Gree Electric Appliances, a leading air-conditioner maker in China, has invested $160 million to establish a chip research and development company, reports The Paper.

The president of Gree Electric Appliances, Dong Mingzhu, will chair the new company, which was formed on August 14. According to an earlier interview with a reporter from The Paper, the plan to establish the new subsidiary has been brewing for the last three years. GREE stopped distributing dividends to shareholders 2017 in order to raise start-up funds for the new company.

The company spends almost $640 million a year purchasing imported chips, which air-conditioner makers in China are unable to produce domestically. Gree's move into chip research and development will reduce the industry's reliance on imported chips. Gree has reportedly already designed one of its own chips and is currently engaged in manufacturing research.

Professor Ni Guangnan from the Chinese Academy of Engineering said that Gree should have no problem designing chips, but that it is not realistic for the company to manufacture them. Professor Ni pointed out that the company has no competitive advantage in this area, and that it takes decades and billions of dollars of investment to see a return in chip manufacturing.