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AMD puts down more roots in China

Company inks chip development deal with Chinese Ministry of Science and Technology, Peking University.

Advanced Micro Devices on Monday announced a deal to license its x86 Geode microprocessor design technology to the Chinese Ministry of Science and Technology and Peking University.

The partnership, part of a larger push by the company into the Chinese market, will focus on exploring ways to speed up the chip while keeping power consumption at less than a watt, AMD said. The processor is found in thin clients, set-top boxes and mobile devices.

Under the terms of the contract, the ministry will facilitate discussions between the U.S. chipmaker and Chinese companies that have access to AMD technology licenses. AMD's clients in China include PC maker Lenovo Group. The Sunnyvale, Calif.-based chipmaker is expected to earn revenue from the licensing. Further financial details were not disclosed.

AMD will also have access to the intellectual property that comes out of the partnership with the ministry and the university, as well as an inside track on investing options if a new business emerges.

The arrangement is possible, AMD said, because Geode's processor technology doesn't need a license to be exported under laws overseen by the U.S. Department of Commerce. That's because the Geode chip's performance is well below U.S. government "MTOPS" (millions of theoretical operations per second) standards, which relate to performance levels of processors that could be used in nuclear arms development.

In addition to the licensing deal, AMD formally opened its new Greater China headquarters in the Zhongguancun Science Park, a high-tech region in Beijing frequently referred to as China's Silicon Valley.

Moreover, AMD signed an agreement with the Chinese Ministry of Education to donate $750,000 to support technology education in schools in rural areas of middle and western China. The three-year contract builds on AMD's previous education investments in programs such as Project Hope, a national charity in China that claims to have helped more than 2.3 million students finish nine years of preliminary education.

The company's investments in China also include $100 million to expand testing and manufacturing facilities.

AMD's aspirations in China are aggressive: The company has said it wants 30 percent market share in China in two or three years.

AMD has 16.2 percent of the worldwide x86 chip market, according to second-quarter data amassed by Mercury Research analyst Dean McCarron, but it could have as much as an 18 percent share in China, based on AMD's focus on low-cost PCs. Rival chipmaker Intel essentially controls the remainder of the x86 market, with 82.2 percent worldwide market share, McCarron said.

Sales of computer chips in China reached about $4.86 billion in 2004.

AMD's China news follows the opening of its new Fab 36 manufacturing plant in Germany earlier this month.