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Intel at AMD's Throat Over Foundry Deal

Intel at AMD's Throat Over Foundry Deal

Intel argues the foundry company AMD spun off is not a subsidiary and thus should not be able to make AMD products.

As if these two companies needed another reason to fight…

Intel on Monday gave AMD 60 days to address concerns surrounding AMD's joint venture chip foundry or it could, in a worst case scenario, yank its 2001 cross-licensing patent, effectively denying AMD the ability to sell x86-based processors.

That seems unlikely, if only for the fact it would be a huge PR disaster for Intel (NASDAQ: INTC) to stomp on a weak competitor. The agreement runs out at the end of this year and the two firms have to renegotiate it anyway, so this may end up forcing the two to deal with the issue a few months sooner than planned.

The issue stems from AMD's (NYSE: AMD) decision to spin off its fabrication facilities last year. AMD, drained from the enormous expense of trying to keep its plants up to modern technologies, decided to cut them loose as semi-independent fabs that would solicit business from all chip makers, similar to TSMC, UMC and many other foundry companies in Asia.

The foundry, first incarnated as The Foundry Company before being renamed Globalfoundries, is a joint venture with the Abu Dhabi government, which holds a 55.6 percent stake through its Advanced Technology Investment Co.

Intel's argument is that its cross-licensing agreement is with AMD, and by AMD giving its chip designs to Globalfoundries, it is essentially transferring the patented technology to a company that doesn't have a license. AMD views Globalfoundries as a subsidiary of AMD, Intel disagrees.

"The structuring of it, basically what we're saying, as structured it's not a subsidiary, it's an independent company," Intel spokesman Chuck Mulloy told InternetNews.com. Intel argues that while AMD put a large amount of cash into the foundry company, ATIC gave the company back almost all of its investment, so it's not a 50/50 ownership.

"They unilaterally decided to transfer our IP rights to Globalfoundries," said Mulloy. "We said you are transferring that to a third party. They said it's a subsidiary. We said without talking to us you have transferred our IP rights, which represents billions of dollars of investment."

AMD responded that it believes it is in compliance and Intel is just conspiring against it.

"Intel's action is an attempt to distract the world from the global antitrust scrutiny it faces. Should this matter proceed to litigation, we will prove that Intel fabricated this claim to interfere with our commercial relationships and thus has violated the cross-license. AMD remains in full compliance with the cross-license agreement," AMD said, in part, in a statement e-mailed to InternetNews.com.

It's all posturing, and a bit of poor timing on Intel's part, said In-Stat Senior Analyst Jim McGregor. "AMD has been up front about how this has been going. Then [Intel] waited until after the deal closed before raising an issue? You guys have known about this for how long? Now you make a case of it?" he said.

But he added "I think it's positioning for that agreement coming up. It's kind of poor timing. They should have raised the issue a lot quicker, but also I do think this is a case where Intel may have a legitimate gripe."

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