New York Adopts an Industrial Policy in Suing Intel 15 comments
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I didn’t get why the NY attorney general is suing Intel (INTC), other than it’s the same publicity-seeking path his predecessor to get elected governor. Antitrust enforcement is a Federal issue, whether for the US DoJ/FTC/FCC or the Eurocrats in Brussels.
However, blogger Geoffrey Manne suggests that NY has an interest in hurting Intel and helping AMD, given that AMD is talking about building a $3 billion plan in upstate New York. For some reason, I thought the idea of Federalism and the Constitution was to prevent inter-state trade wars, but I guess both have gone out the window along with original intent.
Like most lawyer-politicians, the AG’s understanding of business and economics is dubious at best. FT’s Lex aptly summarized the likely effect:
Share prices for Intel and competitor Advanced Micro Devices barely reacted. The problem for AMD, which is set to face Intel in a Delaware courtroom in March, is that legal victories offer only consolation, and perhaps the chance of a pay-out to help pay down debt. The period when the company had a clear technological advantage and opportunity to make a dent in Intel’s market share of about 70 per cent has passed.
…
[E]ven if, as alleged, Intel is shown to have forced customers to guarantee market share levels in return for cash rebates, the structure of the industry will probably remain unchanged.
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This article has 15 comments:
There are plentiful reports that Intels Market Development Funds to Dell amounted to 110% of Dells profits. The good news is that even this was not enough, Intels monopoly greed and waste still made the deal uneconomic, so Dell ended it and started selling AMD chips.
The only time Monopolies work is when they pass on part of their superior cost savings to their customers. And that never lasts, greed causes fools to kill the goose that lays the golden eggs.
1. Doing his job of filing a federal antitrust lawsuit against Intel, that is long over due -- the Intel's dirty deals happened in 2001-2006, now we are in 2009 -- because the incompetence of the Bush administration. Its strategy of dragging the only meaningful competitor AMD with the stupid time-consuming US legal system worked well before in the 80386 generation, so it did it again in the x86 64-bit generation that AMD innovated and pioneered. Regarding the x86 64-bit generation, Intel is not only just a follower but also keep telling customers that you don't need neither x86 64-bit nor dual-core, instead asking people to use its 64-bit CPU that isn't compatible with x86. Who is the innovator?
2. Advancing his career by doing his current job. What's with this? Everyone is trying to move forward and upward for his/her career.
Actually, this is a win-win-win for PC consumers (general public as his customers), him, and educating dominators, why not?
Why don’t AGs of other states sue?
They don’t care because they may not be interest in advancing they careers away from being AGs, or even worse they don’t even know the issue, see the problem, or understand the problem.
How about the US Justice Department that is in charge of antitrust?
It was buried under ground during the Bush administration. Hopefully, it will be different now and do the right thing right since it is now under the Obama administration.
About volume discount and rebate:
Around $6B of block payments paid to Dell, especially based on Dell's quarter earning needs, to buy Dell out for Intel exclusivity ISN'T VOLUME DISCOUNT, PERIOD.
Have you seen a price book listing volume-discount prices conditioned with not buying competitors' products at all or buying no more than certain limits? I used to be a product marketing guy for the #1 chipset company, and the company offered volume discount for selling in quantity but NOT CONDITIONED WITH EXCLUSIVITY OR LIMITS RELATED TO ITS COMPETITORS' PRODUCTS.
Have you seen a consumer rebate that is conditioned with not allowing you buying or using its competitors' products at all or at least no more than certain limits. All the rebates I have seen only require proof of purchase and receipt with date, period.
Whatever terms they use in playing with the legal system, the two dirty CEOs of Intel and Dell are above the law!
Without the two dirty CEOs' cooperation, AMD now probably has a 50-50 or at least 40-60, surely not the current 20-80, competition against Intel, competing a lot more effectively with the needed scale of economy in manufacturing, marketing, selling and even engineering, especially in chip manufacturing that the utilization of a fab is the key, and Intel executives, current and past, know this too well and play so very well! God has been taking a sabbatical leave since 2001.
