AMD Licensing Arrangement Complicates Intel Takeover Talks as Broadcom, TSMC Circle

Key Takeaways

• Intel is reportedly in discussions about selling its business.
• One potential scenario is Broadcom buying Intel’s design arm and TSMC taking over its manufacturing unit.
• However, due to a cross-licensing arrangement, AMD may have a say in any potential breakup of Intel.

Intel is reportedly looking to sell at least part of its business, and Broadcom, Taiwan Semiconductor Manufacturing Company (TSMC), and Silver Lake are among the firms eyeing its assets.

However, Intel’s convoluted cross-licensing arrangement with AMD could complicate any buyout talks. And in the most extreme scenario, AMD may even be able to block a sale.

Semiconductor Firms Eye Intel Assets

After Intel stock lost around half of its value in 2024, toward the end of the year, rivals started circling the embattled semiconductor firm like vultures.

In September, Intel reportedly fielded an acquisition offer from Qualcomm and rejected a proposal from Arm to buy its product division.

At the time, then-CEO Pat Gelsinger was reluctant to break up the business, which would essentially mean abandoning his efforts to transform Intel into a manufacturing powerhouse that could compete with TSMC.

Following Gelsinger’s ousting in December, Intel’s future as a combined chip designer and manufacturer (known in the industry as an integrated device manufacturer) looks uncertain.

According to the latest reports , Intel is in talks to sell its design business to Broadcom and its foundry unit to TSMC.

Meanwhile, private equity investor Silver Lake reportedly wants to buy a majority stake in Altera, Intel’s programable chip subsidiary.

However, with speculation about an Intel breakup running high, the firm’s complex licensing arrangement with AMD threatened to throw a spanner in the works.

Intel and AMD’s Cross-Licensing Arrangement

The roots of Intel and AMD’s intellectual property agreements can be traced back to 1976 when Intel first granted AMD a license to use its x86 instruction set architecture.

At first, AMD used the IP it licensed from Intel in a fairly straightforward manner. But as time went on, the firm built upon and improved the x86 specifications and Intel started to incorporate AMD’s technology in return. (Most notably, the 64-bit extension to the x86 architecture, AMD64)

As the x86 family has grown, the cross-licensing arrangement has become more complicated. And today there isn’t a single chip developed by either company that doesn’t use IP subject to their shared patent agreement.

According to that agreement , if either company is acquired, the other has the right to terminate its license. This effectively gives AMD veto power over any deal to sell Intel’s design business.

An Obstacle to Intel Acquisition

Because AMD spun off its foundry unit in 2009, the company has little interest in what Intel does with its manufacturing facilities.

Intel’s x86 IP is also owned by its design unit, not the foundry business being lined up for sale.

The Broadcom deal, on the other hand, would have a direct impact on AMD’s business.

As things stand, Broadcom is mostly in the business of networking solutions and wireless technologies and doesn’t compete directly with Intel and AMD in the CPU market for desktop or server CPUs.

However, if it acquired Intel’s chip design business, Broadcom would become a formidable competitor to AMD.

AMD’s Position in Intel Talks

Broadcom’s interest in Intel poses a challenge for AMD. A renewed Intel under Broadcom could dominate the global CPU market, but  AMD still needs Intel’s x86 license and would be in trouble if the company went under.

One possible scenario is that AMD uses its leverage to negotiate some form of compensation from Broadcom, either in the form of cash or collaboration on products they have a shared interest in.

AMD also has an interest in what happens to Altera, which competes with its own programable chip unit (formerly Xilinx).

From AMD’s perspective, selling Altera to Silver Lake or another neutral buyer is probably preferable to letting Broadcom keep it as part of any Intel takeover.