Read D.F.'s bio and previous columns


May 15, 2009

Intel Inside . . . a Glass of Pepsi (Or, D.F.ís New Antitrust Rules)


Itís tough to be Intel. OK, not really. OK, not at all.


But owning the computer chip market is bound to come with a few small annoyances. Like being fined $1.45 billion by the European Union, not to mention $21 million by South Korea, for being too successful.


Intel sells 80 percent of all the computer chips in the world that are procured and used to make computers. I donít think they even bother telling you ďIntel InsideĒ anymore, since you pretty much just assume that. Intel has one competitor of note, Advanced Micro Devices Inc., and itís hard to get traction in any market when itís so thoroughly dominated by one established player.


According to the EU, Intel is making it too hard Ė as in, unfairly so Ė by using its superior cash position to offer enticing rebates to its customers, provided, of course, they donít buy too many chips from AMD.


This may or may not break the rules. And it may or may not harm consumers, although itís hard to see how when AMDís presumably superior chip, launched in 2003, inspired Intel to come out with a superior product of its own. Even a competitor who controls less than 20 percent of the market is capable of lighting a fire under the leader if its product is good enough.


Besides, giving away free products to gain or maintain market share is hardly the exclusive domain of the industry leader. AMD tried it too. It tried to give one manufacturer a million chips for free, but the manufacturer took a pass because it would have had to forfeit its Intel rebate.


Is this what Iíve been doing wrong? I keep expecting my clients to pay me. Maybe if I turned around and gave their payments right back to them, or just gave away my services for free, I could so firmly own the market, I could get fined billions of dollars Ė not that I would have billions of dollars, because Iíd be working for free.


But the outrage of international bureaucrats knows no bounds.


At any rate, itís clear to me that we need to take a fresh look at some of these antitrust rules. If the industry leader is getting fined for giving rebates, while the challenger is trying to give away stuff for free and getting no takers, something is seriously whacked here. So Iíd like to propose some new anti-trust rules that will at least have people acting a little more rationally, if not making any money, since we apparently no longer encourage that sort of thing.


Try these:


-          From now on, computer chip manufacturers must conduct the equivalent of The Pepsi Challenge before taking an order. Itís simple. Pour a glass of Coke. Pour a glass of Pepsi. Put an Intel chip in one. Put an AMD chip in the other. Wait a few minutes for the flavor to be absorbed, then have the customer take a drink. Whichever one tastes better determines the chip he or she will buy. If the customer canít decide, the company buys the Meathead chip inside the Royal Crown Cola.


-          You know how computer chips are really, really small? Try this. Go to the home of your customer companyís CEO. Toss the chip up high right in front of the CEOís cat. If the cat likes it as a toy, donít permit the CEO to buy the chip. Itís too big. If the cat eats the chip, donít sell the CEO the chip. Use the money to buy a new cat instead. Or, put one Intel chip and one AMD chip in the catís food. The last one left in the bowl is the one you have to sell the CEO. Why? Because itís Europe! It makes as much sense as anything else they do.


-          You want to make it fair? Have both companies go before the EU for bailouts. You say they donít need bailouts? Increase their fines! Eventually, theyíll come hat in hand. Then youíve got control of the industry, and you just make a rule that says every purchase of computer chips must be half Intel and half AMD. Fairness abounds!


Or you could just let them fight it out. It would be one thing if they were getting together and fixing prices. That would clearly hurt consumers, and would need to be stopped. But flogging Intel for using its strength to control the market doesnít really help consumers.


I can see where Europeans would be a little sensitive about the notion of some super-strong power rolling over them all, but itís too late now, and Neville Chamberlainís infamous piece of paper wouldnít have been any more effective if heíd saved it on a computer chip.


© 2009 North Star Writers Group. May not be republished without permission.


Click here to talk to our writers and editors about this column and others in our discussion forum.


To e-mail feedback about this column, click here. If you enjoy this writer's work, please contact your local newspapers editors and ask them to carry it.

This is Column # DFK187. Request permission to publish here.
Op-Ed Writers
Eric Baerren
Lucia de Vernai
Herman Cain
Dan Calabrese
Bob Franken
Lawrence J. Haas
Paul Ibrahim
David Karki
Llewellyn King
Gregory D. Lee
David B. Livingstone
Bob Maistros
Rachel Marsden
Nathaniel Shockey
Stephen Silver
Candace Talmadge
Jessica Vozel
Jamie Weinstein
Brett Noel
Feature Writers
Mike Ball
Bob Batz
Cindy Droog
The Laughing Chef
David J. Pollay
Business Writers
D.F. Krause