Finally, some good tidings for the struggling silicon vendor
AMD has seen the biggest increase in its share price for the past 35 years, following the announcement of a server chip licensing deal with Tianjin Haiguang Advanced Technology Investment Co (THATIC).
On Thursday, the company published its financial results for the first quarter of 2016 and said it stands to earn $293 million from a joint venture that will make processors exclusively for the Chinese market.
According to Bloomberg, this caused the shares to jump 52 percent to $3.99 on Friday, the biggest hike since July 1980. This means the shares now trade on the level they were in September 2014.
Light at the end of the tunnel
AMD has been struggling to reinvent itself – the sales of PCs are in decline for the fifth year in a row, and the company doesn’t produce chips for the mobile device market. It did score some lucrative contracts with Microsoft and Sony, making GPUs for both Xbox One and PlayStation 4, and the jury is still out on Opteron A1100, its first server CPU based on reduced instruction set computing (RISC).
In the x86 space AMD is betting on Zen, a brand new architecture that’s expected to considerably improve the performance of its CPUs. There are also big hopes for K12, an ARM chip with cores designed in-house. Both are due in 2017, and the company needs to survive long enough to bring them to the market.
At first glance, AMD’s performance in the beginning of 2016 is less than stellar: first-quarter losses of $109 million, with revenue falling 19 percent year-on-year. And yet investors are optimistic, thanks to a joint venture with THATIC, a state-backed entity managed by the Chinese Academy of Sciences.
Under the terms of the deal, Chinese fabs will manufacture AMD chips and sell them locally, on the world’s largest market for semiconductors. In addition to $293 million in licensing fees, AMD also expects to receive royalty payments from the joint venture’s future product sales.
“Our new licensing agreement is a great example of leveraging our strong IP portfolio to accelerate the adoption of our technologies more broadly,” said AMD’s CEO Lisa Su. “The joint venture with THATIC provides AMD with a differentiated approach to help gain share in the fastest growing region of the server market.”
She added that AMD expects to increase its second-quarter revenues 15 percent over the first quarter, with more demand for both CPUs and GPUs.
In January 2016, American semiconductor vendor Qualcomm announced a similar joint venture with the government of the Guizhou province in southwest China. The recently established Guizhou Huaxintong Semi-Conductor Technology Co will focus on the design, development and sales of advanced server chipsets based on ARM architecture.