• The Apple/Intel Report: The AMD Lawsuit

    July 2nd, 2005

    For most of you, when the Department of Justice filed an antitrust action against Microsoft didn’t come as much of a surprise. But Intel? Is the world’s largest chip maker also guilty of predatory practices to lock out the competition?

    Well, that’s the claim behind the latest in a long series of complaints from Advanced Micro Devices, better known as AMD. But it isn’t the first time AMD has looked to the courts rather than the marketplace for relief. Back in 1991, a similar complaint was filed in Northern California, one that got the company $10 million plus royalty-free licenses to Intel patents that might have been used in AMD’s 386-type competitor.

    In 1995, AMD and Intel inked a deal that resolved the legal skirmishes up till that time and delivered to AMD a shared interest in the design of x86 chips. But that wasn’t the last of it. By 2000, AMD was back in complaint mode, and this time it went to the European Commission with a list of alleged violations by Intel by dint of “abusive” marketing techniques.

    The newest lawsuit, filed at U.S. District Court in Delaware, charges Intel with various and sundry dirty tricks to retain its dominance of the market. One example is a claim that, in 2000, Intel managed to force Compaq to stop buying AMD chips. This is, of course, before Compaq was swallowed up by HP.

    Now the rest of the details are beyond the scope of this article, except that it leaves one to wonder whether AMD’s beef with Intel is truly the result of illegal marketing practices, or just a case of sour grapes. If you can’t beat the competition in a free market, you just sue them and hope to get as much cash as you can in the settlement process. It does seem as if AMD and Intel can’t remain friendly or at least civil competitors for terribly long.

    At the same time, maybe it is true that Intel is behaving like Microsoft to stifle its competition, that it wants to do everything it can to stomp out AMD, beat them to the ground and then some. Perhaps something is indeed wrong with the way Intel retains its dominance of the PC chip market, and that AMD has little hope in growing its market share unless the courts intervene.

    But does any of this affect Apple’s deal with Intel? Why go with the market leader when possibly superior chips are available from AMD? Well, it’s possible Intel simply gave Apple a better deal, or that its roadmap looked better, or more likely a combination of both. It’s also true that Steve Jobs didn’t want to be shorted once again by a chip supplier who couldn’t deliver faster chips on time, or the existing ones in sufficient quantities to meet production goals. AMD is known to have had some production problems on occasion, and that probably wouldn’t sit well with Apple. Clearly the devil is in the details here.

    No matter. In the scheme of things, I expect that the latest AMD lawsuit will be resolved eventually, and the company may even get another big check from Intel. But it won’t hurt Intel’s bottom line to any significant degree. More to the point, regardless of the outcome of the latest court battle, Apple will still buy its next generation chips from Intel. But is it an exclusive deal? To Intel, publicly at least, Apple will just be another manufacturer who can buy the chips it needs as they become available, period. Despite the love fest during the WWDC keynote, Apple isn’t getting a sweetheart deal. It’s just another customer.

    So, if Apple isn’t bound by contract to buy strictly from Intel, and I doubt that Steve Jobs would agree to such a thing no matter how attractive the terms, AMD isn’t shut out. It’s always possible that Apple would buy product from AMD if it could deliver a better chip at a lower cost. Of course possible doesn’t mean probable. Unless Apple gains a much larger foothold of the PC market, it shouldn’t have any problems getting what it needs from Intel. It could also benefit from Intel’s brand marketing and its policy of subsidizing the ads from PC makers who buy Intel processors. Maybe it means that the infamous Intel “sound” will conclude future ads for Macs.

    I’m skeptical, however, whether Apple is going to want to affix Intel Inside stickers to new Macs. Maybe just limit it the shipping containers and the manuals, because Apple isn’t one to clutter its products with unsightly labels, as PC box makers do.

    As to AMD, it has invariably prevailed in previous court encounters, and this case may also deliver a favorable verdict. But however it goes, you can be sure that AMD will file still another complaint a few years from now, if history is the guide. This is one battle royal that’ll never end, or at least for as long as both companies exist.

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