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AMD announced yesterday that it would create a new venture called The Foundry Company, which would focus on manufacturing processors, in partnership with Dubai-based firm Advanced Technology.

AMD, meanwhile, would focus solely on designing processors. But Intel spokesman Chuck Mulloy says that AMD and Intel have

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a patent cross-licensing agreement under which AMD pays royalties to Intel.

"Intel has serious questions about this transaction as it relates to the licence and will vigorously protect Intel's intellectual property rights," Mulloy said of AMD's announcement.

Mulloy said Intel has asked AMD to make the agreement public but the company refused, so he was not at liberty to discuss the matter in detail.

AMD hopes the restructuring will allow the loss-making chip maker to compete more effectively with Intel.

The Foundry Company's first tasks will be to upgrade the capacity of AMD's existing plant in Dresden, Germany, as well as building a new state-of-the-art fab in New York.

"With The Foundry Company, AMD has developed an innovative way to focus our efforts on design while maintaining access to the leading-edge manufacturing technologies that our business needs without the required capital-intensive investments of semiconductor manufacturing," Dirk Meyer, president and CEO of AMD said of the deal.