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AMD to license off x86 technology to Chinese Goup.

by on25 April 2016 1381 times

It looks like AMD is trying to develop a new revenue stream and also create some additional competition for Intel. Ever since AMD bet the farm on purchasing ATi they have been taking a back seat to Intel. The reasons are many, but one of the big ones was not having enough money for R&D for multiple concurrent projects. After the ATi buy failed to yield results quickly they had to start cutting corners. R&D and marketing were some of the first places hit. Now, many years (and a number of CEOs) later AMD is still fighting to be relevant. They have some solid ideas, but just to not have the capital to put them all on the table at once.

AMD knows that things are bad, but they have not given up. In order to help even things out they have spun off their GPU business unit into the Radeon Technologies Group. It was a smart move as the GPU side of the house can still compete with their rival NVIDIA in many areas. If this group is tethered AMD’s CPU business they might scare off potential investors. After that announcement and after listening to the earnings calls I thought that the next steps for AMD would be to sell off some additional pieces of the business or simply position themselves to be bought.

However, AMD went another direction while they wait and see if Zen will have any real impact. They have signed a licensing agreement with Tianjin Haiguang Advanced Technology Investment Co. Ltd. (THATIC) for their x86 server technology (CPUs cores, interconnects etc.). This is a joint venture between AMD and a group of Chinese companies. It will be run by the Chinese Academy of Sciences. AMD is putting up all of the IP while the others drop in the cash. This makes it a very clean investment for AMD as they can grow their install base while not spending any additional money. On top of that they gain the licensing revenue. Right now the expected revenue is looking to be in excess of $290 million. It also gives AMD direct access to the Chinese market.

The only sticky point would be the cross licensing agreement with Intel. AMD feels confident that they are not violating it, but Intel might disagree with them and has the money to do something about it. This is one that certainly bears watching and could end up kicking off a new legal battle between the two companies. This is a battle that AMD is not financially equipped to fight. However we do expect to see AMD license or perhaps even sell other portions of their patent portfolio adopting the same business model that IBM did at one time. We wonder if this will lead to them selling off those business units in the same way that IBM did…

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