Columns Logical Conclusions

http://www.bit-tech.net/columns/2007/07/29/logical_conclusions/1

The EU has its sights on Intel now, in the latest Anti-trust volley between big blue and AMD. But is it for real? Brett Thomas cuts through the smoke and mirrors, looks at the numbers and sounds off against the new style of corporate logic.

 

I don't know if those figures are right but if they are, they certainly make for a compelling read, and at the moment theres not alot AMD can whine about power per pound Intel are destroying them and coming out with innovations alot quicker than AMD can.

 

AMD isn't losing here! Conroe is tai gwei-la! It's the fat of the world that desires performance over price or effencientcy.

AMD should start playing it's own game and make the market adapt to them, instead of following intel and Nvidia around, revolutionize yourself fool!

They could easily make a better HTPC/PS3/Wii. They have all the fascets to bring a multimedia pc into every home in the world, but they are using 90's conceptulization as is intel. Intel is still relying on a single piece of the pie with microsoft as crust. AMD has a chance to break away .. ...

 

i dont really think intel has done anything particularly anti-competitive

The high end intel chips offer better bang for your buck, but the lower end AMD chips offer it aswell
If AMD spent more time making somthing to combat core2 and less time trying to sue intel, maybe they would have more luck

 

Very interesting read Brett....
- Certainly paints a different light on the headlines we've been seeing for the last few years!

I guess the only other thing I'd like to know is how Intel's deals with major system builders prevented any major expansion by AMD... After all, presuming they could have raised the cash to increase production, why would they have wanted to? - Without major contracts like Dell, they might have ended up with a warehouse full of stock (the very thing their business model aims to avoid).

At the end of the day, I guess there's no way of knowing just how different the CPU manufacturing business could have turned out!

 

I think intel do have a slight edge, once Core 2 had arrived, there were TV adverts, advertinsing the Core 2, there have been other Intel adverts in the past, and yet, ive seen nothing from AMD what so ever. Maybe, AMD should start advertising on the TV, it might bump up their sales, or it might not

Sam

 

good read, very interesting

 

apart from the cost of such an advertising campaign, if bret is right, it wouldn't make a difference because AMD are selling all they are making

 

There are a couple of problems I have with this article.

No, by itself there's nothing wrong with that, but what happens to the look of things when the EU's accusations are confirmed? It's not so innocent when you're only offering those deals in lieu of exclusivity.

Also, the article paints a rosy picture of AMD's ability to max out their sales per production capacity, and no doubt that's well and good. But while it mentions once or twice that price cuts are hurting AMD, it fails to acknowledge exactly how much it's hurting AMD. It doesn't take very much digging to come up with a few numbers.

To top things off, AMD indeed has some loans to pay off, and has taken in donations to stay afloat. That's the cost of maintaining their market share, apparently. However, as the article says, that means they aren't able to increase it. Even if you only go by market share, Intel is indeed hurting AMD, by not leaving them any room to grow as a direct result of losses due to their pricing schemes, not necessarily because of technological leads (which is only a recent consideration).

Does Intel have such a massive stock pile of Core 2 Solos, Duos, and Quads just one year into production that they need such aggressive price cuts simply to clear inventory? I have my doubts.

 

terminology hiccup: "big blue" has kinda meant IBM for the last 50 years

 

an intersting read, i recently started a bacherlor of infomation technology and had a look at the cpu type that people had in their laptops. out of about 30 people about 5 had celron based systems, 1 (me) with C2D and the rest have paid for Turion based units, i personally found that intersting

 

Greetings!

There is a flaw in the article that makes it invalid.
When the author wrote:

Check the link and you find that that market share percentage is only for the retail market. It doesnt include the OEM heavyweights Dell, HP-Compaq, etc.

I couldnt finish reading the rest of the article.

Also, the insinuation made by the author in this sentence:

That the EU process is tied with the release by Intel of the Core CPUs is wrong.
The EU process follows the Japanese one (where Intel was found guilty of anti-competitive beaviour) and the one currently running in the USA.

