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Intel (Nasdaq: INTC) China, a subsidiary of Intel Corporation, and Chinese language Web search engine Baidu on Thursday announced an agreement to co-develop Internet search and related applications in China.
"Baidu is committed to providing the best way for people to find information. In addition to PCs, our users will soon be able to access Baidu search services on their handsets and home devices," said Jerry Liu, CTO of Baidu.
That will be made possible by the two companies' work to advance Internet search applications for laptops, handsets and PCs in the digital home environment, coupling Intel's server platform with Baidu's backend search systems. Intel is also Baidu's backend server platform provider.
Late Entrant
"Baidu is the most frequently used search engine in China with an enormous user base. Its high traffic volume requires the highest standard of performance and stability in its server platform. Intel is pleased to work together with Baidu to provide optimized search performance and exciting search experience to end users," said Thomas Kilroy, vice president with Intel and general manager of the firm's Digital Enterprise Group.
Intel's announcement comes nearly a year after Google's (Nasdaq: GOOG) decision to open a product research and development center in China. Google hired respected computer scientist and industry pioneer Dr. Kai-Fu Lee from Microsoft (Nasdaq: MSFT) to lead the operation and serve as president of the company's growing Chinese operations last July. Google hoped Lee could help it catch Baidu in the world's second-largest online market.
The Google China R&D center opened in the third quarter of 2005. Now, the company is looking at the possibility of mergers and acquisitions to grow its talent base and technology portfolio. Google actually owns 2 percent of Baidu.com, but has said it has no plans to acquire the company. The company has 70 engineers in China, with plans to add another 30 by July.
The Quest for Chinese Search
China is a battleground, of sorts, for search. Baidu had nearly twice as much market share as Google in the Asian nation last year, according to iResearch. While Baidu boasted a 56.6 percent market share, Google posted only 32.8 percent there. Yahoo (Nasdaq: YHOO) ranks third with less than 5 percent share, while Microsoft barely makes it into the listing with less than 1.5 percent market share.
Much is at stake. China's search industry revenue will grow to 3.62 billion yuan, that's US$452 million, this year, iResearch reports. The firm predicts those figures will swell to 5.62 billion yuan ($701 million) in 2007.
That's a small market compared to the $6.9 billion worth of search-linked ad sales 
in the U.S. Merrill Lynch (NYSE: MER) estimates for 2006. The firm projects the U.S. market could grow to $8.7 billion in 2007.
"China is obviously a huge market opportunity growing much faster than the U.S. and Europe. Ultimately, there are more Chinese Internet and mobile users," Greg Sterling, principal with Sterling Market Intelligence, told TechNewsWorld. "The Chinese market is dynamic and may change. Today's search leader may be tomorrow's second place. It may be that Google in a year or two becomes the leader."
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