AMD vs Intel: The chips are down

AMD vs Intel: The chips are down

Summary: The competition between the chip rivals has escalated into a full-blown legal spat which only one company will walk away from with its reputation intact

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TOPICS: Processors
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This week the gloves came off in the struggle between up-and-coming chipmaker AMD and market leader Intel. AMD filed a lawsuit against Intel in the US courts accusing the chipmaker of anticompetitive practices.

What does AMD say Intel's done?
AMD says that Intel has misused its 90 percent market share to lock it out of the business, primarily by persuading major OEMs such as HP, Dell and IBM to restrict the number of AMD-based products in their line-up, or even exclude them entirely.

Why would these companies listen to Intel?
Intel makes no secret of various sweeteners it offers to companies, such as funding product development, paying for marketing and straightforward discounts in exchange for guaranteed sales. AMD says that Intel also uses 'first dollar' discounts, threatens to withhold supplies if AMD based products are sold or marketed, and put pressure on distributors and retailers to with

First dollar?
This is where Intel pays an OEM cash equivalent to around ten percent of the chip price for every chip bought, but only when the company hits a certain level of purchases. That level, says AMD, is set to limit AMD's sales to a small percentage of the total. If the OEM buys more AMD parts and doesn't hit the Intel discount trigger, they lose a large chunk of cash — timed to appear just before the OEM's quarterly results.

Can't AMD just match Intel's discounts?
AMD says that the range of Intel's discounts and other financial incentives means that there's nothing AMD can do — including giving its chips away — to match them. With Intel's profit margins running at 40 percent and nobody else in double figures, Intel can afford to maintain its market share though 'economic coercion'.

What's illegal about discounts?
If they're not equitably available, not tied to excluding a competitor, not secret and not pitched at a level designed to harm a smaller competitor, nothing. AMD has a tough job proving that Intel did what it claims and that it's illegal. However, earlier this year the Japanese government found Intel guilty of such practices. Intel denied it was doing anything wrong, but stopped the practices anyway.

Is there anything else Intel's supposed to have done?
AMD says that Intel is developing the next generation of memory interfaces in 'secret committee' with memory companies, deliberately locking out AMD and giving Intel a considerable head start when the products are announced. It has also been claimed that Intel's compilers, popular in the industry, generate code that senses when it's running on an AMD chip and consequently runs poorly, if at all.

Why wouldn't companies just give up Intel and go for AMD?
AMD is much smaller than Intel, so it would be a considerable extra risk for an OEM to pin its products on it alone. Also, it can't produce the numbers of processors or the range of support chips that Intel offers — any company relying on AMD would have far fewer options.

What is Intel's response likely to be?
Robust. Intel has been investigated before for anticompetitive practices, and is experienced in defending itself. With billions of dollars and a whole business method on the line, the company will mount an aggressive and practiced defence.

What happens if AMD wins?
AMD's asked for treble damages and its complaint stretches back to 1984, so damages could be expected to be in the multiple billions. Moreover, Intel would be banned from some proportion of its existing incentive schemes offered to OEMs, so AMD would be expected to provide a much bigger share of the market. Intel would have to compete on straightforward margins. Prices won't change much, but diversity will increase.

What happens if Intel wins?
AMD's prospects look gloomy if it loses. The court case is a frank admission that the company has failed to gain market share despite having technologically competitive products. If the court fails to find that dirty tricks are behind AMD's market woes, then the only other reason is mismanagement. Investors, customers and developers are unlikely to find this an attractive reason to work with AMD.

Topic: Processors

Rupert Goodwins

About Rupert Goodwins

Rupert started off as a nerdy lad expecting to be an electronics engineer, but having tried it for a while discovered that journalism was more fun. He ended up on PC Magazine in the early '90s, before that evolved into ZDNet UK - and Rupert evolved with them into an online journalist.

