AMD Strikes CPU Licensing Deal With Chinese Company To Penetrate Lucrative Asian Server Market

AMD reported its first quarter financial results for 2016 earlier today, which continued to show losses and increased expenses in multiple areas. The company showed a net loss of $109 million, a loss per share of $0.14, and a non-GAAP net loss of $96 million, or $0.12 per share. Revenue was $832 million, which was down 13 percent sequentially, and down 19 percent year-over-year. According to the company, the losses and increased expenses were primarily due to lower sales of semi-custom SoCs and client notebook processors, and increased R&D expenses related to new and upcoming products.

But slipped into the release was a very interesting blurb about a new licensing deal AMD has struck in a newly-created joint venture it has formed with THATIC (Tianjin Haiguang Advanced Technology Investment Co., Ltd.), worth approximately $239 Million. In the deal, AMD will license high-performance processor and SoC (System On Chip) technology in an effort to develop custom silicon tailored to the Chinese server market that will complement AMD's own server-targeted offerings.

AMD Has Many New Technologies On Its Current Roadmap

The fact that AMD specified “high-performance processor and SoC” technology in the release, could mean AMD has licensed its upcoming Zen architecture, though that wasn’t specifically stated. Zen is the internal codename for AMD’s next-gen CPU architecture that will reportedly offer up to a 40% IPC improvement over the company’s current architectures, in addition to increased overall throughput. It’s also possible that AMD has licensed something other than Zen, but it’s not clear at this time.

"Our new licensing agreement is a great example of leveraging our strong IP portfolio to accelerate the adoption of our technologies more broadly," said Dr. Su. "The joint venture with THATIC provides AMD with a differentiated approach to help gain share in the fastest growing region of the server market."

The deal infuses AMD with a significant pile of cash, just as the company is preparing to launch an array of new graphics processors based on its next-gen Polaris architecture, which will precede the first Zen-based desktop processors and APUs.

For AMD, the cash infusion is timely to be sure and the market opportunity in Asia is compelling. Coupled with rumored continued wins in mainstream consumer products, like Sony’s confirmed PlayStation 4 refresh, it could signal a significant growth trend for AMD. Regardless, these are critical times for the company and they simply must execute on their core game plan here in the U.S. as well, in order to maintain critical mass and market relevance.