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Intel causes uncertainy over AMD's Foundry deal

Chip giant demands meeting over production plans

Chip giant Intel has demanded a meeting with AMD to discuss how its formation of The Foundry Co may affect long-standing cross-licensing agreements between the two companies, AMD said in a regulatory filing on Thursday.

AMD said the questions raised by Intel won't affect the formation of the new company, and one analyst said Intel may simply be maneuvering for a better negotiating position.

While they compete fiercely in the chip market, Intel and AMD also have licensing agreements related to x86 processors that allow them to use certain technologies without fear of being sued by each other.

The agreements apply to AMD and its subsidiaries, and Intel wants to meet with AMD to discuss whether The Foundry Co will qualify as a subsidiary under the cross-licenses, according to the filing.

AMD is splitting itself into two companies by spinning off its debt-laden manufacturing business. AMD will continue to design and sell its chips, while The Foundry Co will manufacture them. It will be majority-owned by an Abu Dhabi investment firm, and AMD will hold 34 percent.

AMD called Intel's letter "another attempt by our competitor to cause uncertainty" as it gets close to closing the Foundry deal, which is expected next month if shareholders approve it at a February 16 meeting.

The letter is "in no way a condition" to AMD closing the deal, which will be "consistent with the terms of all our IP licensing agreements," AMD CFO Bob Rivet said during AMD's earnings call on Thursday.

Intel said it isn't trying to derail the deal. "Our concern has nothing to do with whether or not the company gets formed or not," said Intel spokesman Chuck Mulloy. "It has to do with what are our rights, and what are our rights after the company is formed. ... The letter was sent to address our intellectual property concerns."

Nathan Brookwood, principal analyst at Insight64, said the letter probably isn't a big deal.

"I think Intel has been pretty clear in saying they're not trying to scotch this deal, and AMD is saying we don't care because Intel doesn't have a leg to stand on anyway," he said.

The cross-license agreements between the companies come up for renewal in a couple of years, Brookwood said, and Intel may simply hope to leverage the concerns it has raised to negotiate better terms when the time comes around.


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