HTC is set to buy graphics technology company S3 Graphics for US$300 million, in a deal which was widely seen as the company bolstering its patent portfolio in order to defend against actions from competitors. S3 is described as “a leading provider of innovative graphics visualisation technologies used in PCs, game consoles and, more recently, mobile devices.” According to Dow Jones Newswires, HTC said it hopes to recoup its investment in “two to three years,” and that Winston Yung, CFO of the company, had said that it intends using its patents “defensively and offensively” in the future. S3 is currently involved in a lawsuit against Apple, and last week the US International Trade Commission issued a ruling that was partially favourable to S3. Separately, HTC and Apple are involved in several actions, with the suggestion that the S3 buy may now put the Taiwanese company in a better position to negotiate a deal.

S3 Graphics was acquired by VIA Technologies in 2001, with WTI Investment International becoming an investor in 2005, and HTC will be making payments to both companies as part of the transaction. Reuters reports that Citigroup analyst Kevin Chang had raised the issue of a “conflict of interest” with the transaction, due to the management of the companies involved. Cher Wang (pictured), who is chairman of HTC, holds the same role at VIA, and is also a “significant shareholder” in WTI. Dow Jones reports that Yung argues: “Just because two companies are related doesn’t mean one can’t be acquired by the other, we followed the government regulations in this regard.” There was also a mixed response to the price paid: while some observers have questioned the valuation, including the potential worth of S3’s intellectual property, others have said that the improvement to HTC’s position in the Apple case will be beneficial. The deal is subject to regulatory approval and other customary conditions, and is expected to close before the end of 2011.