In a surprise announcement with the company’s earnings, AMD announced that its broader intellectual property (IP) licensing strategy is gaining momentum with the licensing of modern x86-64 server CPU and related SoC technologies to a Chinese joint venture. The joint venture (JV), which has yet to be named, has been created with THATIC (Tianjin Haiguang Advanced Technology Investment Co., Ltd.), an investment consortium led by the Chinese Academy of Sciences, China's top science and technology research and educational organization and the same entity that spun off a little company named Lenovo. The newly-formed JV will develop server SoCs (system-on-chips) for the China market. AMD will provide the necessary IP and some engineering support. For its efforts, AMD will receive US$293 million (US$52million in Q1) and royalty fees once devices begin shipping. Further details will be available from the JV in the future.
Source: AMD Presentation
China has become the greenfield opportunity for server development. With a huge investment in building new infrastructure plus investments into advanced technologies like deep learning, China has an insatiable appetite for servers, as reflected in Intel’s recent earnings announcement. In addition, China has long looked at breaking the dominant positions of western companies, especially Intel. As a result, both the Chinese public and private sector have invested in alternative server products based on the 64-bit ARMv8 and POWER8/9 (from IBM) instruction sets over the past several years. Intel has offered to license technology to China, but only at the intellectual property (IP) block level, which is essentially a black box that can be used by licensees but not modified, and has offered only very low-end Atom processors. ARM and IBM have been willing to share the detailed design information through architecture licenses. Now, AMD is stepping in with the x86 architecture and the JV will have the ability to use and/or customize the CPU architecture as needed for future products.
What this means for China is the ability to develop advanced server SoCs using all three of the major 64-bit CPU architectures – ARMv8, POWER8/9, and x86-64 – as well as receiving engineering support from leading western technology companies. While the announcement comes several years after development has begun on the ARM and POWER architectures, AMD is now licensing the dominant server instruction set architecture, supported by the global industry standard server software ecosystem.
Note, however, that there is room for all three architectures. The server market has always leveraged different CPU architectures because no two workloads are the same. Having all three gives China the opportunity to leverage each architecture where it makes the most sense.
AMD, on the other hand, stands to gain the most from the deal. Not only does this help propel the company back into the server segment, it also gives AMD a foothold in the hottest growth market in the world. In addition, the relationship could lead to much more than just a financial gain. With previous downsizings, AMD has been constrained on engineering talent. The joint venture could provide much needed engineering resources and contribute to further advances in the architecture. It is also important to remember that AMD is also an ARMv8 licensee. There is the potential for the joint venture to also leverage ARM-compatible technologies in the future as well, providing a further boost to AMD and the ARM ecosystem.
Some of the details of the agreement are still vague for good reason. Because the cross licensing agreement involves the x86 instruction set architecture, Intel is sure to raise some concerns about the announcement. But, AMD believes the joint venture does not breach its cross license agreement with Intel. AMD is also not disclosing the CPU core that is being licensed, but has indicated that it is a leading-edge technology. TIRIAS Research believes that it is likely to be the upcoming Zen core. With performance and complexity claimed to be competitive with IBM’s POWER architecture and Intel’s x86-64 Xeon products, the Zen core should be more appealing to the Chinese partners and more competitive to other server products. The first AMD products based on the new Zen core are expected to be sampling in the fourth quarter.
Developing a new semiconductor SoC is no easy task and normally I would estimate the first products to ship in two to three years. However, I have seen other Chinese start-ups produce working silicon on other CPU architectures in as little as 6 months. Despite dwindling market share over the past few years, AMD created and released the x86-64 instruction set in 2000 and shipped the first “AMD 64” branded Opteron processors in 2003. With support from AMD to overcome complexities in the CPU/SoC design and the challenges of supporting legacy x86 software, new products from the JV could be available in one to two years.
The one remaining question is who will provide manufacturing. It would be preferred to use SMIC, the leading Chinese foundry, but given its history of producing x86 SoCs for AMD, Globalfoundries will likely be producing at least the first generation of products. This is not a given, but it would reduce the risk of moving the x86-64 design libraries to a new foundry.
This is not the first time AMD has formed a Chinese joint venture for x86 processors. AMD licensed the Geode processor, an older x86 processor targeted at embedded applications, to China's Ministry of Science and Technology and Peking University in 2005. But, this new agreement is the most significant China partnership for AMD and the largest licensing agreement achieved under the company’s new licensing strategy. So, at a time when there is concern over growth rates in the semiconductor industry, AMD surprises with an announcement that provides welcomed resources and growth potential for the future.
