The Future of ICT

It’s very amazing how much the world changes before breakfast.

At 6am Pacific this morning, a joint Intel & AMD press release hit our inboxes like a nuclear bomb: AMD and Intel are settling their differences. And just like that, the CPU landscape as we know it has significantly changed.

We’re previously talked about the spat between AMD and Intel, one that Intel was looking increasingly likely to lose. AMD had had leveraged some very serious accusations against Intel over actions Intel supposedly undertook earlier this decade: paying OEMs and retailers not to use or carry products utilizing AMD processors through the use of discounts and rebates. With this AMD launched civil anti-trust suits, and petitioned various governments for criminal anti-trust investigations.

Recently, the European Union’s European Commission agreed with AMD’s claims, resulting in the EC fining Intel for roughly $1.45 billion. And other governments had investigations in various states, including the New York Attorney General’s which opened up a case against Intel earlier this month. Things were not going well for Intel.

With a major loss for Intel looming, the massive cost of many more years of litigation, and the monumental fine Intel would face if they lost a case in the United States (where damages are trebled), Intel and AMD sat down and began settlement talks in earnest in April, culminating in what has happened today. AMD and Intel have agreed to settle all of their outstanding litigation, Intel has agreed to adhere to certain business practices, Intel will be paying AMD, and the two companies have signed a new 5-year cross-licensing agreement for x86.

We should note that even with this settlement, neither AMD nor Intel are admitting to any wrongdoing. Intel is not admitting to engaging in any anti-competitive actions, and AMD is not admitting to breaking their existing x86 license by not producing the bulk of their CPUs in-house. In laymen’s terms, everyone is agreeing to be happy and to stop bludgeoning each other with lawsuits.

Out of this settlement come four major things for AMD:

1. $1.25 billion in cold, hard cash.
2. Intel will stop doing things that they and AMD agree they shouldn’t be doing.
3. The right to not have to produce x86 CPUs in-house. AMD can go fabless.
4. The right to have their x86 processors fabricated anywhere of AMD’s choosing.

Although AMD and Intel don’t attribute anything to the cash portion of the settlement beyond the fact that it’s a number the two could agree on, we believe that it is intended to cover the legal costs AMD has incurred over the years in fighting Intel. Remember why Intel settled in the first place: anti-trust suits are expensive. AMD will receive the $1.25 billion in cash within 30 days.

The second concession to AMD is that Intel and AMD have come to an agreement on which business practices Intel is and isn’t allowed to engage in, which Intel will have to adhere to. This is a tricky thing, since as we stated before Intel hasn’t admitted to any wrongdoing, so we’re not quite sure what practices are in question. Intel claims that this won’t result in any changes for them, but we will hopefully have a better idea once the agreement is published by the Securities and Exchange Commission. Without any additional information, our best guess is that whatever Intel was doing specifically to drive AMD out of the market, they have or are going to stop doing it.

Moving on, it’s the 3rd concession that’s the biggest for AMD. Although the Intel/AMD x86 cross-licensing agreement is private, it’s well-known that the agreement stipulated that AMD needed to produce the majority of their x86 processors in-house. With the formation of Global Foundries, AMD was applying a new interpretation to that requirement, one that Intel disagreed with and lead to a side-suit between the companies.

As part of this settlement, the in-house production requirement has been dropped from the cross-licensing agreement. AMD is no longer required to produce x86 CPUs, and as of today AMD has begun immediate preparation to go fully fabless.