AMD is planning to launch a joint venture with a Chinese chip manufacturer to which it will license some of its CPU technology, the company announced this week. The new venture will be focused on processors and systems-on-a-chip (SoC), and will allow it to better compete in the lucrative Chinese server market.
With the decline in traditional desktop sales, chip makers like AMD and Intel are increasingly looking to enterprise-oriented servers for growth. AMD says its new joint venture with Tianjin Haiguang Advanced Technology Investment Company (THATIC) will be focused on tailoring SoCs for Chinese servers.
The agreement with THATIC, which will build chips using AMD designs, is worth $293 million to AMD. Shortly after the announcement, which was part of AMD's first-quarter earnings report, the company's stock price ballooned 23 percent, the Wall Street Journal reported.
"Our new licensing agreement is a great example of leveraging our strong IP portfolio to accelerate the adoption of our technologies more broadly," AMD President and CEO Lisa Su said in a statement. "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 joint venture is also seen as a move to take on Intel in the x86 server market. Intel supplied more than 87 percent of all all x86 chips shipped in 2015, according to the Wall Street Journal.
AMD has invested heavily in alternatives to x86 chips as well. It delivered its first 64-bit ARM-based server processor in 2014. The company believes that the 64-bit ARM-based chips—already widely used in smartphones and other mobile devices—will prove useful in data center operations, where they are up against the dominant x86 architecture used in server processors.
China is a logical place to prove that theory, since its web services companies' need for data centers position them among the world's largest buyers of servers.