Duopoly

29 June 2005



AMD Sues Intel for Coercing Customers

Microprocessors are the nifty little chips than make the 21st century run. Obviously, they are in computers, but less obviously, in microwave ovens, telephones, and air conditioning systems. Yesterday, American Micro Devices, the number two chip maker, announced it had filed an anti-trust suit in US district court in Delaware against Intel, the number one chip maker. The suit alleges that Intel has coerced potential AMD customers to avoid doing business with AMD.

Now, this isn’t the first time that AMD has complained about Intel. Japanese trade authorities have already ruled that Intel has violated its anti-monopoly laws and has engaged in pursuits designed to stifle competition from AMD. And the European Union authorities are looking into similar allegations there.

In conjunction with filing the suit, AMD put out a statement that read in part, “"Everywhere in the world, customers deserve freedom of choice and the benefits of innovation -- and these are being stolen away in the microprocessor market.” Elsewhere, the statement alleges that “Intel has paid Dell and Toshiba huge sums not to do business with AMD.” It also claims, “Intel paid NEC several million dollars for caps on NEC’s purchases from AMD. Those caps assured Intel at least 90% of NEC’s business in Japan and imposed a worldwide cap on the amount of AMD business NEC could do.” And, “Office Depot declined to stock AMD-powered notebooks regardless of the amount of financial support AMD offered, citing the risk of retaliation [from Intel].”

At issue are the x86 microprocessors that run PC operating systems, which includes not only Mr. Gates’ Windows, but also Solaris and Linux systems. Of that market, Mercury Research estimates Intel controls 82%, AMD 17% and the leftovers belong to VIA and Transmeta. This is bad for the economy whether Intel has done as AMD alleges or not.

When one company makes four out of every five microprocessors, or worse, when two make ninety-nine out of one hundred, inefficiencies enter the market and monopolistic (or duopolistic) abuses arise. Intel and AMD may have won their market share fair and square, but in the long-run, the world economy would be better served if there were more competition. Perhaps the authorities should look beyond the AMD allegations and ask just why do two companies get to control virtually the entire market. A case can be made for breaking both of them up – which probably isn’t what AMD had in mind.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
Produced using Fedora Linux.

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