 

Hello,

I#m on the same line as Impar.

When this process was initiated, Core wasn't around, and Athlons were beating P4's. We're talking 2002-2004 here. The courts are just this slow.

Don't get me wrong, all this has changed with the core family, and AMD's slow answer to it. At the moment, I'd go for an Intel system.
But when Intel was technologically behind, it used it's vast resources, and it used the dependance nearly all computermanufacturers and resellers have on it.

In the japanese market AMD lost a fair number of computer manufacturers, while offering the superior processor at a superior price. And the Manufacturers admitted that Intel told them if they'd sell "a competitor" then their next Pentium-M delivery might just coincidentally be a few months behind the one of their closest competitor.
Same in Germany, on the height of the Athlon hype, Germany's biggest reseller "forgot" to add AMD to his lineup...while getting his advertising paid by Intel. (the "Intel Inside" programme would sponsor advertising heavilly, as long as no other manufacturer was mentioned in the same ad...or in the same booklet)
Same story (back then...not now) was Dell (remember, I'm talking pre Core days here).

Also, AMD selling everything they could produce was not true at that time. the middle to low end processors (which are produced because not your entire linup can be risk-production of the fastest product) sold pretty poorly.
AMD's die-stocks may have been small compared to Intels, but at this time AMD was about 1/10th of Intel in size. So this smaller stock weighed heavily.

The japanese courts proved it, and the europeans are slow to follow.
Once again: don't get me wrong, Intel has the best processors, (I'd love a Core2duo or a quad) but when they didn't they used every trick in the book (and a few not in there).

Xir

 

Impar, the term "retail" is broadly defined usually as end-user sales, but I think you make a valid investigative point and I will double-check my findings. That being said, I think you'll find that my numbers hold true.

Please keep in mind that HP is one of the largest on-store computer companies in the USA - so to say that it doesn't include them would be flat out wrong. The only mail-order company at the time (i.e., did not sell through proper 'retail' channels) was Dell - but even they had retail kiosks that would have been factored into the equation. My main concern for my figures would be that Dell's mail-order business was properly included.

@Xir
In 2004, AMD flat out told us that they couldn't even keep up with the Athlon 64. To say they weren't selling their stock is simply incorrect. If they weren't selling their low-end sempron chips that quickly, well...Intel wasn't exactly moving Celerons by the bucketload either. It wasn't a "low-end" market at that time.

As for the Japan issue, well, there are companies far outside of AMD that were affected there. And in reality, they were a bunch of small companies. When a big company cuts its prices for any reason, small companies make less profit. AMD seems to have weathered that storm just fine. Once again, my argument is that what Intel has done did not injure AMD as a business. It has grown since, it continues to grow.


Once again, i'll double check my numbers. But I think you'll find I'm not far off, unless, of course, you have some magic numbers you'd like to show me that tell me YOU have done YOUR research on the topic, and can illustrate otherwise. I don't mind being wrong, but before you go telling me you "couldn't read the rest of the article" because of what you view to be a factual error, I would hope you have your facts lined up and illustrated. If I DID miss something, I'll make sure to amend.

 

Finally, someone with half a brain! AMD sells out their stock. End of Story. Period. You can't do better than that. If you want to complain that pricecutting by Intel hurts, AMD should try not cutting! I bet they still sell out! Most people just pick a brand and stick with it. Maybe volume purchases might look closer at prices and the enthusiasts like us look at prices. But most people either a)buy the absolute cheapest, whether it fits their needs or not or b)buy the same brand they've been using. Which is why my mother has a horribly slow AMD: it was the cheapest desktop at walmart and she has been told that Intel is "evil" (probably by an AMD fanboy).

 

Great article! Brought to light a whole new perspective on the incident.

I think a couple of posters are missing the point. As I see it, if Intel gave companies incentive to stock only intel CPU's during the time in question--moral issues aside--it was because intel wanted to clear its stock. It wasn't specifically to hurt AMD business, but to secure the ability to clear out its over abundance of product.

