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Intel Fires Back At FTC In Antitrust Suit
adeelarshad82 writes "Intel has responded to the Federal Trade Commission's antitrust investigation, unsurprisingly challenging the FTC's allegations as well as criticizing the agency for what the company calls an attempt 'to turn Intel into a public utility.' The motion is a response to the FTC's December announcement of a lawsuit brought by the FTC, accusing Intel of anti-competitive practices. Intel also goes on to provide a paragraph-by-paragraph rebuttal of the FTC's complaint and proposed remedy, although most of the company's response seems designed to promote the impression that those that failed, failed on their own."
Actually, anti-trust issues are exactly the sort of thing that needs to be handled by the government because no one else is in a position to do so. There are many good reasons for anti-trust issues: 1) large controling companies in industries can hurt customers, stifle competition and stifle innovation. 2) They make industries and the economy as a whole more vulnerable to sudden fluctuations (look what happened in the banking industry. That was in part because the largest banks were too large. Unfortunately, we haven't really dealt with that part of the problem...). The FTC doesn't need to know how to run a business. They just need to know how to identify anti-competitive practices.
..because even when AMD was price AND performance king of the x86 CPU, Intel still sold more due to market manipulation.
"His name was James Damore."
Actually it's Intel's business practices during the time (and before) Athlon was "king of the world" that are at issue. They fed companies "cooperative marketing" funds (read cash handouts and sweetheart pricing deals) via the "Intel Inside" program that were not based on how much Intel product they moved, but rather on them not selling AMD parts. There were companies that wanted to sell more AMD, but couldn't because with the amount of money Intel was giving them, it simply didn't make sense. They would have been crushed by competitors who were willing to play ball with Intel.
Thus was Athlon's marketshare artificially limited, which can be seen as a cause of AMD later falling behind. There was a brief period in the K8 days where AMD was fab capacity limited, but this too is because AMD had not secured enough revenue from Athlon to build as aggressively as they would have otherwise.
As usual, legal entities like the FTC move slowly, and the issues they actually act upon are thus well in the past. Not that Intel stopped engaging in these practices until (possibly) very recently, when other trade organizations around the globe started hammering them and AMD's lawsuit against them was settled in AMD's favor. It's just understandably harder to see the business practice issues when Intel's products are also superior.
The enemies of Democracy are
Intel has a good point. If the a major point of the FTC's inquiry is that they have an integrated presence in the market, then is Intel being penalized partly for merely being successful, and making good business decisions? Pah. They are in a competitive business. AMD is suffering as much for their choice in manufacturing partners as anythuing right now. Design aside.
I believe that the major points in the FTC's inquiry involved Intel essentially holding their immediate customers over a barrel involving pricing of their chips. Specifically:
http://www.ag.ny.gov/media_center/2009/nov/nov4a_09.html
By leveraging their market position, Intel provided "rebates" to customers who went with Intel exclusively. When a computer maker wanted to offer AMD-based systems, Intel would threaten to raise their per-chip cost to a point where the maker couldn't compete. There are plenty of other notes. Please feel free to review and comment.
CPU manufacturing is what is known as a "natural monopoly."
No, it's not. According to Wikipedia: "In economics, a natural monopoly occurs when, due to the economies of scale of a particular industry, the maximum efficiency of production and distribution is realized through a single supplier, but in some cases inefficiency may take place.
Natural monopolies arise where the largest supplier in an industry, often the first supplier in a market, has an overwhelming cost advantage over other actual or potential competitors. This tends to be the case in industries where capital costs predominate, creating economies of scale which are large in relation to the size of the market, and hence high barriers to entry; examples include public utilities such as water services and electricity. It is very expensive to build transmission networks (water/gas pipelines, electricity and telephone lines), therefore it is unlikely that a potential competitor would be willing to make the capital investment needed to even enter the monopolist's market."
While fabs may be expensive, I really don't think that is what is keeping other companies from entering the market. In fact, a fab has to be retooled every few years to manufacture chips with a new/smaller process. What's keeping other companies out of the desktop CPU market is licensing. Nvidia has been rumoured to be trying to enter the x86 cpu market for the last couple of years but has been unable due to licensing restrictions of the x86 architecture.
AMD no longer owns their own fabs but they are still a "CPU Manufacturer." They design the chips which are made by someone else's Fab.
I really don't think the global market can support more than 3 companies doing this.
Off the top of my head: Intel, AMD, Freescale, IBM, TI, Motorola, NVIDIA, Qualcomm, ARM (Who designs a lot of chips made by TI, Freescale and Qualcomm,) and Sun.
"Frequently wrong, never in doubt."