How Intel competed as a near-monopoly.. and why it's not fair

[brxndxn]

Intel, from 2001-2005 pretty much was clearly beat in terms of processor performance by AMD. Yet, somehow, you had Dell and other large oems stick to being exclusively Intel - until antitrust allegations were brought up.

A lot of people are saying, "Intel has the best.. AMD cannot compete. Screw AMD." But, AMD is having trouble competing right now because they are severely cash-strapped.

Here's why Intel was able to keep AMD cash-strapped:

Say you need to buy 1,000,000 processors this quarter. Of course, you must by most of them from Intel. The only other option is AMD. So, you plan to buy 900,000 Intel processors and 100,000 AMD processors.

Intel would offer the following options:
1,000,000 processors with average selling price (ASP) of $90 ~ $90,000,000 total
900,000 processors with average selling price of $100 ~ $90,000,000 total
800,000 processors with average selling price of $115 ~ $92,000,000 total

The pricing structure was set up according to percentages - unique to each oem. So, a smaller oem could get a similar pricing structure according to the percentage of Intel processors they bought. (Of course, the prices would be higher than at a large oem like Dell - but they would be set up in the same way.)

So.. with pricing structure like this, how many AMD processors do you buy if AMD does not want to give them away for free?

This is a serious matter that is getting ignored in the US. And, AMD is getting acused of being anti-american for trying to expose this.

 

[jonmcc33]

Why do you care? As long as there's serious competition with pricing and performance we, the consumer, are only going to benefit more. Right now it's not as much pricing but performance, AMD has fallen behind so most of the former AMD fanboys have switched. I know 2 years ago most of the people here had AMD rigs. Now look at the change. Why is that? AMD became too comfortable with their technology, not realizing that Intel had not price cuts but a new performance king just waiting to arise. Now AMD is playing catchup where they should have been continuing to develop and improve their technology.

 

[21stHermit]

Originally posted by: brxndxn
Intel, from 2001-2005 pretty much was clearly beat in terms of processor performance by AMD. Yet, somehow, you had Dell and other large oems stick to being exclusively Intel - until antitrust allegations were brought up.

A lot of people are saying, "Intel has the best.. AMD cannot compete. Screw AMD." But, AMD is having trouble competing right now because they are severely cash-strapped.

Here's why Intel was able to keep AMD cash-strapped:

Say you need to buy 1,000,000 processors this quarter. Of course, you must by most of them from Intel. The only other option is AMD. So, you plan to buy 900,000 Intel processors and 100,000 AMD processors.

Intel would offer the following options:
1,000,000 processors with average selling price (ASP) of $90 ~ $90,000,000 total
900,000 processors with average selling price of $100 ~ $90,000,000 total
800,000 processors with average selling price of $115 ~ $92,000,000 total

The pricing structure was set up according to percentages - unique to each oem. So, a smaller oem could get a similar pricing structure according to the percentage of Intel processors they bought. (Of course, the prices would be higher than at a large oem like Dell - but they would be set up in the same way.)

So.. with pricing structure like this, how many AMD processors do you buy if AMD does not want to give them away for free?

This is a serious matter that is getting ignored in the US. And, AMD is getting acused of being anti-american for trying to expose this.

Isn't America wonderful, every crackpot can have their own pet conspiracy theory . . . now we know yours!!!

 

[harpoon84]

And yet, despite all this, AMD actually grew marketshare considerably when they had a decisive performance lead starting from late 2003 through to mid 2006. Marketshare went from around ~11% during the Athlon XP days to ~25% during the peak of the K8 reign, so obviously gaving a competitive product helps.

I don't think it's coincidence that since C2D was released AMD has been in the red.

You want fair? Donate $10billion to AMD so they can play on a level field financially.

Otherwise, $$$ talks. Eventually the 10x bigger R&D and marketing budget of Intel is going to wear AMD down... I can just see it coming. It sure as hell ain't fair, but such is life ain't it.

My parents had to close down their business because large franchises were getting bulk discounts that we could only dream of. Was that fair? Probably not. But hey, we get on with life.

 

[shabby]

Originally posted by: brxndxn

Intel would offer the following options:
1,000,000 processors with average selling price (ASP) of $90 ~ $90,000,000 total
900,000 processors with average selling price of $100 ~ $90,000,000 total
800,000 processors with average selling price of $115 ~ $92,000,000 total

This is nothing new, the more you buy the cheaper the asp is, its like this everywhere.
Using your logic monoprice.com is a monopoly too, because they sell one cable for $2 while 50 cables are $1.15 each.

