Today, Qualcomm announced a sweeping, strategic collaboration agreement with Tencent Games covering 5G, smartphones, augmented and virtual reality, and personal computers. While I don’t pay too much attention to these kinds of non-binding, collaboration agreements, this one is interesting for many reasons above the current icy relationship between the US and China. While there wasn’t a dollar figure stated by the companies, I believe this deal is “real,” not one of those strategic agreements that end up with little. Let’s dive in.

Qualcomm announced that the two companies will collaborate in “digital entertainment,” working on projects for China and outside China spanning:

• “mobile gaming devices based on the Qualcomm Snapdragon mobile platform
• game content and performance optimizations
• Qualcomm Snapdragon Elite Gaming enhancements
• cloud gaming
• AR/VR
• 5G gaming use case developments
• Always Connected PC”

This is one of the more detailed strategic engagements I have seen in years. I compare this to the agreement between AT&T and Microsoft I wrote about last week, and there were almost no details on that strategic agreement, albeit, a leaked dollar figure.

A few things stand out to me about the laundry list. First off, Tencent is the 800lb gorilla when it comes to gaming in China, and the company first chose to partner with American company Qualcomm. This, in itself, is a big deal for Qualcomm as its chipsets will be optimized for Tencent’s gaming library.

The ACPC call-out is interesting as well. You may not know this, but Qualcomm-based Always Connected PCs Qualcomm-based Huawei Matebook E a recent best-seller on JD.com(ACPCs) were some of the best-selling SKUs on JD.com, and I can see Tencent optimizing its Windows game library to run well on ACPCs.

Then there were what I consider the more strategic announcements regarding 5G, cloud gaming, and AR/VR (XR).  While AR and VR haven’t set the world completely on fire for short-term sales, I do think the industry knows the challenges and are on a trajectory to make it more mainstream. I love what Microsoft is doing with HoloLens and remote rendering (here), and this is exactly what I am envisioning with Tencent and Qualcomm. I believe cloud gaming and content using split/remote rendering to deliver that content over 5G to headsets could accelerate the industry by five years, maybe ten.  The super-realistic effects are rendered in the cloud; the lower density effects are rendered on the headset and delivered with very low latency to the user.

Given this time of friction between the US and China, you have to be surprised that Tencent chose Qualcomm and did a ribbon-cutting ceremony. When you dig in and think about the motivations, it starts to make a lot of sense. This is basically China “Belt and Road” meets Huawei. With 5G, Qualcomm helps China meet its Belt and Road initiative better than Huawei. It also could be reinforcing from a US standpoint that the issue is Huawei, not China. I am also struck that as Google is distanced from  Huawei with the trade war, Tencent gets closer to Qualcomm. Fascinating.