I've been accused of vulgarity. I say that's bullshit - Mel Brooks
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AMD plays antitrust poker for Intel's X86 licence
IT OCCURRED TO us here at the INQ recently, that AMD's European antitrust beef with Intel, may in fact just be a massive game of (Austin) Texas Hold ‘Em, with plenty of chips on the table.
It's fairly obvious what Intel has to lose if the European commission's antitrust probe finds it guilty as charged, but what would AMD really have to gain? A little settlement? Hardly worth the bother. But the more we asked ourselves the question, the clearer it became in our minds.
AMD has little but gleeful vindication to gain from a guilty verdict, but much to gain from using the case (and its complaint against Chipzilla) as a bargaining chip. For instance, if AMD decided to drop its complaint, the firm might find itself suddenly entitled to all sorts of Intel goodies, including some sweet renewed X86 licences.
To understand the game, you have to go back to Intel and AMD's cross-licensing agreement on X86 processors. Although some terms of the deal are strictly confidential, it's widely known that somewhere in the mountain of legal paperwork is a clause stating AMD can only outsource a certain percentage of processor manufacturing to other firms (around 20 per cent). So there's effectively a 20 per cent cap on non-AMD produced wafers in the licence.
But after shedding its fabs to go 'asset light' and bequeathing its manufacturing capabilities to spin-off firm The Foundry Co, some have wondered whether Intel may have a case for either revoking the licence, or simply not renewing it.
More complicated is the fact that some 62 per cent of the Foundry Company is now owned by the oil sheiks of Abu Dhabi, meaning it's not even majority owned by AMD. AMD can spin till it's blue in the face, DAAMIT FC is not a subsidiary, it's a separate and separately-owned entity.
In the past, when we've asked AMD about the potential cross-licensing problems which could arise, we've been told there's nothing to worry about, and no one at the firm thinks Intel will seriously try and revoke the licence. But having a few strong cards to play doesn't do AMD any harm.
Since the contract is full of top secret clauses we don't know about, it's possible AMD is correct in saying it really doesn't have anything to worry about. Perhaps there's a 'change of ownership' clause in the contract which covers the whole Foundry Co issue, perhaps there are other loopholes, or perhaps, just perhaps, AMD is banking on the fact that Intel has better things to do with its time and money in the midst of a recession than to let loose its lawyers on the firm, revoking the licence the messy way. The fact is, we may never know.
What we do know is that the cross-licence contract is up for renewal in the next couple of years anyway, and whereas AMD might not be too worried that Intel will expend oodles of energy trying to pry the licence out of its hands, it may be a teeny tiny bit concerned that Chipzilla might choose not to renew it.
Of course, this would be a bit unlikely (*cough*, Intel X86 monopoly, *cough*) and pretty damn mean of Intel, but no one can blame AMD for taking precautions.
Finding its newly-acquired jewel ‘x86-less' would definitely put a crimp in the majestic ruler of Abu Dhabi's plans, leaving him quite sheiken, we imagine. A chance AMD can't exactly take seeing as his magnificence signs a great many cheques for the firm.
So, AMD will most likely play its advantage, using the complaint (and its potential dropping of it) as a powerful negotiating tool, with everything on the table – especially letting AMD unilaterally consign its x86 rights to the Foundry Company – to play for.
The antitrust case is clearly a large pain in Intel's rear end and, despite the fact there's no stopping EC wheels already in motion, AMD dropping the complaint would still have an effect. A desired effect, as far as Intel is concerned.
So, if we were the betting kinds, we'd put our money on AMD dropping the complaint like a hot potato any day now.
Then again, the firms – both of whom refused to comment on this story – could just have excellent poker faces. µ
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"To understand the game, you have to go back to Intel and AMD's cross-licensing agreement on X86 processors. Although some terms of the deal are strictly confidential, it's widely known that somewhere in the mountain of legal paperwork is a clause stating AMD can only outsource a certain percentage of processor manufacturing to other firms (around 20 per cent)."
"Widely known" without a reference or link is quite possibly Intel FUD. AMD apparently has the problem of using a non-standard process, IBM's SOI. They should be out of the fab business themselves entirely given AMD's size. The only license text on-line is heavily redacted but apparently provides for outsourcing without limitation. The idea that Abu Dhabi would invest so many billions without having a lawyer to read AMD licenses is bizarre. Intel being found guilty of abuse of dominance, if it is, compromises its ability to damage AMD through license enforcement actions as well.
