In a deal that could help restore Advanced Micro Devices' (AMD) declining fortunes, the chip-maker is to set up a research and development joint venture with an educational software company in Shanghai. It could lead to the use of its microprocessors in millions of personal computers in Chinese schools over the next 10 years. The deal, signed yesterday, will see the chip-maker and Shanghai's China Basic Education Software form the Beijing CBE AMD Information Technology Co. The company will work on three reference designs for computers for use by students and teachers. According to AMD, the new company plans to develop three types of hardware platform - a Student PC, a Teacher PC and a Classroom Server. The platforms will contain AMD chips, including its x86 microprocessors, MIPS-based embedded processor, and Flash memory devices. The reference designs will be licensed to third-party manufacturers for production. The deal is subject to regulatory approval. AMD chief executive Hector Ruiz said: 'We expect this relationship to solidly position AMD as a preferred supplier in China and expand AMD's participation in China's microprocessor, embedded processor and Flash memory markets.' The company would not reveal financial details of the joint venture. China is becoming the world's largest PC market. It is already the world's fastest-growing PC market. The business opportunity could be huge for AMD, which has been struggling with weak demand for its Athlon and Duron processors during the economic downturn. AMD competes against Intel in home PCs and is weak in the enterprise sector. AMD moved its South Asia-Pacific headquarters from Hong Kong to Shanghai on October 1. PC analyst Kitty Fok from market research firm International Data Corp said the joint venture could be significant for AMD because it would translate to critical new business for the company. 'China's Education Bureau is in a major push to speed computer literacy across the country so schools across China are spending on new hardware and software. The tie-up with a company backed by the education ministry is promising,' she said. China's Ministry of Education has mandated that all schools be connected by 2010 to the China Education and Research Network, a national academic network. Ms Fok said the announcement 'sounds good for AMD because it really needs to gain more momentum in China, where it has a relatively low-key presence. This deal might see AMD coming forward in more areas to really help drive the PC market in China'. Ms Fok said apart from this latest deal, there had been some encouraging signs for AMD's business in China. The mainland's PC market is 48 per cent dominated by local players, such as Legend, with white boxes accounting for 32 per cent and multinational PCs taking just a 20 per cent share. 'AMD has over 45 per cent market share in China's white-box business, which is much higher than other Asian countries,' she said. However, Legend Group, the country's biggest supplier of PCs, mostly uses Intel chips, as do Dell Computer, Hewlett-Packard and IBM. 'Intel dominates the market by far, so I don't think this AMD deal is going to worry them at all,' said Ms Fok. Beijing-based China Basic Software Education Co was formed in February last year by Shenhua Holdings, the Ministry of Education's National Centre for Curriculum and Text and Beijing Normal University. The deal is the third major agreement between a multinational corporation and China's education sector. In June, Microsoft announced it would work with the ministry and five leading Chinese universities. In March Sun Microsystems donated software to mainland schools.