STMicroelectronics, the Franco-Italian chipmaker, is to make China's Dragon processor under a technology licensing deal struck with its developer, the Institute of Computing Technology.

Variously known as the Loongson 2E, Godson 2E or Dragon chip, the processor is comparable in performance to Intel's old Pentium IV chip but costs a lot less. It is aimed at low-end PCs and devices requiring low power consumption.

Its a rare occurrence for a well-established western tech firm like STMicro to licence Chinese technology, particularly in an industry like semiconductors.

The Chinese partner, not surprisingly, made much of the deal. Li Guo Jie, Director of the ICT, said:

The licencing by a foreign company of the Loonsong 2E IP proves that ICT has successfully placed China on the world's technology competitive stage. Through the cooperation with ST, the commercialisation of this technology is shortened with great market potential."

I'm not sure about the "great market potential"bit. In China, the Godson will probably find some success and it is already sampling with selected customers, according to the official release. But the global electronics industry is likely to look with some suspicion at a a Made-in-China microprocessor.

Under the licence agreement, STMicro is responsible for manufacturing and selling the processor internationally.

More on the Godson in this earlier EngagingChina story.