Intel explores investment opportunities in Thailand

Intel Capital plans to invest US$300 million (Bt9 billion) to $500 million this year around the globe.

Intel Capital - which sees  Thailand and Southeast Asia as emerging markets - has so far invested in 52 countries. In Asia, the company has invested in China, India, Japan, Taiwan, Korea, Singapore, and Vietnam.

 Arvind Sodhani, president of Intel Capital, said Intel Capital continues to look to invest in companies in this region. The Asean Economic Community (AEC) will help companies as they will be able to do business in 10 countries and target the region. 

Thailand and Southeast Asia are growing rapidly and they have the potential for substantial expansion. Some changes in infrastructure, such as access to broadband, will dramatically change the landscape. He said the access to broadband in Thailand is very low and that needs to be improved. It will help entrepreneurs and SMEs grow their businesses. 

“We hope that broadband penetration will be expanded and the government and the authorities will do everything to promote it,” Sodhani said. “We know that broadband is a key driving factor in economic growth around the world. The broadband penetration rate in Thailand is still very low. It needs to be expanded dramatically. Thailand is driven by SMEs and we would like to make Thailand the 52nd country where Intel Capital has invested in,” said Sodhani.

He said the company has two main criteria before it invests in companies. The first is strategic interest. It wants to make sure the investment is in a technology company. Is the technology relevant to Intel? The strategy is to help enhance the overall goal of increasing penetration and usage. The second is financial viability. The company wants to make sure that everything it invests in, is financially successful. 

“The company [we invest in] has to have the right management skill set. It is critically important to have a management team that has the ability and the vision to grow the company. We want to invest in companies that will be successful in the long-term,” said Sodhani.

The areas Intel Capital is interested in are education, software, data centre, consumer Internet, e-commerce and cloud computing.  Sodhani added that this year, Intel Capital will invest $300 million to $500 million. It has already invested about $200 million in the first half of this year. 

“It depends on how many right companies we find and how many companies we close a deal with. Thus, it is hard to predict exactly how many companies Intel Capital will invest in,” said the president of Intel Capital.

The company has invested 50:50 in and outside the US. Over the years, it has been increasing the investment percentage outside the US. There are many factors driving the increase, including rapid growth of GDP in developing countries, and growing technology adoption. Technology adoption in Southeast Asia is also rising very rapidly.

“The investment in companies outside the US will be 50 per cent or more for this year,” said Sodhani.

“We see a lot of companies, but we invest in only a select few. We try to find the right company to invest in, which means companies that have the right management and the desire to grow and to become a regional company, not just local company. They have ability to hire people. And that’s where we could come in and provide the financial and technological know-how, and global relationship,” said Sodhani.

Most of the companies Intel Capital invests in are start-ups who have $2 million to $10 million revenue. During the last year until now, Intel invested in 89 new companies, 51 per cent outside the US. It invested $526 million last year. It has six IPOs in the portfolio and 28 acquisitions. 

Intel Capital is the investment arm of Intel Corporation. It was started in the mid-80s, with investments in start-up companies in the Silicon Valley. Many people left Intel and set up start-ups, developing technology relevant to Intel’s technologies such as chipset, software application.

“We have been investing every year. We started to invest outside the US in the late 90s, in countries such as China, India, Latin America, Europe. Our goal is to promote technology, technology adoption, and technology entrepreneurship,” said Sodhani.

When the company promotes technology, it benefits because people buy more technology devices. “It is a direct correlation,” he said. 

“For example, in China and Vietnam, we have made a lot of effort to help increase PC and broadband penetrations. In most emerging countries by helping bring about investment in application, technology and innovation it helps to grow technology adoption in those countries,” said Sodhani.

Meanwhile, Deepak Natarajan, investment director for Intel Capital in Southeast Asia, Australia, and New Zealand, said that on average about 5 to 10 per cent of the companies who get interviewed by Intel Capital are invested in. In Asia-Pacific, excluding China, it is 1 to 2 per cent on average. 

“We see a lot of companies and business plans but we decide on those that make sense to us. We are looking aggressively to find Thai companies. We would love to be able to. But currently, we have not yet found the right companies. But we are very hopeful of finding a company in Thailand in which we can invest,” said Natarajan.

Natarajan said the company wants to invest in companies who have their own products and have figured out how to sell the product and what is valuable for customers. Thus, they have to have the right management team, the ability to expand business to the region and the ability to be successful.

He said that in Southeast Asia, there are a lot of businesses going online and a lot of online businesses are e-commerce. In order to make e-commerce a success, the broadband infrastructure will have to be good.

Improvement in broadband infrastructure will make possible more innovative e-commerce. 

Thailand has a lot of SMEs, which are the backbone of the economy. They do not have IT staff and do not have the ability to implement big applications. They can use applications delivered over the cloud. 

So, once the broadband penetration gets better, there will be more innovation as local companies will have the ability to build innovative applications that Thai businesses can use to automate their businesses. Mobile broadband is the trend. Once the speed of mobile broadband is improved, there will be a lot of applications coming out, he said. 

“We are a minority investor in each of these companies. We own 20 per cent or less in the companies we invest in,” said Natarajan.

Natarajan said that Thailand is an important part of the global supply chain for two main industries – electronics and automobile. Intel Capital is looking to invest in Thai companies who provide electronic functions for cars. There are opportunities for Thailand to build an industry around that. Thailand is a major manufacturing hub in this field. It is easy to build an ecosystem around that. And Intel Capital is tracking a few companies here in Thailand.

This year, Intel Capital invested $17 million in two Southeast Asian companies – Singapore-based Reebonz.com, one of the largest private sales e-commerce groups in Asia for luxury goods ‘Reebonz.com’; and an Internet infrastructure and services company Vietnam Communications Corporation. Intel sees Southeast Asia as one of the world’s fastest-growing markets for high technology, driven by robust economic growth and a rising middle class. There is strong demand for e-commerce and cloud-based services across the region.