The agreement allows AMD to use Denali's Databahn Nand Flash controller and Spectra Flash file system in next-generation processors for handheld devices.
The licence will include the Databahn core technology, as well as hardware and source code, along with test and simulation support.
Nand Flash memory forms the core of removable USB Flash drives, as well as most memory card formats available today.
"An endorsement from a leading silicon provider like AMD is a strong testament for our technology," said Robert Pierce, senior director of Flash products at Denali.
Pierce claimed that Databahn is well suited for applications that need high-density memory, direct Nand boot with high performance, quality and reliability, and will give AMD a competitive advantage over handheld manufacturers.
"Denali is addressing not only the silicon resource cost but the performance needs of hardware designers developing mobile and consumer electronics," he added.
Following its acquisition of graphics company ATI, AMD has amassed more than 20 years of graphics and multimedia expertise.
This new deal is expected to spur the continued development of its Imageon media processors, helping the company to a bigger stake in the mobile and handheld market.
"Design requirements for handheld devices continue to become more complicated and more diverse," said Shawn Kermanchi, engineering director at AMD's Handheld Division.
"AMD is continually looking for ways to help our OEM customers bring compelling features to market while reducing integration time."
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