Explain That Intel Monopoly Again?

by on January 6, 2011 · 9 comments

After a steady relationship that lasted several generations of the Windows operating system, Microsoft has told Intel that it wants to see other chip makers.

In a world where antitrust law was pursued logically, news like this would throw a monkey wrench into the proceedings with which the European Commission has been burdening Intel, starting with 2009’s $1.45 billion fine for providing discounts and rebates to its largest customers—a common business practice in any industry—up to the current obstacles the EC is putting in the way of Intel’s purchase of McAfee, the maker of security software.

On this side of the Atlantic, the Federal Trade Commission piled on with its own inquiry, although its investigation into Intel’s alleged abuse of its sizable market share in PC microprocessors yielded far less: a handful of concessions from Intel, but no fine and no admission of wrongdoing.

It’s unknown whether Intel offered Microsoft discounts, rebates or loyalty incentives to use its chips with its latest version of Windows Mobile, the OS Microsoft developed to run on smartphones and tablet PCs. It doesn’t seem to matter because, in an announcement that flies in the face of trans-Atlantic claims that Intel has an ironclad grip on OS chip market, Microsoft said it will be buying chips from three (count ’em) other manufacturers: Nvidia, Qualcomm and Texas Instruments.

Microsoft’s reasons are simple: these chips, based on a design by yet a fourth company—ARM Holdings—are better suited to portable devices because they use less power and therefore extend battery life, a major factor consumers weigh when choosing a portable device. Intel apparently could not force Microsoft to buy chips it didn’t want, and Microsoft had options. This is a functional market.

Nonetheless, I have no illusions that the misguided antitrust attacks on Intel will subside, even as Microsoft’s decision points to the chip makers’ competitive vulnerability in chips for tablets and smartphones. New tablets that will compete with the iPad are a big story out of the Winter Consumer Electronics Show this week. When we combine this development with the rollout of faster wireless networks, solid state storage and the growing use of cloud-based applications, it’s at least arguable that Intel’s bread-and-butter–desktop and laptop PCs–are entering the twilight of their utility. Think about this: your laptop’s on-board drives (hard disk and DVD) account for much of its weight, consume a hefty portion of power, comprise a significant amount of its retail cost, and are the components most likely to fail. If desktop and laptop sales begin to give way to tablets, the argument about Intel’s dominance in the market for PC chips may rapidly become moot.

The lesson once again is that in high-tech, one company may dominate a sector for awhile, but a convergence of trends can dislodge that grip quickly. That’s why antitrust proceedings against high-tech firms are counterproductive. The market responds to attempts at dominance faster and more decisively. The U.S. government was prosecuting IBM for monopolizing mainframes long after distributed computing became the norm. Later, it prosecuted Microsoft for monopolizing Web browsers long after they were downloadable for free.  It’s given antitrust action, both in the U.S. and Europe, its current ADHD-like character. In a three-year timespan, in addition to Intel, Apple, Google and, most recently, Facebook have been attacked as powerful monopolies that threaten the diversity of the digital economy.  That authorities feel the need to accuse a different company of monopoly every year undermines the underlying charge. At what point do you exclaim, “Aw c’mon!”

  • cryptozoologist

    you seem to be tacitly asserting that if a company does not have a monopoly then it cannot be engaging in anti-competitive behavior. waiting until a monopoly is clearly entrenched before investigating is a very high bar indeed. there is lots of evidence that intel has robustly engaged in anti-competitive behavior. i believe that regulatory pressure and ongoing investigations can have the desired chilling effect on these behaviors regardless of the individual outcomes of each inquiry.

    your statement “Later, it prosecuted Microsoft for monopolizing Web browsers long after they were downloadable for free” shows a misunderstanding of the history of the ‘browser wars.’

    microsoft, and bill gates himself, purgered themselves when they insisted that internet explorer was an integral part of windows 98 and could not be removed. had this trial never happened, microsoft would likely have continued to unreasonably tie their browser to the operating system and we all would be using ie6 today (shudder!)

    in other words, the system worked.

    i am also not clear how microsoft supporting arm proves that intel does not have a monopoly. i would say that microsoft exploring its options demonstrates their desire to chip away at intel’s market dominance.

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  • http://www.facebook.com/people/George-Conklin/100001296443132 George Conklin

    Intel, Google, and Microsoft are monopolies; this is obvious.

    Intel charges 100X the total cost-of-production on many of their products, and people buy it anyway. They are either ignorant or mis-informed about other options because of Intel’s tactics. I don’t see any laptops based on AMD’s Phenom II X4 X920 BE, their i5 competitor, do you?

    http://www.notebookcheck.net/AMD-Phenom-II-X4-X920-BE-Notebook-Processor.30503.0.html

    It’s on par with a i5 540M; there’s nothing wrong with it. Yet it is strangely absent from the market. Tell me Intel didn’t have anything to do with that? I suspect they purposely bought AMD out of the market in the public’s eye to build-up to their Sandy Bridge release, which is faster than their previous generation processors for 1/3 the cost.

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