The last week has had a number of news items:
There will no doubt be plenty more items over the next few years, and even more confusion over how significant any particular item is in the grand scheme of things.
The following precepts ought to be helpful in deciding whether a particular event is important, and if so, how it is important.
There Is Legal, And There Is Illegal The core concept behind antitrust law is that there’s some otherwise legal things the business equivalent of huge gorillas just can’t do to their competitors. There’s two key elements
to determining any antitrust case: is the gorilla big enough, and only if that’s the case, did the gorilla do something huge gorillas can’t do?
Different governments have different rules governing both factors. In the US, the gorilla has to be considered a “monopoly” in the field to be considered big enough. In contrast, the EU (and much of the rest of the world) think the gorilla is big enough if it has a “dominant position” in the market in question. To make
a long story short, it is very arguable whether or not Intel has a “monopoly” on the CPU business in the U.S; while it is not seriously arguable that is has a “dominant position” in the EU or elsewhere.
So Intel could be found completely guilty by a South Korea or the European Community, and completely innocent by the United States for doing exactly the same thing in both countries, simply due to different gorilla-measuring tools.
Whether the measurement is monopoly or dominant position, there’s nothing wrong with just being a monopoly or having a dominant position in a participant. You have to also abuse that monopoly/ dominant position, and again, the laws differ in different places. Again, the U.S. generally sets the bar somewhat higher than most other places.
There Are Fines, And There Is Restitution
The South Korean fine might make AMD feel good, but none of that fine will ever end up in Green’s empty wallet. It hurts Intel, but doesn’t immediately help AMD. Governmental fines generally get paid to the government, not the injured party. Depending on the laws of the particular country, AMD may well be able to file a lawsuit against Intel for damages after getting such a ruling, but there’s no immediate relief.
The AMD lawsuit against Intel in the U.S., if successful, certainly would do just that, but as you can see from the news item, the initial trial won’t start until February 2010, which is more than 4 1/2 years after AMD initially filed it. The trial will take a long time, and any appeals will take a few more years. It’s certainly no way for AMD to get quick cash.
There Is Punishment, And There Is Affirmative Action There are different kinds of punishment. One type just punishes you for past behavior, like a simple traffic ticket. While a traffic ticket can have some adverse future negative effects, the court normally takes no other steps to prevent you from doing whatever again. They may well punish you more severely if you do the same thing again, but they don’t assign a police car to follow you around.
If the court or government agency thinks it’s more than a little likely that huge gorilla will do the same thing, or something much like it in the future, it may (if allowed by local law) to impose restrictions on the future behavior of the gorilla.
Finally, at the most extreme, the court or government might decide that you’re such an incorrigible gorilla that they’ll just have to cut you up into smaller pieces, littler gorillas.
As we’ve already noted, a traffic ticket doesn’t help AMD directly very much. While it would be AMD’s ultimate fantasy to see Intel split up into little Intel, they just don’t smoke enough crack even in the exec lounges at Sunnyvale to believe that will happen as a result of these legal actions.
No, the most AMD can hope and push for in all these actions is that governments and courts constrain Intel as much as possible and create what would be an affirmative action program to get AMD healthy. There’s a million possible variations on this theme, but almost all of them will boil down to making Intel charge more so AMD can charge more, too, while still being able to undercut Intel on price to increase market share.
In other words, push up CPU prices so AMD can make money. You may not like that at all, but then again, if that isn’t done, AMD is likely to die, and Intel pushes up CPU prices with no government help at all.
Again, Intel will no doubt appeal any serious constrictions until they run out of places to go, but restrictions and constraints are what AMD wants, needs and is demanding.
Has Intel Hurt AMD That Much?
Recall that AMD recently asserted as part of its lawsuit against Intel that it’s current revenue marketshare of 13% is “less than half of what it requires to operate long-term as a sustainable business” and that it was due to Intel’s practices that they were doing so poorly.
How true is this likely to be?
There is one market in which Intel has already been found guilty of the practices in question and said, “OK, we won’t do that anymore.” That is Japan.
Japan went after Intel for unfair trading practices in 2005 after AMD’s unit market share went from over 20% in 2002 to around 10%.
Japan forced Intel to stop offering rebates. What happened? AMD’s market share as of the beginning of 2008 is now around 12%.
Yes, the drop from 20% to 10% is a more significant indicator than the later rise from 10% to 12%, but the small recovery during the period of Intel resurgence does say that AMD needs more than Intel behaving itself to do well in the future; it also needs relatively good, competitive products.
And that’s AMD’s problem. They have a chicken-and-egg situation. They need competitive products to make money, but they don’t have the money to make competitive products, and the most immediate reason for that is they spent their money on ATI.
If you want to say they would have had a lot more money in the bank if not for Intel, you’re probably right, but all the legal actions AMD has going won’t get them any money or other relief for years to come, at best.
It’s like having cancer and being told you have a year to live, but there’s a potential cure that should become available in five.
So What’s The Point?
What AMD is doing is selling the lawsuits. If enough people with money believe that AMD will eventually prevail, and back up that belief with their money, that’s almost as good as winning these legal actions.
Ultimately, AMD will live or die based solely on whether it can get more money, a lot more money, or not. It does not matter who or where it comes from, how they get it, or why they get it. All these legal actions are meant to do in the short-run is to increase the possibility of getting other money from other sources, soon.