Intel tried to choke AMD during the 32-bit 386 generation in the past, but failed - AMD is alive - and yet also succeeded a great deal because its strategy of using the time-consuming legal system to slow down AMD worked very well, so it has been playing with the legal system the 2nd time when AMD invented the 64-bit x86 a few years back. But unfortunately, the Bush administration had slept for eight years. Hopefully, now the Obama administration will be different!
Intel's very successful strategy is that do whatever needed to limit and slow down AMD's growth and deal with the legal issues later by leveraging the time-consuming legal system. Time is always on the market dominators' side, especially in the fast-moving electronics industry. AMD is the only meaningful competitor competing with and pressuring Intel in the PC CPU market.
AMD did gain some share, but a lot less than what it would gain if Intel didn't play dirty by leveraging the time-consuming legal system.
Without the two dirty CEOs' cooperation, AMD now probably has a 50-50 or at least 40-60, surely not the current 20-80, competition against Intel, competing a lot more effectively with the needed scale of economy in manufacturing, marketing, selling and even engineering, especially in chip manufacturing that the utilization of a fab is the key, and Intel executives, current and past, know this too well and play so very well!
If what Intel did is right, every American should just constraint and keep all other Americans' kids in elementary schools for all their whole lives except his/her own kids, so they won't grow through middle schools, high schools, or even colleges to become WELL EDUCATED, LAW-ABIDING ADULTS to compete more effectively with his/her kids.
On Nov 08 05:59 PM paul.ottelini wrote:
> Intel doesn't have to pay anybody to see their point of view or to
> use their chips. Which have become far more superior today than ever
> before. The time in question that this self serving Cuomo is talking
> about, AMD actually did gain market share. And AMD's main deterent
> to gaining even more market share was their inability to mass produce
> their more desireable product for that time. Intel clearly has gained
> a huge distinction now in technology by capitalizing on their decade
> long research and development on a new fabrication process with new
> materials which AMD is having trouble mastering. The key point to
> remember, which cannot be doubted, is that PC's have dramatically
> improved over the years while coming down in price significantly
> which serve the customers around the world very well. And it has
> been more Intel's great technological advancements that has served
> the public rather than AMD's attempts to compete. One of the most
> important fact of evidence was denied by the EU, which was the statement
> by Dell executives that their main reason to use Intel was the superior
> technology they had over AMD. If the legal systems of the world try
> to follow the ways of the European Union to try to punish Intel will
> only result in higher prices for consumers. And in the United States,
> that means that our public official are causing a great disservice
> to the very people who elected them and are paying their salaries
> through taxes.
For well established, publicly traded companies doing legal businesses, pricing deals are negotiated UP FRONT IN WRITING with quantity, price and even kickback (meeting quantity requirement in certain time period, but not excluding or limiting competitors' products) breaks, especially for very high volume deals, not paying blocks of kickbacks basing on the needs of quarterly earning reports. Even worse, I hope there is no kickback money to individauals (CEOs and executives) involved in deals that aren't in writing.
On Nov 08 05:59 PM paul.ottelini wrote:
> The key point to
> remember, which cannot be doubted, is that PC's have dramatically
> improved over the years while coming down in price significantly
> which serve the customers around the world very well. And it has
> been more Intel's great technological advancements that has served
> the public rather than AMD's attempts to compete.
It is unbelievable to me that anybody can possibly think AMD is the good guy or some kind of victim here. It is not so now and it never has been. Wake up...
1. AMD invented 64-bit x86 CPUs, then Intel followed.
2. AMD started dual-core CPUs, then Intel followed.
3. AMD had a memory controller integrated on chip with CPU, then Intel followed after being in denial for some time.
Intel do have very good and capable engineers who I respect, but unfortunately its CEO and executives govern its product roadmaps. Who in Intel make the following decisions:
1. Promoting a new 64-bit CPU that isn't compatible with x86.
2. Telling consumers that they don't need 64-bit CPUs.
3. Telling consumers that they don't need dual-core CPUs.
4. Telling consumers that an integrated on-chip memory controller won't make any difference in performance.
Both Intel and AMD have very good and capable engineers, but the single most powerful weapon Intel has is the scale of economy. This is the reason why Intel constrained and limited, legally or not, its only meaningful competitor AMD's growth as much as it can, so the competitor didn't have the chances to grow large enough to compete with it effectively, e.g. this antitrust case.