j20blackdragon
SENIOR MEMBER
- Joined
- Sep 11, 2011
- Messages
- 2,224
- Reaction score
- 3
- Country
- Location
AMD to License Chip Technology to China Chip Venture
By Don Clark
April 21, 2016 4:15 p.m. ET
Advanced Micro Devices Inc. has reached a deal to allow a new joint venture in China to produce chips there using proprietary technology long considered the crown jewel of AMD and its rival Intel Corp.
The move, which could spur opposition from Intel, underscores AMD’s pressing search for new revenue following its long-running struggle in the microprocessor market. It also reflects China’s high-profile quest to become less dependent on foreign technology, using investments and acquisitions that at times have prompted U.S. government scrutiny.
AMD’s announcement, made at the same time it released its first-quarter earnings and an upbeat projection for the second quarter, helped its shares surge 23% in after-hours trading on the Nasdaq Stock Market.
Under the deal, AMD said it had licensed x86 chip technology to a new venture it is forming with Tianjin Haiguang Advanced Technology Investment Co., which will use the technology to develop chips for server systems to be sold only in China. In exchange, AMD said it expects to receive $293 million in licensing fees plus royalties on sales of any chips developed by the venture.
Chinese Web services have lately been among the world’s largest server buyers, prompting competing joint ventures by rivals of Intel to help break the Silicon Valley giant’s near-total hold on server chips. In some cases, including the AMD deal, the ventures allow Chinese companies to develop chips with homegrown security circuitry to ease fears that foreign spies will penetrate computers in China.
“This is very significant,” said Jim McGregor, an analyst at Tirias Research, of the AMD venture. “China is the battleground for the next generation of servers.”
AMD, under Chief Executive Lisa Su, previously had signaled it planned to find new ways to make money from its intellectual property. “Our new licensing agreement is a great example of leveraging our strong IP portfolio to accelerate the adoption of our technologies more broadly,” she said in prepared remarks.
AMD, with its headquarters in Sunnyvale, Calif., announced the China deal Thursday with its first-quarter financial results, which were slightly better than expected. Still, its computing and graphics segment, which includes the x86 chip technology and has been operating at a loss, continued to struggle. The segment reported $460 million in revenue, down 2% from the previous quarter and 14% from the year-ago period on lower sales and average selling prices.
AMD said it has received $52 million so far from the China deal, recognizing $7 million on its income statement for the first quarter.
Intel, the biggest maker of chips that serve as calculating engines in computers, developed the x86 technology that in the 1980s became a technical foundation for personal computers that run operating systems from Microsoft Corp. AMD originally sold chips that Intel designed but later designed its own chips based on the x86.
Intel supplied 87.7% of all x86 chips shipped in 2015, Mercury Research estimated, while AMD accounted for 12.1% and Taiwan’s Via Technologies Inc. a fraction of 1 percentage point.
Servers using x86 chips drive most corporate data centers, particularly those run by big Web services. Among corporate data centers, Intel accounted for 99.4% of the market in 2015, according to Mercury Research. AMD, which once had nearly a third of server chip sales, had a 0.6% share of the market.
Patrick Moorhead, founder and analyst at Moor Insights & Strategy, said the China deal gives AMD a financial injection while allowing the company to continue marketing its own server chips outside China. “This is really, really good for these guys,” he said.
It is also surprising, given the terms of a 2009 cross-licensing agreement between AMD and Intel. That agreement says neither party can transfer rights to licensed technology to other companies. “I’m sure Intel is going to have some issues with this,” Mr. McGregor said.
An Intel spokeswoman declined to comment.
A spokesman for AMD said the deal doesn’t violate the cross-licensing pact, citing the way the joint venture’s ownership is structured.
Exports of advanced semiconductor technology are subject to U.S. government export controls, which seek to limit the transfer of technology that could affect national security. The AMD spokesman said the company believes all information it has transferred to China conforms with U.S. export regulations.
AMD described its partner in the venture, often called THATIC, as an investment consortium under the guidance and led by the Chinese Academy of Sciences. AMD’s announcement follows moves by companies that include Qualcomm Inc. and International Business Machines Corp. to work with partners in China to create non-x86 chips there.
Intel, for its part, has been setting up its own ventures in China. In January, the company said it had a deal with Tsinghua University and Montage Technology Global Holdings Ltd. that allows the university to develop a programmable chip to carry out unspecified “local requirements” alongside one of Intel’s Xeon microprocessors.
Intel also recently announced plans to begin manufacturing memory chips in China, but it has never licensed its x86 technology to partners in the country.
For the three months ended March 26, AMD reported a net loss of $109 million, or 14 cents a share, compared with a loss of $180 million, or 23 cents a share, a year earlier. Excluding stock-based compensation and other items, AMD reported a loss of 12 cents, compared with a loss of 9 cents a share a year earlier.
Revenue fell 19% to $832 million, in line with the company’s projected range.
Analysts surveyed by Thomson Reuters had projected an adjusted loss of 13 cents a share on $818.2 million in revenue.
Gross profit margin improved to 32.3% from 31.7%.
