify component packages for smartphone makers

As part of the venture the two companies are seeking to combine wireless technology developed by Qualcomm with TDK’s specialized “filters,” which turn radio waves into data inside devices. The components are currently found in drones, wireless chargers, smartphones and other devices connected to each other via the internet of things.

According to Cristiano Amon, the head of Qualcomm’s chip division, the tie-up will allow the company to offer smartphone makers comprehensive modules that contain all of the necessary components.

“You have to deliver the economies of scale to the industry,” Amon said. “Providing baseband all the way to the antenna is going to provide significant growth.”

Analyst Hideki Yasuda of the Ace Research Institute in Tokyo believes that the deal is a good one for both companies. “Qualcomm is aiming to reduce costs by teaming up with TDK,” he said. “Qualcomm and TDK can complement each other in terms of technology.”

For its part TDK is set to benefit by pushing into businesses such as drones, robotics and automotive applications. If the joint venture works as planned we could see a new generation of smart, wireless devices brought to market.