 

[Phynaz]

I nominate this as the most pointless post of 2007.

Do I have a second?

 

[jmmtn4aj]

Originally posted by: jonmcc33
Why do you care? As long as there's serious competition with pricing and performance we, the consumer, are only going to benefit more. Right now it's not as much pricing but performance, AMD has fallen behind so most of the former AMD fanboys have switched. I know 2 years ago most of the people here had AMD rigs. Now look at the change. Why is that? AMD became too comfortable with their technology, not realizing that Intel had not price cuts but a new performance king just waiting to arise. Now AMD is playing catchup where they should have been continuing to develop and improve their technology.

Isn't the reason monopolies are bad because competition isn't as fierce as it should or could be?

 

[jonmcc33]

Originally posted by: Phynaz
I nominate this as the most pointless post of 2007.

Do I have a second?

Your post or this thread? I'd agree with both!

 

[Aluvus]

Originally posted by: jonmcc33
Why do you care? As long as there's serious competition with pricing and performance we, the consumer, are only going to benefit more. Right now it's not as much pricing but performance, AMD has fallen behind so most of the former AMD fanboys have switched. I know 2 years ago most of the people here had AMD rigs. Now look at the change. Why is that? AMD became too comfortable with their technology, not realizing that Intel had not price cuts but a new performance king just waiting to arise. Now AMD is playing catchup where they should have been continuing to develop and improve their technology.

Intel allegedly cut deals with OEMs (Dell, etc.) whereby the OEMs got a discount for not selling any AMD products. They are also accused of various other practices that would indicate abuse of a monopoly-like position. That was the source of AMD's antitrust complaint. AMD provides a summary (PDF) of what they say happened. Intel has since changed their OEM pricing, which is why for instance you see Dell beginning to sell Opteron-based servers and now Athlon 64/X2 systems.

The enthusiast market is much smaller than the OEM market, both in terms of number of units sold and in terms of profits. The OEM market is also where all the growth is: laptop and server sales are growing, desktop sales are relatively flat. Both laptops and servers are purchased predominantly through OEMs.

I'm not really clear on the intended purpose of this thread.

 

[bradley]

Hadn't Intel already been warned about anti-competitive practices in Japan and many countries under the European Union? I know AMD had recently won their antitrust lawsuit against Intel Japan, in June 2007. And the European Commission has so far found that Intel was using kickbacks to computer makers and selectively sold their products at a loss, or were otherwise employing "predatory pricing." I believe Intel's defense is that they were infact "guardians of consumers," and somehow this was good for competition. Many insiders believe this is a more clear-cut case of Intel abusing their dominance, than previous suits, and the ruling will be swift in AMD's favor.

Now, I also understand US Federal regulators are currently ignoring requests from Congress for a formal investigation into Intel's alleged anticompetitive practices; but that certainly doesn't make the original poster's notion so far-fetched. Is something being obsured here? I definitely believe under fair market competition far more of Intel's global marketshare should have been eroded than was enjoyed under concurrent years of AMD's chip dominance.

 

[rchiu]

Originally posted by: brxndxn
Intel, from 2001-2005 pretty much was clearly beat in terms of processor performance by AMD. Yet, somehow, you had Dell and other large oems stick to being exclusively Intel - until antitrust allegations were brought up.

A lot of people are saying, "Intel has the best.. AMD cannot compete. Screw AMD." But, AMD is having trouble competing right now because they are severely cash-strapped.

Here's why Intel was able to keep AMD cash-strapped:

Say you need to buy 1,000,000 processors this quarter. Of course, you must by most of them from Intel. The only other option is AMD. So, you plan to buy 900,000 Intel processors and 100,000 AMD processors.

Intel would offer the following options:
1,000,000 processors with average selling price (ASP) of $90 ~ $90,000,000 total
900,000 processors with average selling price of $100 ~ $90,000,000 total
800,000 processors with average selling price of $115 ~ $92,000,000 total

The pricing structure was set up according to percentages - unique to each oem. So, a smaller oem could get a similar pricing structure according to the percentage of Intel processors they bought. (Of course, the prices would be higher than at a large oem like Dell - but they would be set up in the same way.)

