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CFIUS Must Consider AMD’s Position as Military Supplier when Vetting Abu Dhabi Deal

written by: •edited by: Lamar Stonecypher•updated: 12/29/2008

Letting a foreign government have significant say in the corporate affairs of companies that supply a large portion of domestic technological infrastructure and parts to military suppliers, rightly concerns the US government.

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    Our previous articles gave a little background on CFIUS, and why AMD’s fabrication spin-off plans require the Committee’s approval. Many concerns that CFIUS looks at are involved in the transaction, but we can summarize them into two main considerations: how important is AMD to US national security, and is the buyer going to take advantage of that? We deal with AMD’s relations with the US military and the availability of AMD’s products in Iran in this article, the relationship between the USA and UAE in the next.

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    Internet is Made Offshore Anyways

    As far as infrastructure and supply questions, semiconductor manufacturing is a largely oversees affair. The chips used to maintain telecommunications, including the Internet, mainly come from Asia. AMD might get some of its Pentagon business by virtue of making chips in Germany, a NATO ally.

    The transaction AMD and Abu Dhabi have in front of CFIUS involves building a $4 billion foundry in Saratoga County, NY (with a $1.2 billion grant from the State). Thusly, there is at least some national security benefit from the deal.

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    US Military a Big AMD Customer

    We touched on AMD’s military business in the previous article, pointing out that they do business with the military, apparently supplying off the shelf parts, but that if there were classified projects as well, we wouldn’t know about them. AMD’s director of public sector sales, George Warren, said earlier this year that “every branch of the military is using our stuff.” (Forbes)

    The off the shelf parts aren’t really a big deal, or at least they shouldn’t be. Blocking the deal based on the fact that it would give the UAE access to technology anyone in the UAE can currently buy dramatically. Certainly, AMD's plans pale in comparison to letting a foreign government control domestic ports, as the DP World deal involved.

    The concern that off the shelf AMD parts could end up in embargoed Iran is realistic. But this has to be looked at as a possible increase in the amount of chips Iran can smuggle in, not giving them access to unprecedented technology. This was proven in 2007 when the Iranian High Performance Computing Research Center announced they had built a super-computer with 216 AMD Opteron CPUs they weren’t supposed to have.

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    That Sounds Dangerous

    We will, to be on the safe side, out of hand reject Iranian claims that the computer is for weather forecasting. But even if they have some nefarious purpose in mind, they don’t appear to need a sophisticated smuggling network to get these products into Iran. We even turned up a website with tech news and reviews for AMD users in Iran.

    Trying to keep CPUs out of Iran, whatever one’s political views are, isn’t working. Also, CFIUS is specifically not supposed to look at political or diplomatic issues, only ones of national security while maintaining an open and fair financial system.

    The Iranian, or any government’s, ability to acquire products that are widely and internationally manufactured and available, should be assumed. This is one of the cons of using what the military calls commercial-off-the-shelf, or COTS, parts in military design (Military & Aerospace Electronics), not a problem specific to AMD’s plans. While cheap and available computing power has countless advantages the world over, it does make denying it to unfriendly governments impossible.

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    But Huawei/3Com Got Shot Down and They Aren’t Near Iran

    True, but not on the grounds that US technology was falling into the wrong hands: Huawei got shot down because, we think (remember CFIUS deliberation is completely confidential), they are believed to have connections with the Chinese military, and “the concern in Washington was that the Chinese company would be able to alter the equipment to make it less than 100 percent effective.” (International Herald Tribune)

    How CFIUS views the deal is closely related to how they view the UAE as opposed to China. We examine the US’s national security relationship with the UAE and how it affects AMD in the next article.

Do Recent Changes to CFIUS and a New White House Complicate Needed Approvals for AMD’s Asset Lite Plans?

AMD seeks approval from the President’s Committee on Foreign Investment in the US for its fabrication spin-off plans. Will backlash from DP World, new requirements for reporting to Congress, and a whole new administration and staff make getting that approval more difficult?
  1. AMD Seeks Approval For Foundry Spin-Off from an Ever Changing CFIUS
  2. AMD’s CFIUS Approval Hinges on Many Factors
  3. CFIUS Must Consider AMD’s Position as Military Supplier when Vetting Abu Dhabi Deal
  4. AMD’s CFIUS Approval Based on US-UAE Relations
  5. Which White House is Handling AMD and Abu Dhabi’s CFIUS Review?