China finds its way to start making x86 processors based on AMD’s IP

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The x86 processor architecture made by Intel back in 1978 was held with the help of a patent by the US government then the rights to use the architecture was bought by the VIA technologies and at last AMD got the rights to use the architecture, Cyrix and other US-based silicon manufacturers also used the architecture, but the license remained in the hands of these US silicon giants.

For a lot of years, these companies have made processors that are widely used to solve problems that our mind cannot do quickly and efficiently. US government has administered the licensing of the architecture because the government thinks if other potentially developed countries get their hands on this architecture then the results will be devastating for the United States. That is the reason despite so many efforts, funding and investments from the Chinese silicon manufacturers, they could not get a direct hand on the architecture yet.

The patent does not allow any of the three firms to share the architecture with any other firm however they can share it with the firms they own, due to this the Obama government did not allow Intel to sell its Xeon processors to the Chinese companies. But AMD found a way for this architecture to find its way in the Asian market, according to a report over tomsHardware the US tech giant is clear that it is not selling the final designs to the Chinese firm, they are only allowing them to make their processors that are catered for the Chinese server market only. Additionally, AMD is very clear about the sale of the product the processors will only be available for sale in the Chinese market and the sales of these processors will not sabotage the sales of other processors in any state or form.

Now, how did AMD managed to dodge such strict laws the answer is very simple yet interesting in enterprise terms. AMD announced its joint venture within China to develop processors in 2016, that got much-needed investment to the company that was operating in the loss for the last six quarters. The result of this joint venture of AMD and a Chinese firm was the foundation of another company that was named Tianjin Haiguang Advanced Technology Investment Co. Ltd (THATIC), and AMD agreed to license its x86 architecture and the SoC IP for the processor development.

Other than AMD the THATIC had many shareholders ranging from the Chinese government to the Chinese Academy of sciences that too was influenced by the Government. Then according to a report over THATIC then made two other companies by the name Haiguang Microelectronics Co. Ltd. (HMC) and Chengdu Haiguang Integrated Circuit Design Co., Ltd (Hygon) both these companies would work under the supervision of THATIC and will cover different stages of the production of processors.

The story gets a little tricky to digest here so please bear with me, AMD holds 51% of shares of the HMC while THATIC owns the remaining share, as the majority is under AMD’s ownership HMC can use the licensed x86 architecture that is cross-licensed by Intel. Since HMC owns the x86 architecture which is in turn owned by AMD the patent restrictions from US government and the cross-licensing restrictions from Intel both are met. All of this seems to favor Chinese market, but this is not the case entirely AMD has restricted both companies to sell their products specifically in the Chinese market, and AMD will get royalties whenever the sales start in bulk volume. Furthermore, HMC is restricted to produce processors that are specially tailored for needs of the Chinese servers, and these processors will be of no use for any other constituency.

image: tomsHardware
image: tomsHardware

For the Hygon AMD owns only 30% shares and the remaining is owned by THATIC, HMC license the IP to Hygon which then makes x86 chips and then sells them back to HMC. HMC then ships the chips for the fabrication process to complete the product China foundries or TMSC may do the fabrication. The product is then interestingly shipped back to Hygon instead of HMC which then ships the Dhyana processors, all of this is to stay within the legal boundaries.

The result is beneficial for AMD due to many reasons; firstly, the Chinese government is investing heavily in the processor market under the Made in China 2025 policy. Secondly, AMD will get royalties with the sale of Dhyana processors that will heavily increase its revenue and lastly, AMD will get to explore the Chinese data centers that are exploding with the information that they can use for their advantage to make their products better for the future. Strategically this step will boost the progress of the company, and it will potentially serve as a blow to Intel due to the heavy involvement of the Chinese government in the project.


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