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AMD Disputes WSJ Story Claiming Chinese Joint Ventures Sidestepped U.S. Regulations

'AMD’s belief is that it did everything correctly and transparently in interactions with the U.S. Government in advance of and since forming these joint ventures,' the chipmaker says in response to a Wall Street Journal story claiming that its Chinese joint ventures sidestepped U.S. regulations.

AMD is disputing several details in a recent Wall Street Journal story, which reported that the chipmaker had sidestepped U.S. regulations to provide processor technology to Chinese partners for the development of supercomputers that could be used for military purposes.

The Wall Street Journal published the story on Thursday, titled "How a Big U.S. Chip Maker Gave China the 'Keys to the Kingdom,'" which reported on the concerns of current and former national-security experts who believed AMD's two joint ventures in China gave the country important technology for building its first exascale supercomputer as the U.S. races to build its own.

[Related: PTC CEO: U.S. Blocking Huawei As A Customer Doesn't Do Any Good]

AMD's joint venture partner, THATIC, along with affiliated Chinese entities, including Sugon, were among those blacklisted from buying U.S. technologies by the Department of Commerce last week for "acting contrary to the national security or foreign policy interests of the United States."

AMD told the newspaper that the Santa Clara, Calif.-based company "has and will continue to comply with all U.S. laws," including the Commerce Department's latest actions against the Chinese firms, and that the x86 CPU technology supplied to China was lower performance than what was commercially available on the market at the time of the transfer.

The chipmaker outlined its disputes with The Wall Street Journal article in a Thursday blog post published to its website — repeating some of the statements that were published in the story.

"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," the post stated. "AMD takes strong exception to characterizations in the story that it did not act properly or transparently in creating the joint ventures."

A spokesperson for The Wall Street Journal said the newspaper stands by its reporting, which was "based on 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 China," according to the article.

AMD Says It Received No Objections To Chinese Joint Ventures

Among the details AMD disputed was the claim in the article by current and former national-security officials that the chipmaker structured its joint ventures with THATIC, or Tianjing Haiguang Advanced Technology Investment, in a way that allowed the company to sidestep U.S. regulations. The company told the newspaper that the joint ventures were structured to abide by regulations.

AMD said in its statement that it "diligently and proactively briefed the U.S. Department of Defense, the Department of Commerce and multiple other U.S. agencies" and that there were no objections — contradicting assertions in the story that Pentagon officials sought to "unwind the deal."

"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," the company said.

An AMD spokesperson told CRN that the Chinese joint ventures "were set up to sell complementary server processors for the commercial China market," and that the sale of their processors are contractually limited to certain market applications, which do not include military uses.

The Wall Street Journal story reported that AMD's Chinese joint venture for licensing its x86 processor technology involved Sugon, a state-owned supercomputer developer that makes systems for military and civilian uses. AMD acknowledged that Sugon's involvement is not insignificant but noted that the joint venture, which is called Higon, is through a partnership with THATIC, which is owned by Sugon and other companies.

With the U.S. now blacklisting AMD's Chinese joint ventures and partners, the chipmaker said it is not providing further technical assistance to the joint ventures to comply with the rules.

AMD Says Chinese Partners Are Using Lower-Performance Chips

While The Wall Street Journal reported that AMD's Chinese joint ventures gave the country important technology to develop exascale supercomputers, the chipmaker de-emphasized the capabilities of the x86 processor technology it transferred to Chinese partners.

The company claimed that The Wall Street Journal omitted details about how AMD "put significant protections in place to protect its intellectual property and prevent valuable IP from being misused or reverse engineered to develop future generations of processors."

The AMD spokesperson added that the x86 core processor technology was transferred to the Chinese joint venture with THATIC had lower performance than its first-generation EPYC server CPU that rebooted the chipmaker's data center efforts when it launched in 2017.

"We licensed one generation of CPU core that had protections in place so that there isn’t any practical way for it to be reverse engineered or for there to be incremental designs extended from generation to generation," the AMD spokesperson said. "This idea we turned over the ability for the joint venture or China to design x86 chips, it's a gross oversimplification."

AMD is also not licensing newer chip designs to the joint venture, AMD CEO Lisa Su told told Tom's Hardware earlier this month, meaning its Chinese partners will not have access to the technology underlying its second-generation EPYC processors that are coming out later this year. Su's comment was made before the Commerce Department announced the blacklisting of AMD's Chinese joint ventures.

AMD announced in May that it would supply future generations of its EPYC processor and Radeon Instinct GPU to Frontier, one of the first U.S. exascale supercomputers, that it said would be the world's fastest when it's expected to go online in 2021.

"When you look at the amount of innovation that is going into Frontier […] we believe that at the time of power on the Frontier system really will be the most powerful super computer system in the world," Su said at the time of Frontier's announcement in May.

WSJ Story Underlines Escalating Tensions Between U.S. And China

The new scrutiny faced by AMD's activities in China underlines the increasing escalations between the U.S. and China since President Trump took office in 2017, according to Dominic Danginger, vice president of engineering at Nor-Tech, a Burnsville, Minn.-based high-performance computing AMD partner.

"I absolutely think that was the case that it got a lot stickier, and we're seeing all kind of evidence for that," he said, pointing to recent events in the tech industry such as Supermicro reportedly shifting motherboard production out of China over customers' concerns about security.

One of the Trump administration's biggest targets as its trade war with China continues has been telecom giant Huawei, which was blacklisted from buying U.S. technologies in May over national security concerns.

Daninger said he doesn't think AMD's Chinese joint ventures would have been possible if they were set up now.

"I think in the current political environment, I don’t think any American-based company would do something like that, because the risks in that, it's just not worth it," he said.

In AMD's post about the WSJ story, the chipmaker seemed to acknowledge the current political climate.

"AMD’s belief is that it did everything correctly and transparently in interactions with the U.S. Government in advance of and since forming these joint ventures," the company said. "We recognize that there are increased sensitivities and concerns today around national security and technology."

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