—Maria Armental contributed to this article.
http://www.wsj.com/articles/amd-to-license-chip-technology-to-china-chip-venture-1461269701
By Don Clark
April 21, 2016 4:15 p.m. ET
Advanced Micro Devices Inc. has reached a deal to allow a new joint venture in China to produce chips there using proprietary technology long considered the crown jewel of AMD and its rival Intel Corp.
The move, which could spur opposition from Intel, underscores AMD’s pressing search for new revenue following its long-running struggle in the microprocessor market. It also reflects China’s high-profile quest to become less dependent on foreign technology, using investments and acquisitions that at times have prompted U.S. government scrutiny.
AMD’s announcement, made at the same time it released its first-quarter earnings and an upbeat projection for the second quarter, helped its shares surge 23% in after-hours trading on the Nasdaq Stock Market.
Under the deal, AMD said it had licensed x86 chip technology to a new venture it is forming with Tianjin Haiguang Advanced Technology Investment Co., which will use the technology to develop chips for server systems to be sold only in China. In exchange, AMD said it expects to receive $293 million in licensing fees plus royalties on sales of any chips developed by the venture.
Chinese Web services have lately been among the world’s largest server buyers, prompting competing joint ventures by rivals of Intel to help break the Silicon Valley giant’s near-total hold on server chips. In some cases, including the AMD deal, the ventures allow Chinese companies to develop chips with homegrown security circuitry to ease fears that foreign spies will penetrate computers in China.
“This is very significant,” said Jim McGregor, an analyst at Tirias Research, of the AMD venture. “China is the battleground for the next generation of servers.”
AMD, under Chief Executive Lisa Su, previously had signaled it planned to find new ways to make money from its intellectual property. “Our new licensing agreement is a great example of leveraging our strong IP portfolio to accelerate the adoption of our technologies more broadly,” she said in prepared remarks.
AMD, with its headquarters in Sunnyvale, Calif., announced the China deal Thursday with its first-quarter financial results, which were slightly better than expected. Still, its computing and graphics segment, which includes the x86 chip technology and has been operating at a loss, continued to struggle. The segment reported $460 million in revenue, down 2% from the previous quarter and 14% from the year-ago period on lower sales and average selling prices.
AMD said it has received $52 million so far from the China deal, recognizing $7 million on its income statement for the first quarter.
Intel, the biggest maker of chips that serve as calculating engines in computers, developed the x86 technology that in the 1980s became a technical foundation for personal computers that run operating systems from Microsoft Corp. AMD originally sold chips that Intel designed but later designed its own chips based on the x86.
Intel supplied 87.7% of all x86 chips shipped in 2015, Mercury Research estimated, while AMD accounted for 12.1% and Taiwan’s Via Technologies Inc. a fraction of 1 percentage point.
Servers using x86 chips drive most corporate data centers, particularly those run by big Web services. Among corporate data centers, Intel accounted for 99.4% of the market in 2015, according to Mercury Research. AMD, which once had nearly a third of server chip sales, had a 0.6% share of the market.
Patrick Moorhead, founder and analyst at Moor Insights & Strategy, said the China deal gives AMD a financial injection while allowing the company to continue marketing its own server chips outside China. “This is really, really good for these guys,” he said.
It is also surprising, given the terms of a 2009 cross-licensing agreement between AMD and Intel. That agreement says neither party can transfer rights to licensed technology to other companies. “I’m sure Intel is going to have some issues with this,” Mr. McGregor said.
An Intel spokeswoman declined to comment.
A spokesman for AMD said the deal doesn’t violate the cross-licensing pact, citing the way the joint venture’s ownership is structured.
Exports of advanced semiconductor technology are subject to U.S. government export controls, which seek to limit the transfer of technology that could affect national security. The AMD spokesman said the company believes all information it has transferred to China conforms with U.S. export regulations.
AMD described its partner in the venture, often called THATIC, as an investment consortium under the guidance and led by the Chinese Academy of Sciences. AMD’s announcement follows moves by companies that include Qualcomm Inc. and International Business Machines Corp. to work with partners in China to create non-x86 chips there.
Intel, for its part, has been setting up its own ventures in China. In January, the company said it had a deal with Tsinghua University and Montage Technology Global Holdings Ltd. that allows the university to develop a programmable chip to carry out unspecified “local requirements” alongside one of Intel’s Xeon microprocessors.
Intel also recently announced plans to begin manufacturing memory chips in China, but it has never licensed its x86 technology to partners in the country.
For the three months ended March 26, AMD reported a net loss of $109 million, or 14 cents a share, compared with a loss of $180 million, or 23 cents a share, a year earlier. Excluding stock-based compensation and other items, AMD reported a loss of 12 cents, compared with a loss of 9 cents a share a year earlier.
Revenue fell 19% to $832 million, in line with the company’s projected range.
Analysts surveyed by Thomson Reuters had projected an adjusted loss of 13 cents a share on $818.2 million in revenue.
Gross profit margin improved to 32.3% from 31.7%.
—Maria Armental contributed to this article.
http://www.wsj.com/articles/amd-to-license-chip-technology-to-china-chip-venture-1461269701
