Intel to face Chinese competition as AMD licenses x86 server technology

AMD strikes joint venture with consortium of Chinese companies

Ailing chip designer AMD is setting up a joint venture in China intended to provide heavyweight competition to Intel in the x86 server microprocessor market.

The deal will involve the licensing of high-end technology to the company, called Tiajin Haiguang Advanced Technology Investment Company (THATIC), which is backed by a consortium of public and private Chinese companies.

The technology will come from AMD, and THATIC will provide the funding to establish facilities, especially those necessary for manufacturing. It follows a deal with Nantong Fujitsu Microelectronics in October 2015, and comes as the Chinese government bids to wean itself off US technology following some of the revelations from the Edward Snowden leaks.

Intellectual property transferred under the agreement will likely include core x86 design, including forthcoming designs, as well as system-on-a-chip know-how, memory controllers, and input/output expertise. However, neither company has yet provided details.

AMD will benefit from upfront cash payments and royalties from sales as soon as parts begin rolling off production lines. The company has been moving towards a more ARM-style technology licensing business model since it floated off its fabrication facilities to form GlobalFoundries in 2009, but it continues to source most of its production from the company.

GlobalFoundries, meanwhile, has struggled to keep up with Intel's 14-nanometre process production technology, which has had an effect on AMD.

The company will also launch its alternative to Intel's Skylake microprocessors with the release of its Zen FX CPUs in the fourth quarter of 2016. The Zen FX should mark AMD's re-entry into the high-performance compute end of the microprocessor market with a completely new microarchitecture which, according to AMD, will enjoy a 40 per cent instruction per clock-cycle improvement over its predecessor.

At the same time, the company is planning to release server CPUs based on Zen with up to 32 cores. This should enable AMD to compete more squarely with Intel in the server market for the first time in 10 years.

In graphics processing units, meanwhile, which form the other main element of AMD's business, it enjoys a technological edge over rival NVIDIA, but trails in terms of sales.

However, a slowdown in the rate of development at Intel may open a window of opportunity for AMD, while deals with Microsoft and Sony to provide the CPU and GPU technology at the heart of their respective games consoles have helped keep sales ticking over.

The announcement of the China deal coincided with the unveiling of the company's first-quarter results, which were both good and bad: bad because revenues fell, once again, by 19 per cent from $1.03bn (£717.5m) to $832m; but good because the drop in revenue and the net losses filed were not quite as bad as feared by investors.