Advanced Micro Devices on Monday said that it would license its advanced unified shader graphics technology for handhelds to Freescale Semiconductor. The move will allow AMD to leverage its handheld graphics technologies originally developed by ATI Technologies, however, will also mean that AMD will get itself a rather strong rival.

Freescale will incorporate AMD’s industry-standard OpenGL ES 2.0 and OpenVG 1.0 graphics core technologies in its i.MX applications processors. i.MX processors with this graphics technology will be available for portable media players, portable navigation, home electronics and automotive infotainment applications.

The new generation Imageon mobile graphics architecture features unified shader architecture in addition to native hardware acceleration for rendering vector graphics and flash-like applications. This architectural design delivers high-quality graphics, while consuming less power than either software rendering or rendering using a traditional 3D graphics core. According to AMD, this combination is unique for the company.

“The adoption of AMD graphics technology by a world-leading semiconductor supplier validates our belief that thrilling graphics and attractive user interfaces are driving growth and revenues throughout the wireless industry. By licensing AMD’s leading technology, Freescale can leverage our patented unified shader architecture and the only native vector graphics hardware solution to offer their OEM customers outstanding graphics functionality,” said Adrian Hartog, senior vice president and general manager of AMD’s consumer electronics group.

Advanced Micro Devices and Freescale Semiconductor did not disclose terms of the deal. However, it is somewhat strange for a chip company to license its technologies to another chip company because of the fact that it creates another rival on the market. Freescale creates solutions for a broad portfolio of devices, just like AMD, therefore by providing advanced tech to Freescale the world’s second largest maker of x86 chips creates obstacles for its own consumer electronics group.

After AMD management gained control over ATI Technologies, graphics and multimedia business of ATI Technologies lost 40% of graphics products revenue in Q2 2007 compared to Q2 2006* (down from $325 million to $195 million) and also lost 37% of consumer electronics sales in Q2 2007 annually (down from $135 million to $85 million).

Perhaps, lowering sales of handheld graphics products made AMD to decide to change business model for the consumer electronics business. Though, the company denies it, saying that it started to offer various companies to license handheld graphics technologies back in February, 2007, when STMicroelectronics licensed AMD graphics technology, including 2D, 3D and vector graphics core engines, as well as related software compliant with OpenGL ES 2.0 and OpenVG 1.0 standards. STMicroelectronics intends to combine AMD’s handheld unified shader architecture graphics technology with its Nomadik platform.

*We compare data between AMD’s Q2 of fiscal 2007 (which ended on June 30, 2007) and ATI’s Q3 of fiscal 2007, which ended May 31, 2006).