The gradually shutting down economies around the world would seem more of a hazzard. The economy of the world needs realigning without grossly excess US debt accumulation fueling and distorting it. Also according to reviews so far, Windows 7 doesn't need a more ambitious PC than Vista and won't occasion the wave of PC replacements that previous Windows versions did in Wintel's heyday. That's a game changer for all in the PC business. Inq's writer might speculate on that. Or, with the US a falling star should the world's kids start learning Mandarin instead of English?
x64 is derived from (or an extension of) x86. So if Intel don't renew the x86 licensing, I think AMD won't be able to manufacture x64 as well.
If Intel cut off AMD from 86bit, It be 64 bit computing for AMD. Intel would be cut from 64 bit. Every one who needs a 64 bit processor go to AMD and Intel would stuck on 86x, left to rot. They could try and come up with a 64 bit design, but the Ititanic has already sunk!
AFAIK Intel can't drop cross-licensing unless it wants to give up 64-bit computing.
With only Intel making x86 chips, they would be shooting themselves in the foot.
AMD would go to another architecture, like an advanced ARM based chip, and Intels monopoly would fall, very hard.
I think you've got it backwards. It's not AMD that's holding the winning cards here, it's intel. IMO, the only reason that intel has not gone all out in the past to crush AMD, was the thereat of Antitrust. With AMD's actions, not to mention shooting their big mouths off all over the globe, that reason no longer exists.
Like you said, the EU ball can't be stopped now, and being found guilty, would mean fines to the EU, not AMD. AMD would still have to sue, and intel will mostlikely tie it up in the courts, until AMD and their Arab friends either run out of money, or quit.
And you can forget about any x86 license renewal. No, I'm not detecting any desire at intel to do any negotiating at all. As far as I can tell, intel management is pissed off, and with the anti-trust steamroller unable to be stopped, and the insults they've taken from ole Hector the last few years, IMO, intel'sonly goal now, is to slowly squeeze AMD, inflicting as much financial pain on them as possible, until they suffocate.
Done deal.
I always love INQ's combination of facts, intrigue & writing style. What a change has occurred at AMD from their July 2006 Conference Call - where Ruiz called Intel's chips "pathetic" and other management acted drunk with their success. How does INQ factor in Intel's apparent willingness - even encouragement - for that famous License Agreement to be publicly disclosed? For example, is there some business weakness/exposure that might put off the Dubai investors? Or, are there certain terms that show Intel to be a benevolent dictator and not the viciously "unfair" competitor? Come on INQ, help us.
I spend an hour on a comment and still stuff it up. In the last sentence, read "while *enjoying* alignment" [with China's love for MIPS] in the long term. Alchemy might've been a useful bit of strategery!
Looks like this is the public form of the current agreement: http://contracts.corporate.findlaw.com/agreements/amd/intel.license.2001.01.01.html They would expect to renegotiate in 2011 anyway. Based on the definitions in the agreement, the whole reorg does seem a little distasteful, but it's probably worth more to Intel to negotiate in good faith, maintain the x86 duopoly and keep up royalties than to torpedo AMD and immediately face the hardships of a monopoly position - while AMD would be kind of screwed absent the deal. But If AMD becomes a design shop for TFC and TFC takes over "production, sales, leases or other dispositions of *****", is AMD contemplating cutting royalties to a trickle under the current agreement? ... Meanwhile, AMD does have a better hand than just a friendly regulatory environment; *if* someone complains, Abu Dhabi has the option of picking up the rest of AMD and making good on ownership stakes "within sixty (60) days after receiving written notice . . ." Or, if Intel chooses the nuclear option and Abu Dhabi is patient, they can even cede the desktop, put out a high-performance MIPS design, and remain competitive in servers and HPC while alignment with moves in certain growing markets (China) in the long term.
what if Intel aren't guilty at all??? You haven't considered that possibility. There's a small chance that they aren't guilty and if that's really the case, it makes all the above arguments invalid. And what if Intel just decided to pay the fine to AMD and not renew the license? If you say AMD has nothing to gain from continuing the suit other than a small payout, then Intel has nothing to lose other than an even smaller payout IMO (for them). So this might not go as anticipated.
Isn't it a bit absurd to say that AMD has nothing to gain from the lawsuit other than a small payout? What about the idea that this may allow them to compete on equal ground? Wasn't the whole point that even when AMD had a significantly better product (athlon in 2005, 2006) they still couldn't increase their market share that much because of Intel's practices? I think AMD has a lot to gain if they can keep Intel competing honestly.
someone's been spending way too much time watching the EPT...