By Don Clark 

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.

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.

Write to Don Clark at don.clark@wsj.com

 

(END) Dow Jones Newswires

April 21, 2016 16:29 ET (20:29 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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