Electronic Design

Play Nice—Or Pay The Price!

The European Commission (EC) gave chipmaker Intel a very hard financial slap on the wrist over its competitive strategies relative to rival chip firm AMD. The size of the fine imposed by the EC is close to $1.5billion and now, like senior management at Microsoft, the bosses at Intel have just felt the sharp bite of the EC’s teeth.

Microsoft was ultimately levied a fine of $1.35billion for anti-trust and anti-competitive behaviour. Of particular interest was that the size of the fine took into account Microsoft’s failure to comply with earlier warnings to put a halt to such business practices.

So, now Intel will need to consider several factors. First, I think it got off fairly lightly with a $1.5billion fine. Under European Law, the EC could have raised it to a figure representing 10% of the company’s annual revenues, whereas the actual fine is closer to 4% of the chipmaker’s revenues.

Second, Microsoft was slow to curb its practices and paid the price. Intel has been told to immediately cease all anti-competitive practices. And unlike the Commission’s action against Microsoft, this time it’s indicated the European Union’s antitrust sanctions would be carried out immediately, rather than being suspended during a protracted appeals process.

All of this sounds fair to me. After all, the EC found that Intel paid computer makers to delay or cancel product built around processors manufactured by AMD. The company also issued rebates to manufacturers and retailers to encourage them to show favoritism toward products containing Intel chips.

The Commission said that computer makers Acer, Dell, HP, Lenovo, and NEC had all been given hidden rebates if they only used Intel chips. Media Saturn, which owns Europe’s biggest consumer electronics retailer Media Markt, was given money in exchange for only selling computers containing Intel processors. Last year, Intel made 80.5% of all the processors used in PCs. AMD’s slice of the pie was 12%.

Not surprisingly Paul Otellini, the chief executive of Intel, said his company took “strong exception” to the decision and would appeal. That aside, the EC has made it abundantly clear that when it comes to huge multi-national organisations trying to freeze out rivals from actively competing in the European market, it will come down hard on them.

For electronic design engineers trying to develop leading-edge products, this has to be a good thing. Rather than being channeled into using a specific set of components, they’re free to select from a wider choice with subsequent price and specification advantages for the end-user. And the long-term effect of such freedom has to be a positive one for the electronics industry as a whole.

TAGS: Intel
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