AMD Fires Back at China Chip Accusations in Strongly Worded Statement

AMD is firing back at an explosive report in the Wall Street Journal, titled "How a Big U.S. Chip Maker Gave China the 'Keys to the Kingdom,' that purportedly outlines the company's maneuvers leading up to, and following the formation of, its THATIC joint venture (JV).

The end result of the joint venture comes in the form of Chinese-produced Dyhana processors that are tailored for the Chinese market, but many have characterized the deal as giving the Chinese government access to critical technology that it can use for military purposes. AMD originally established the joint venture in 2016 to license its x86 and SoC IP for chip development in a deal worth $293 million (plus royalties). The joint venture consists of a web of both public and private Chinese companies, including the Chinese Academy of Sciences that is heavily influenced by the Chinese government.

The United States Department of Commerce recently added the joint venture to the entity list, saying Sugon, which has an ownership stake in the venture through its subsidiaries, is "acting contrary to the national security or foreign policy interests of the United States." The order effectively shuts down the joint venture.

The Wall Street Journal says its accounting of the deal consists of information from "interviews with more than a dozen current and former government officials familiar with AMD's China deal, senior chip-industry executives, lawyers and company and government filings in the U.S. and Canada." Among several other interesting tidbits, the report claims that Pentagon officials tried to get AMD to submit the details of the JV for review by the Committee on Foreign Investment in the U.S. (CFIUS), but that AMD refused on the grounds that CFIUS doesn't have jurisdiction over joint ventures.

The report outlines several maneuverings by AMD that the company doesn't feel are accurate or complete. AMD's rebuttal says that the report omits important factual details, especially in regards to mechanisms AMD put into place to protect its intellectual property (IP) and prevent reverse engineering.

AMD CEO Lisa Su confirmed to Tom's Hardware at Computex 2019 that the company isn't licensing further chip designs to its China-backed joint venture. That means that AMD's joint venture was already confined to the Zen architecture that debuted in first-gen Ryzen and EPYC Naples processors, and would not move forward with designs based on AMD's new Zen 2 microarchitecture that powers the third-gen Ryzen and EPYC Rome processors.

According to a report from Austin Craig at Seeking Alpha, AMD received $226 million in licensing fees from the partnership from 2016 to 2018, and for the first three months of 2019 it made $60 million, with an additional $18 million in receivables.

That suggests the U.S. government's ban on further technology transfers shouldn't hurt AMD too badly in the revenue department. But the company is obviously worried about the optics of the circumstances surrounding the deal, as evidenced by its statement, which you can read in full below:

June 27, 2019AMD has released the following statement regarding a story that appeared on The Wall Street Journal website on Thursday June 27, 2019 entitled “How a Big U.S. Chip Maker Gave China the ‘Keys to the Kingdom’”.The Wall Street Journal story contains several factual errors and omissions and does not portray an accurate picture of the joint ventures that AMD entered into with THATIC in early 2016.AMD takes strong exception to characterizations in the story that it did not act properly or transparently in creating the joint ventures.Starting in 2015, AMD diligently and proactively briefed the Department of Defense, the Department of Commerce and multiple other agencies within the U.S. Government before entering into the joint ventures. AMD received no objections whatsoever from any agency to the formation of the joint ventures or to the transfer of technology – technology which was of lower performance than other commercially available processors. In fact, prior to the formation of the joint ventures and the transfer of technology, the Department of Commerce notified AMD that the technology proposed was not restricted or otherwise prohibited from being transferred. Given this clear feedback, AMD moved ahead with the joint ventures.The Wall Street Journal story omits important factual details, including the fact that AMD put significant protections in place to protect its intellectual property (IP) and prevent valuable IP from being misused or reverse engineered to develop future generations of processors.AMD’s belief is that it did everything correctly and transparently in interactions with the US Government in advance of and since forming these joint ventures. We recognize that there are increased sensitivities and concerns today around national security and technology. In compliance with the amended U.S “Entities List,” AMD has restricted the sale and purchase of products and taken steps to ensure that no technology transfers occur to listed entities.As a company, AMD strictly complies with all U.S. laws, and cares deeply about the national security interests of the United States. The company will continue to work with the U.S. Government and others to ensure strong protections of intellectual property and best practices in corporate citizenship and transparency.Harry WolinSenior Vice President, General Counsel​ and Corporate Secretary

Update June 20, 2019, 10:00am PT: Updated AMD revenue from joint venture.