First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.
Experts: 'Predatory pricing' for Intel's Atom legal
- — 29 May, 2009 07:06
Intel Corp. may very well bundle its Atom CPU and graphics chipset to netbook PC makers for a lower price than Atom alone, as rival Nvidia Inc. CEO Jen-Hsun Huang charged last week.
Intel may even sell the bundle for less than the cost of making it, known as predatory pricing, in order to lock Nvidia and its Ion platform out of the netbook market.
And none of that violates U.S. antitrust law, a leading legal expert told Computerworld on Wednesday.
"Intel is not obligated to deal with a competitor at all," said Michael Cooper, a lawyer with the Washington D.C. office of the firm Bryan Cave and a former anti-trust prosecutor for the Department of Justice and the Federal Trade Commission. "It can set its own terms, even if it is the only one making the [Atom] chip."
Facing looming competition from Intel in the high-end graphics chip market, Nvidia is counterattacking in the netbook market with its Ion, which is considered more powerful than Intel's offering, the 945 Express (PDF document).
But uptake of Ion has been limited. Since its release earlier this year, only Lenovo Group Ltd. and Acer Inc. have announced plans to make Ion-powered netbooks and net-top PCs, respectively.
Moreover, Lenovo is charging buyers of the Ion-powered IdeaPad S12 netbook $50 more than the all-Intel version.
"That seems pretty unfair," Huang told Reuters. "We ought to be able to compete and serve that market."
However, Cooper, says there is no law to preclude such pricing. "The law has evolved such that unless you have a history of dealing with a competitor in a certain way, even a monopolist is under no obligation to deal with a competitor in a particular way, especially if it would help the latter make a profit or do better than they would otherwise would."
"It's easy to look at things from a static standpoint and say, 'Geez, this company is being hurt because they have to pay more for that chip,'" he said. "[But that] may actually be beneficial for competition by spurring that firm to innovate."
Huang's complaint followed the European Commission fining Intel $1.44 billion for anti-competitive behavior against Advanced Micro Devices, including allegedly paying rebates to PC makers for buying most of their chips from Intel, not AMD, as well as selling server chips at below cost to large customers such as governments and universities.
Intel spokesman Bill Calder told Reuters: "We compete fairly. We do not force bundles on any computer makers and customers can purchase Atom individually or as part of the bundle ... If you want to purchase the chip set, obviously there is better pricing."
Calder declined to comment on the bundled price Nvidia's Huang had cited, or whether that price is lower than Intel's cost of manufacturing.
Robert Castellano, principal analyst with The Information Network, says it's clear that "Intel is trying to drive Nvidia out of the market with these low prices."
The problem, however, is that while such pricing may be illegal in Europe, it does not by itself violate U.S. antitrust laws.
Cooper also notes that predatory pricing is "very hard to prove" in a courtroom. It would have to be shown that Intel was selling its Atom chip bundle for less than its "average variable cost," which only includes Intel's cost of labor, electricity and raw materials, but excludes Intel's massive investment in its manufacturing plants as well as its huge R&D costs.
Cooper points out that predatory pricing differs from dumping, which typically involves a company selling chips for less overseas than at home. noted Cooper. He said dumping cases are more often successfully prosecuted.
Jon Peddie, principal analyst with Jon Peddie Research, argues that the assumptions may actually be backwards.
"If Atom can be sold for, say $20, and Intel can make a profit, and if it can sell the chipset for $5 and make a profit so the combination is $25, then selling the processor (Atom) alone for $45 is simply raising the price," said Peddie. "There is no law against raising your prices unless you are a government-regulated monopoly."
Which Intel, at least for now in the U.S., is not.
Despite his complaints, Nvidia's Huang said he has no plans to sue, for now.
That's telling, says Cooper. "If a company really thinks they have a legitimate case, they should go to the Department of Justice," he said. "They are pretty familiar with Intel, after all."