AMD Says Manufacturing Deal Does Not Violate Intel Processor Patents

The deal that will spin off Advanced Micro Devices’ manufacturing facilities into a new joint venture company will not violate the company’s licensing agreement with Intel, an AMD spokesman said.

On Oct. 7, AMD announced that it would take a bold step and split the company in two in order to better compete in the x86 chip market. While AMD will remain responsible for CPU and graphics development, design and marketing, a new company – temporarily called The Foundry Company – will be formed around AMD’s two Dresden, Germany, fabrication plants or fabs. Advanced Technology Investment Company (ATIC), a technology investment backed by the government of Abu Dhabi, will own half of the new company.

A few hours after the announcement, Intel made a statement that it was investigating whether the new company violates a chip licensing agreement it has with AMD. Specifically, the agreement allows AMD to use Intel’s x86 chip instruction set and in return, AMD pays Intel a royalty.

The next day, Oct. 8, AMD fired back and charged that the new company does not violate any previous agreement with Intel.

“We are completely confident the structure of this transaction takes into account our cross-license agreements,” Phil Hughes, an AMD spokesman, wrote in an e-mail. “Rest assured – we plan to continue respecting Intel’s intellectual property rights, just as we expect them to respect ours.”

Intel spokesman Chuck Mulloy told eWEEK that the company will defend its chip patents against any violations and Intel continues to review its options. Mulloy added that Intel wants AMD to publish a full version of the licensing agreement – a redacted copy is available – as the deal to create the new foundry company unfolds. (The two companies have been signing licensing agreements with each other since the mid-1970s.)

In AMD’s defense, Hughes said the agreement between the two chip makers is a business transaction and any publication of that agreement or other disputes related to licensing are a matter for both companies’ attorneys at this point.

“It’s a business document and we are not going to negotiate this in the press or the media,” said Hughes. “This is something that the lawyers have to work out.”

The dispute might also create some leverage for Intel going forward, writes Hans Mosesmann, a financial analyst with Raymond James. Intel could use this issue to make AMD drop its long-standing lawsuit against the company.

“AMD, in our view, is likely violating the Intel x86 cross-license, but we suspect Intel may look the other way as it benefits Intel to have an AMD that will over time have increasing variable costs (good for ASPs),” Mosesmann wrote in an Oct. 7 research note. “Intel may choose to entice AMD to drop the anti-trust suits against Intel in return for this altruistic gesture (true realpolitik policy at play here).”