Intel defends its business practices
The chipmaker denies it coerced computer OEMs to buy microprocessors exclusively from Intel
Jim Carbone -- Purchasing, 1/14/2010 4:34:18 PM
Intel has formally responded to a Federal Trade Commission (FTC) complaint last month that the chipmaker engaged in uncompetitive practices in the microprocessor market.
The FTC in December filed an administrative complaint against Intel, charging that the chipmaker illegally stifled competition and innovation in the microprocessor market. The
FTC alleges that Intel over the last 10 years has waged a systematic campaign to shut out rivals from the microprocessor marketplace. By doing so, Intel deprived consumers and electronics buyers of choice and innovation denying consumers to potential superior, lower-priced microprocessors, according to the complaint.
The complaint also says that Intel coerced leading PC manufacturers not to buy microprocessors from Intel's rival Advanced Micro Devices. The complaint says Intel's practices resulted in higher prices for microprocessors.
In a 22-page response to the complaint, Intel tries to refute the charges. The response cites data from the Bureau of Labor Statistics that says microprocessor prices during the time cited in the complaint declined 42% per year and the prices of PCs declined 23%.
The complaint says Intel reduced output, but sale of x86 processors grew from 136.4 million units in 1998 to 324.7 million in 2008. Intel says during the time it had made multi-billion investments in new semiconductor manufacturing capacity.
The complaint also alleged that Intel stifled innovation, but during the time covered in the complaint, Intel developed dual-core and multi-core processors, reduced power consumption of chips, introduced Centrino, a mobile computing platform and incorporated cache memory on processors.
"This extraordinary level of innovation is a reflection of large investments in research and development, which rose sharply during the period covered in the complaint," says the response.
In 1999, Intel spent $3.1 billion on R&D. In 2008 the company spent $5.7 billion, according to the response.
Intel also takes issue with the FTC's charge that Intel threatened OEMs with loss of discounts if they purchased microprocessors from AMD or other competitors.
Intel's response says the company engaged in "ordinary and desirable competitive conduct" by offering volume discounts to PC OEMs.
Intel's statement says: "A supplier offers a better price for more volume when negotiating with a customer. The customer demands greater discounts by threatening to take some or all of the business at issue to another supplier. The offer of a lower price for more volume necessarily implies that the lower price is contingent on the additional volume." Intel says the Supreme Court has ruled such practices are lawful.
The case is tentatively scheduled to be heard before an administrative law judge on September 15, 2010.
See also: Intel, AMD settle $1.25 billion antitrust suit
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