Reports emerged today that the United States Department of Commerce will add AMD's THATIC Joint Venture to the entity list, saying Sugon, which has an ownership stake in the venture through its subsidiaries, is "acting contrary to the national security or foreign policy interests of the United States."

The action would cut off the joint venture's access to US technology, and while the report does not specify a date for the action to go into effect, it comes a week before President Trump's scheduled trade talks with China President Xi Jinping at the G20 summit as the two countries remain embroiled in a trade war.

The ruling also has an impact on Intel and Nvidia, as Sugon has developed 10 of China's 20 fastest supercomputers, and continues to develop more based on AMD, Nvidia, and Intel components. Given the company's deep involvement in developing supercomputers for China, it could also put a large dent in the country's exascale ambitions.

AMD originally established the joint venture (JV) in China, called the Tianjin Haiguang Advanced Technology Investment Co. Ltd. (THATIC), in 2016 and agreed to license its x86 and SoC IP for chip development in a deal worth $293 million (plus royalties). The joint venture consists of a web of both public and private Chinese companies, including the Chinese Academy of Sciences that is heavily influenced by the Chinese government.

AMD CEO Lisa Su confirmed to Tom's Hardware at Computex 2019 that the company isn't licensing further chip designs to its China-backed joint venture. That means that AMD's joint venture was already confined to the Zen architecture that debuted in first-gen Ryzen and EPYC Naples processors, and would not move forward with designs based on AMD's new Zen 2 microarchitecture that powers the third-gen Ryzen and EPYC Rome processors.

The impact of a ban on the JV's current chip production, which includes both EPYC Naples- and Ryzen-derived chips, remains unknown. However, the document states: "The EAR imposes additional license requirements on, and limits the availability of most license exemptions for, exports, re-exports, and transfers (in-country) to listed entities." The document also states that the license review policy for the entities is a "presumption of denial."

The Department plans to institute the ban against THATIC because Sugon, a Chinese supercomputer vendor, has "publicly acknowledged a variety of military end uses and end users of its high-performance computers."

Haiguang Microelectronics Co. Ltd. (HMC) Chengdu Haiguang Integrated Circuit Design Co., Ltd (Hygon) AMD Ownership % 51% 30% Tianjin Haiguang Holdings Ownership % 49% 70%

The blanket ban would apply to all of Sugon's subsidiaries, which includes Chengdu Haiguang Integrated Circuit and Chengdu Haiguang Microelectronics Technology, both of which are partners in AMD's THATIC joint venture. The document also explicitly lists THATIC as an entity.

The Chinese government is known to provide preferential treatment to indigenous companies, so the partnership provided AMD with a springboard into the booming Chinese market. The deal was also thought to give China access to critical x86 technology, long an ambition of the Chinese government to help close the country's massive technology gap with the U.S., but the finer details of the technology transfer are unknown. AMD has clarified that it did not transfer the register transfer level (RTL), which is much like the 'source code' of its architecture, to the JV, but the JV can modify some parts of the design to customize the chips for the China market. AMD isn't being more specific about the licensed technologies. Sources close to the matter tell us that while some portions of the core can be modified, other parts cannot.

The agreement allowed Hygon, a Chinese server vendor, to design specialized processors based upon AMD's Zen microarchitecture, which is the underlying design of AMD's Ryzen and EPYC processors. Many of the architectural customizations consisted of specialized cryptographic elements that meet the requirements of the Chinese government, with the first products consisting of Hygon's 'Dhyana' x86 processors that appeared to be near-replicas of AMD's EPYC data center processors. We are told there are other optimizations to the architecture that are designed specifically for the Chinese market, but we haven't been given more details.

From a larger perspective, this event isn't unprecedented: In the past, the Obama administration blocked China's access to some Intel processors to prevent them from being used for military pursuits, such as nuclear research, but that action has largely been credited with China's development of its own chips to power the Tianhe supercomputer.

Intel also has a partnership in China with Tsinghua University, long known to be heavily influenced by the Chinese government, and Montage Technology Global Holdings, a Chinese server vendor, that allows the development of a co-processor that connects to Intel's Xeon cores to provide China-approved encryption/decryption technologies. These two solutions are combined in a single "Jintide" package, but Intel didn't grant the companies access to its core IP. It remains to be seen if that initiative will also be added to the entity list.

We have reached out to AMD for comment and will update as necessary.