I guess there are two hard lined ways to view the matter at hand. 1) Intel sees AMD as a threat and would want to hamper their business (see: prohibit growth) by securing an exclusivity deal or 2) intel has an abundance of supply and seeks exclusivity to maximize their output thereby minimizing their wasted stock.

I would say either perspective are extremes catering to those who harbor a preference to either company. The reality probably lies somewhere inbetween. However, argument #1 becomes moot once the fact that AMD was completely selling through their available stock is brought to light. Worse, they werent even simply selling through their stock, they were selling through what they could produce at max manufacturing capacity. Intel coudlnt have taken the stance to hurt AMD by striking exclusive deals as there was no way AMD could be hurt (other than through a price war with the intention of hampering profit margins in the current channels; we are seeing this now with core 2 duo but intel was in no position to pursue such action in 2003-2004)! They were selling them as fast as they could make them! I cant think of a witty analogy to describe this but I'm sure theres one out there that fits the bill.

I suppose a good analogy would be along the lines of microsoft signing an exclusivity deal to increase sales of X360's being thrown at the retail channel (in which microsoft reportedly has a huge overstock at the moment), in conjunction some new retailer, which stipulates that this retailer can not sell the Wii. Sure, doesnt really ooze with moral righeousness, but will it hurt nintendo when their consoles are sold out the minute they hit store shelves as is? Would one more channel for Nintendo to sell through increase their sales when all the current channels are bone dry from insane amounts of customer demand?

And this very valid point holds true regardless of market share. If AMD is selling 100% of their maximum output, any claim that a compeditor is trying to stall or impede those sales via exclusivity deals is asinine and borderline conspiracy theory! The only reason a company would push for exclusivity as a reaction to a compeditor (and not for the sake of smart business; i.e. clearing stock) would be to cut into the competitions profit margin or hamper growth, which would only be necessary if there is abundant stock with which the company (AMD) is looking for additional channels through which to move (i.e. AMD is produsing 6 units for every 4 sold, and seeks new partners to help clear the 2 units left over).

Not sure if I'm explaining it well, but in my attempt to do so I believe I'm becoming redundant. Anyway, It makes sense to me!

A+++++ article!

 

Greetings!

So, we have different understandings of the term.
I googled and found this from November 2005:
By definition, retail sales do not include consumer PCs sold direct by Dell Inc., the world's top PC maker and one of the last Intel-only PC makers. Retails sales also don't include all of HP's and Gateway's machines, as the companies also market desktops and notebooks directly. Despite serving some small businesses, retail also excludes the majority of business machines sold.
If you see the historical AMD retail market share, you will find it has been quite healthy, from 50%+ in the K6 years (1) to even reaching 60%+ in some months of the K8 era (2) and now holding 45%.
Yet, AMD only held 15-20% of the overall CPU market share in that time frame, as the non-retail market is where the bulk of CPUs are sold. And it is in that market where Intel anti-competitive methods were/are practised.

Now, apply the old rule of supply and demand in a market where AMD is selling all its stock, and the demandants arent demanding all they could because Intel is forcing them to buy only P4 CPUs.
What would happen to the selling price of the Athlons if the demandants were to demad more to the AMD? Right, it would increase making AMD have more revenue/pofits.



(1)- In January, AMD passed Intel, but in February they passed 50 percent.
(2)- Last month, AMD's slice of the US retail store pie reached 67.7 percent for desktops, up from 52 percent in September.

 

Why would Intel care what AMD's profit margins are if they arent directly hurting Intels business? I could understand your argument if I could see a sound reason why Intel would want to hurt AMD's profit margins in such a way.. however, I would think Intel would be more concerend with its own profit margins. Clearing abundant stock through exclusivity would arguably help those profit margins more than, say, trying to hurt AMD's via that exclusivity. One has monopolistic intent, the other simply denotes smart business.