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6 comments
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  • This lawsuit is a bunch of crap. AMD has been making inroads regarding marketshare with their desktop and enterprise processor offerings. AMD has been steadily chipping away at Intel's lead in all but the notebook processor sectors. What do the exec's over there expect, overnight dominance? Intel has been offering the same incentives and discounts to their customers long before AMD even had a competitive product. They are even dating their complaint back to 1984! What ever happened to statute of limitations? And by the way, it it takes them 21 years to decide that they don't like the way their competitors sell their products, I'd be willing to bet that the problem isn't their competitors. AMD has lost a lot of respect in my book.
    anonymous
  • I take it from the comment above that this is part of Intels defence.
    anonymous
  • This lawsuit should have been filed years back. I never buy Intel processors myself, not that it matters to Intel, but it matters to me. Lets see Intel come down and play against AMD based on technology, and not on locking out AMD. The guy who "lost respect" for AMD doesnt even know or understand what this lawsuit is about. When you LOCK OUT another competitor by offering millions of dollars, its ANTI COMPETETIVE. Does the poster even understand that x64 would not have happened if Intel was the only one? We would have have to buy the Itanium for our desktops!! Competetion matters. Look at how Microsoft is now that Linux and open source are at its heels. A SMALL example. When tabbed browsing came out, MS said is useless and no one wants it. Look at them now. They added it to their browser because they are scared. THAT is what competetion does my friend. it spurs innovation and makes prices come down. Look at the prices of the processors these days. You have lost respect for AMD? lol I have lost respect for "business analysts".
    anonymous
  • Some people seem to think that AMD is doing this to solve their woes.. I ask them to show me AMD's woes. The company is not in the red, and is profitable.

    It continues to gain market share and supporters as die hard as Mac lovers. And AMD has not demonstrated a lack of intelligence at all in its business dealings.

    The fact is, they feel they have evidence of Intels nastiness and is letting the public decide. They are bringing to light what many tech people have thought.. something fishy is going on with Intel.

    Tell me how a company with such lack of innovation and crappy performance stats continue to have so many vendors selling only their processors, or mostly. Dont you think many people have asked Dell to sell AMD? There is some reasons for it, but not many that fit unless that company is being forced into dealings with Intel.

    They own 90% of the market, yet if you set to identical looking boxes next to each other with the difference in processor manufactorers, there is a 50-50 chance of joe blow picking either one. And most people are joe blow.

    Comeon... AMD has something and now they are letting everyone know it.
    anonymous
  • AMD have been the leaders in chip technology, over Intel, for a few years now. Intel have known this fact and have had to force PC manufacturers into dodgy deals that are not only bad for AMD but bad for the consumer. Microsoft & Intel have been in partnership for many years and both promote ( recommend ) each other's products. They have both been guilty of conning the consumer and forcing us to pay higher prices for shoddy goods. How come AMD chips have been 64bit ready for over 2 years and Windows hasn't? I suppose it had nothing to do with delaying the introduction of new software until Intel can be ready???? Finally, a couple of years ago, Microsoft compensated all Windows users in the US but refused to compensate us in the UK. Microsoft, Intel and any other hardware / software manufacturer doing dodgy deals like this should be forced to compensate us for taking away our choices of cheaper and better products and conning us. This is not just an issue between Intel and AMD, this is between AMD and Microsoft / Intel
    anonymous
  • I didn't buy my latest PC from DELL, even though I had considered them, simply because I couldn't get AMD. I therefore, reluctantly, went to Tiny and they first sent an AMD but one DVD drive was not there, the card reader was not there and there was no floppy. After returning it, I got a replacement, with the hardware that I had paid for but sadly, they had used a stupid Intel Celeron 2.4Mhz. I suspected they were in difficulty by then & didn't risk another return. That was in March this year. So now, I'm stuck with an Intel Celeron :-( that is slower than my old Pentium2. Maybe, one day soon, I will find out who manufactured this PC for Tiny and get that company to give me the AMD 64 that I originally ordered.
    anonymous