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US FTC's Intel lawsuit could prove a boon for rivals AMD, Nvidia
- — 17 December, 2009 08:08
The antitrust lawsuit filed today by the U.S. Federal Trade Commission's against Intel Corp. could turn out to be a great Christmas present for Advanced Micro Devices Inc. and Nvidia Corp.
In the suit, the FTC charged that Intel, the world's largest chip maker, is basically holding the semiconductor industry hostage by the sheer force of its size and might. The government contends that Intel has illegally used its dominant market position to stifle competition and strengthen its monopoly for the past decade.
The FTC's complaint charged that "Intel's anticompetitive tactics were designed to put the brakes on superior competitive products that threatened its monopoly in the CPU microchip market." The commission is seeking an order to keep Intel from using threats, bundled prices or any other offers to manipulate prices or smother competition.
The FTC lawsuit comes just a month after Intel agreed pay AMD $1.25 billion to settle antitrust litigation. And just a week before that, the state of New York filed a federal suit alleging that Intel had threatened computer makers, made payoffs and engaged in a "worldwide, systematic campaign of illegal conduct."
"This is significant," said Rob Enderle, an industry analyst with the Enderle Group. "Intel was on a settlement path. The FTC really has thrown them one heck of a curve ball. This puts the focus back on them and they need to find something that approaches middle ground to get out from underneath this cloud."
In a statement, Intel countered that "Intel has competed fairly and lawfully. Its actions have benefited consumers. The highly competitive microprocessor industry, of which Intel is a key part, has kept innovation robust and prices declining at a faster rate than any other industry. The FTC's case is misguided."
Ezra Gottheil, an analyst with Business Technology Research, noted that despite the settlement with AMD, Intel should have expected an FTC lawsuit considering the heavier hand wielded by the administration of President Barack Obama's administration on antitrust issues.
"What you have here is a company that has always played hardball in an environment where the watchdogs were basically drugged for eight years," said Gottheil. "The Bush administration was not active in antitrust. It was very passive. So [Intel] became bolder. Intel has always been tough and then there [they hit a period] where there were no refs. The whistle never blew so they got tougher and tougher. This led to some chicanery. Now this administration is more active in the antitrust space and Intel is a clear object of scrutiny."
And while all of this is bad news for Intel, it's nothing short of a gift for competitors like AMD and Nvidia.
"I won't say that AMD is dancing in the aisles but it's probably close," said Enderle. "AMD got the settlement and the FTC is going ahead with a suit anyway. This is not only like having your cake and eating it too, but getting a second helping."
In a statement this afternoon, Nvidia president and CEO Jen-Hsun Huang alleges that Intel fell behind in CPU innovation so the company moved to "smother competition" in the GPU market.
"We support today's action by the FTC, which has fully recognized Intel's behavior as an impediment to progress in the computer industry and to consumer choice," wrote Huang. "The GPU is critical for common applications like graphics, video and photo processing. Today's filing is sorely needed to stop Intel from using unlawful tactics to lock out the GPU and block consumers from its revolutionary benefits."
Industry analysts noted that whether or not the FTC wins its lawsuit against Intel, AMD and Nvidia should find it a lot easier to strike deals with computer makers. The mere fact that the federal government has gone after Intel should be enough to change its alleged anti-competitive ways, they added.
"This strengthens both companies markedly," said Enderle. "For them, this is a great day. It's going to make it so that Intel can't lock them out."
Gottheil noted that AMD and Nvidia can now will be fairly assured that their main rival won't have its normal arsenal of deal-making weapons.
"AMD just has to keep doing what they've been doing," said Gottheil. "Some of the hard edges of Intel will soften. The competitive balance shifts a few degrees toward AMD though it's still a much smaller company with fewer resources. There's some unmeasurable degree that life gets a little better for AMD. It might mean they can get a few dollars more for individual products because there isn't someone out there forcing [computer makers] to prefer Intel."
Sharon Gaudin covers Internet and Web 2.0, emerging technologies and desktop/laptop chips for Computerworld . Follow Sharon on Twitter @sgaudin or send e-mail at email@example.com.