I dont think its a case of Intel trying to bully AMD out of certain channels as much as Intel trying to maximize their business model by taking advantage of the current channels. Though, I'm sure there is more to it as that sounds way too simple. Still, it illustrates the validity of the perspective expressed through the article.

These are corporations who wish to make money. I think that is the top priority, even though us consumers/fans sometimes see the competition between companies as the top priority.

 

Greetings!

Just to say I read the rest of the article.

You read the article?
The part where the author wrote:

If a company puts an AMD CPU in its product, it doesnt put an Intel one. That Intel CPU that didnt got sold goes to the warehouse and could be sold afterwards at a huge discount.

Intel does not bully AMD, it bullies AMDs customers.
So far, the only final decision regarding anti-compettive practises by Intel was the japanese one.
Those practises included:
-- One manufacturer was forced to agree to buy 100% of its CPUs from Intel; another manufacturer was forced to curtail its non-Intel purchases to 10% or less;
-- Intel separately conditioned rebates on the exclusive use of Intel CPUs throughout an entire series of computers sold under a single brand name in order to exclude AMD CPUs from distribution;
-- The mechanisms used to achieve these ends included rebates and marketing practices that includes the "Intel Inside" program and market development funds provided through Intel's corporate parent in the United States.

All of those practises are free market deforming and shouldnt be tolerated.

 

Excellent. Now that we have some support for your claim, let's look at it a bit closer.

AMD itself has acknowledged its sales outstrip its inventory. You mention that it held only 15-20% of the market share during this time, which is exactly what my article arrives at. We may have come to it with slightly different maths, but at the end of the day AMD can only output 25% of the world's computing needs now - and less previously. It keeps growing, but so does the market. That means the 80% share keeps getting bigger, and so does the 20% share.

By laying out the fabrication technologies (which I include in the half of the article you say that you didn't read, though I bet you probably took a peek!), I illustrated that the company simply did not have the production ability to build more chips - and it sold almost every one. Of course not every chip of every line will be sold, particularly because on some of those chips Intel won on both performance AND price. That's not unfair competition unless you mean that it's unfair to have the better product.

Math is math - and 20% of 240 million x86 computers sold is 48 million chips. So, if anything, your numbers simply strengthen my claim, as I pegged it at about 45 (which I did say was an estimate). I also properly reduced the market pool down to US purchases, but I will acknowledge that my retail vs. other sales math may be off in light of your argument. Strangely, we come out roughly the same in spite of this.

At the end of the day, my conclusion that AMD's overall market share is not limited by Intel but instead by its own production capacity is perfectly valid. As is the conclusion that Intel, on the other hand, does not have that luxury (as evidenced by its balance sheets).

However, that doesn't mean your point is incorrect, just that regardless of how you phrase it, we're coming out the same.


EDIT: I want to add one thing - impar is proving exactly why I said, off the bat... "Is there any truth to these allegations? Probably." Did Intel do things that inadvertently damaged AMD? I'd bet money on it. I'm just saying it's not all that "oh, poor AMD."

The truth lies somewhere in between Intel being perfectly competition-friendly and AMD being a beaten dog. Above all, that's what I'm hoping to prove - if you cut out all the hype, did Intel really hurt AMD's business with the exclusivity? My bet is probably not - the price cuts hurt a lot more, but that's because AMD chooses to keep up with the proverbial Jones'.

Now, the question is - did intel do this to create a monopoly? I don't think so. In many ways, I think it hardly recognizes AMD as a competitor. Currently, there's room for both companies in the market, and I don't think that will change until AMD gets bigger.

AMD may not be viewed by Intel as a competitor (though it's getting to be, particularly now that it can do more than just processors), but Intel is a dead-on threat to AMD. Which means that it would have a lot to gain by slowing Intel up a bit with some antitrust issues.

EDIT 2:
http://www.internetnews.com/ent-news/article.php/3595946

Try that on for a little bit about the direct sales issues