Intel is threatening to terminate an agreement allowing Advanced Micro Devices to use its computer chip designs, citing AMD’s transfer of the designs to GlobalFoundries, the spinoff company planning to build a chip factory in Luther Forest.
Intel sent AMD a letter saying transferring technology to a third party violated the agreement, and said it is terminating the deal in 60 days if the alleged violation is not corrected. The letter was disclosed by AMD in a filing with the Securities and Exchange Commission on Monday.
AMD, Intel’s much smaller main rival in the world microprocessor chip market, denied violating the agreement. Intel said it believes the matter can be settled, perhaps through mediation.
GlobalFoundries plans to start site preparation within a few weeks for a new $4.2 billion factory at the Luther Forest Technology Campus, and the company said those plans won’t be affected.
“We’ll continue plans to put capacity in place in Dresden and New York to support the long-term growth needs of our business,” GlobalFoundries said in a statement.
In its letter, Intel said AMD’s transferring the design technology to GlobalFoundries “committed a material breach of the cross license.”
The letter initiates a process that will lead to mediation, said Intel spokesman Chuck Mulloy.
Intel’s argument is that GlobalFoundries is not an AMD subsidiary, and therefore not a party to the licensing agreement. The agreement has been in place for decades and was last renewed in 2001.
“AMD cannot unilaterally extend Intel’s licensing rights to a third party without Intel’s consent,” said Bruce Sewell, senior vice president and general counsel for Intel. “We have attempted to address our concerns with AMD without success since October. We are willing to find a resolution but at the same time we have an obligation to our stockholders to protect the billions of dollars we’ve invested in intellectual property.”
AMD, in the SEC filing, said it believes the agreement is not being breached, and that Intel has no right to terminate it. That has been AMD’s position since the issue first emerged in public discussion last October.
GlobalFoundries said it believes AMD will prevail in any litigation.
“We believe that the legal process will determine that AMD has not breached the patent cross-license agreement. GlobalFoundries sees Intel’s action as a diversionary tactic to distract the world from the global antitrust scrutiny it faces,” said Travis Bullard, a GlobalFoundries spokesman.
GlobalFoundries, which took over AMD’s manufacturing operations as of two weeks ago, is nearly two-thirds owned by the Advanced Technology Investment Co. of Abu Dhabi, but AMD controls half of the board of directors, and senior management is coming from former AMD employees. Both companies are headquartered in Sunnyvale, Calif.
GlobalFoundries owns two former AMD plants in Dresden, Germany.
GlobalFoundries makes chips for AMD, but also will be free to make computer chips for other customers, company officials have noted.
The Intel letter and AMD’s response could be a precursor to litigation, though Mulloy said Intel hopes mediation can settle the matter.
AMD has a long-standing series of legal actions it has brought against Intel, charging its larger rival with engaging in monopolistic business practices. Some analysts believe Intel’s action may be aimed at reaching a broad settlement of all lawsuits.
Intel, however, rejected that interpretation.
“This is not tit for tat,” Mulloy said. “We have faith we will find a way to resolve this.”
Mulloy said Intel isn’t trying to stop AMD’s and GlobalFoundries’ plans, but wants protect the company’s intellectual rights under the AMD agreement.