So.. with pricing structure like this, how many AMD processors do you buy if AMD does not want to give them away for free?

This is a serious matter that is getting ignored in the US. And, AMD is getting acused of being anti-american for trying to expose this.

That's too bad because the investigation is too late. Intel used this tactic when they didn't have a competitive product and they got away with it. AMD is going after Intel because their product isn't as competitive right now and it's too late. I am sure Intel don't need this tactic anymore with them having the lead in both cost and performance.

 

[bradley]

Originally posted by: rchiu
That's too bad because the investigation is too late. Intel used this tactic when they didn't have a competitive product and they got away with it. AMD is going after Intel because their product isn't as competitive right now and it's too late. I am sure Intel don't need this tactic anymore with them having the lead in both cost and performance.

Many of these suits are on-going, the one in the US is from 2005. And these aren't just claims made by AMD; these statements were actually indirectly corroborated by a class-action lawsuit against Intel started on behalf of investors -- filed by a separate UK and US group.

Investors sue Dell on payments from Intel
"The suit alleges that Dell received at times as much as $1 billion a year in "secret and likely illegal" kickbacks in the form of "e-Cap" or "exception to corporate average pricing" payments" from Intel to ensure that Dell used no other chip supplier, according to The Journal. Specifically, the complaint alleges that Dell received payments from Intel for not doing business with American Micro Devices Inc.... The story added that the suit seeks class-action status on behalf of purchasers of Dell shares between February 2003 and September 2006."

There was also a recent report in Forbes about Lenovo recieving a payment of 22M to use Intel chips.
Forbes.com: Lenovo's Phantom Profits

 

[Aluvus]

Originally posted by: rchiu

AMD is going after Intel because their product isn't as competitive right now and it's too late. I am sure Intel don't need this tactic anymore with them having the lead in both cost and performance.

AMD initiated their antitrust complaints in both Japan and the United states in 2005, about 1 year before the launch of the Core microarchitecture.

 

[ShawnD1]

Originally posted by: harpoon84
And yet, despite all this, AMD actually grew marketshare considerably when they had a decisive performance lead starting from late 2003 through to mid 2006. Marketshare went from around ~11% during the Athlon XP days to ~25% during the peak of the K8 reign, so obviously gaving a competitive product helps.

It was even better in the gaming market (which is a small percentage overall, yes I know).
Steam Hardware Survey - 46% of gaming computers have AMD processors.

AMD did pretty well when it was the performance leader.

 

[livingsacrifice]

Yeah this dissapoints me because I like AMD, but lately since the release of Core2 Intel processors they haven't been doing as well. I am switching over to Intel for that very purpose, however I still use ATI over Nvidia. I hope AMD makes a comeback sometime in the near future.

 

[Roy2001]

Originally posted by: brxndxn
Here's why Intel was able to keep AMD cash-strapped:

Say you need to buy 1,000,000 processors this quarter. Of course, you must by most of them from Intel. The only other option is AMD. So, you plan to buy 900,000 Intel processors and 100,000 AMD processors.

Wow, good logic. You should ask to close Costco as you buy larger package with more discount. Of course you should ask to shut down Wal-mart and all chains since they purchase prices are lower.

As customer, we only care about better product at lower price. Right now Intel delivers and we buy.

When AMD had better performance product they charged premium and increased their market share. AMD's current situation is because competition. Isn't that fair enough???

 

[Roy2001]

Originally posted by: Aluvus

Intel allegedly cut deals with OEMs (Dell, etc.) whereby the OEMs got a discount for not selling any AMD products. ...... Intel has since changed their OEM pricing, which is why for instance you see Dell beginning to sell Opteron-based servers and now Athlon 64/X2 systems.

Wrong, DELL began to sell AMD based products because market trend when Intel's P4D underperform.

 

[BladeVenom]

Don't forget South Korea. They have already said that their initial conclusion is that Intel abused it's market power, and have charged Intel with antitrust violations.

 

[The-Noid]

You should read economical theory. The only monopolies that ever last in life are those "authorized" by governments or the governments themselves. Capitalism ftw!

 

[adairusmc]

Originally posted by: Phynaz
I nominate this as the most pointless post of 2007.

Do I have a second?

Seconded

 

[Emission]

Tripled.

The discussion is alright, but the topic in itself is redundant, and has been discussed the last ump-teen times when AMD and Intel we're competing with older products.