Wednesday, August 27, 2008

AMD deal with Intel a factor in plant's future

MALTA -- Advanced Micro Devices Inc. Chairman Hector Ruiz will surely
face questions today about the company's plans for a $3.2 billion
computer chip factory here at the Luther Forest Technology Campus.
has yet to officially commit to the site. The company's financial
condition and secretive "asset smart" strategy, designed to save money,
are key to the decision.
But a technology-sharing agreement that AMD has with its main rival,
Intel Corp., also looms large in the decision, analysts say.
and Intel have had some form of the so-called patent cross-license
agreement in place since 1976. Such agreements are common in the
industry, and AMD pays Intel royalties for the use of Intel technology.
latest version was signed in 2001. It is set to expire at the end of
2010, before AMD would likely finish construction of its Malta factory,
known as Fab 4X.
Morningstar Inc. analyst Andy Ng said the
agreement is key to AMD's manufacture of mainstay x86 processors that
power personal computers and servers. He said AMD likely can
renegotiate before the expiration.
"They need it," Ng said of AMD. "This agreement has been going on for a while. Chances are, it will go through."
Ng also said Intel, the world's No. 1 maker of x86 chips, might run into antitrust issues if it refuses to renegotiate.
already has filed an antitrust suit against Intel, accusing the company
of selling chips at a discount to customers in exchange for agreements
that they not buy from AMD.
Intel spokesman Chuck Mulloy said
Tuesday the company would not talk about the agreement with AMD or
whether it will be renegotiated.
"We never comment about negotiations with anyone," he said. "As far as we're concerned, that's all confidential."
An AMD spokesman could not be reached for comment.
and other industry observers note the agreement can be canceled if AMD
is acquired, and language in the agreement indicates that the license
cannot be transferred to a third party.
That means if AMD's
asset-smart strategy includes the spinoff or sale of its manufacturing
operations -- something many analysts have said is a possibility --
then the agreement will also have to be amended.
"There could be hurdles there," Ng said.