Nanotech - The Circuits Blog

Advanced Micro Devices is not the only large Intel competitor to rail against Intel's alleged strong-arm tactics.

Nvidia has also complained loudly for years about Intel business practices in the graphics chip market, where Intel commands about 50 percent of the market.

Nvidia is the world's leading supplier of "discrete," or standalone, graphics chips but takes a distant second place in overall market share to Intel, which supplies "integrated" graphics built into the chipsets that accompany all of its processors. Mercury Research estimates the total market for graphics chips, including integrated graphics, at almost $10 billion in 2009.

In the third quarter, Intel had 53 percent of the graphics chip market, up from the 49 percent share in the same period last year, according to Jon Peddie Research, which tracks the graphics chip market. Nvidia took about 24 percent, down from the 28 percent in the third quarter of last year.

These figures get even more lopsided for Intel when the market is segmented into integrated graphics only. "Put your seatbelt on. They've got 80 percent of the notebook integrated market," said Jon Peddie, president of Jon Peddie Research. Though this is a much smaller and more segmented market than overall PC processor market, which was at the center of last week's $1.25 billion settlement between Intel and AMD, it still shows the level of Intel's dominance, according to Peddie.

Nvidia has taken to lampooning Intel. Here, CEO Paul Otellini is the object of satire on Nvidia's 'Intel's Insides' Web site.

(Credit: Nvidia)

Nvidia claims these latter market share figures reflect Intel's "bundling" tactics--the same carrot-and-stick tactics that AMD has cited for years and that were spelled out in a complaint filed by New York's attorney general earlier this month.

Intel is trying to impede competition on two chipset fronts, according to Nvidia. One front is the burgeoning market for chipsets in Netbooks--tiny, inexpensive laptops that are typically priced around $350. In this market, Nvidia sells its Ion chipset, which competes with Intel's integrated graphics product.

"Intel's tactics with Ion have been the most aggressive we've seen from a competitor. They have offered the Atom [a total of three chips] for $25, but when the one-chip Atom is used with Ion, it sells for $45," Nvidia CEO Jen Hsun Huang said in a statement provided to CNET. "A customer can't even choose to resell the chipset and use Ion instead. What's the point of Nvidia getting an Intel bus license if it's impossible to overcome Intel's pricing bundles?" he asked, referring the licensing fee that Nvidia pays Intel.

"We'll keep growing as a company, but further action needs to be taken to protect consumers," Huang said.

Intel disputes this. "He's playing a trick of numbers, said Intel spokesman Chuck Mulloy. "He's giving you a $45 list price--that nobody pays--for a part and then a negotiated price (which is more realistic). He's mixing apples and oranges. We have scrubbed and continue to scrub our pricing practices as it relates to chipsets and processors. It's all above cost. And that meets the legal standard worldwide."

In Netbooks, Nvidia has made some headway this year; its Ion chipset has been used in Netbooks from Hewlett-Packard and Lenovo, among others--and Huang concedes this. But Peddie said Nvidia still faces a formidable challenge. "They're nibbling away it at. But it's a pretty big hill to climb," Peddie said.

In the second front of Nvidia's most hotly-contested feuds with Intel, the former has halted development of chipsets for Intel's new "Nehalem" processor technology (marketed as the Core i series of chips), following a complaint filed by Intel in February--which Nvidia then countered in March. Intel alleged in its motion for a declaratory judgment that the 4-year-old chipset license agreement with Nvidia does not extend to Intel's future-generation processors with "integrated memory controllers," which includes Intel's newest Nehalem Core i processors.

"It's meant to get Nvidia to cease and desist from citing that they have a license," Peddie said. "That's an interesting tactic because if the court rules in favor of keeping Nvidia from saying they have a license, it also creates the burden on the OEMs [PC makers] of not wanting to get in a crossfire between Nvidia and Intel," he said.

Intel again disputes this. "It's not seeking to prevent them from doing anything. For well over a year and including mediation, we argued with Nvidia about their rights under that agreement. And we tried multiple times to reach an agreement. And we could not," Mulloy said. "We asked the court to tell the parties what the agreement means. At the end of that process, we'll work with them and try to figure out what to do next."

Note: Mercury Research numbers were provided by Nvidia.

Now comes the hard part for Advanced Micro Devices. It has to compete with Intel on the merits of its products.

After settling with Intel and walking away with $1.25 billion, how competitive is AMD's silicon? Some experts weigh in.

Two analysts that follow Intel and AMD said separately that AMD won't be competitive until 2011--at the earliest.

"The only chance for reaching any kind of parity is in 2011. They don't have anything on the roadmap until then," said Ashok Kumar, an analyst at Northeast Securities. In the interim, AMD will get by with about one-fifth of the processor market, according to Kumar. But whether AMD can expand its market share beyond this and be profitable--like Intel--isn't clear. "Intel can leave 20 percent of the unit volume for AMD but (AMD) will have to come up with a business model where it can return to profitability based on this."

AMD may have a chance to expand into more profitable segments if it executes well in 2011, according to another analyst. "AMD believes it's on the cusp of another cycle where they will have strong product offerings compared with Intel. I think this happens in 2011," said Nathan Brookwood, the principal at Insight64. "The products are innovative and have tremendous potential," Brookwood said, referring to the particulars of new chip technologies that AMD disclosed at its analyst day on Wednesday.

But these are big ifs. AMD must close a yawning gap with Intel that's not going to get any smaller because of the legal settlement. "Technically, Intel now has a definitive advantage, which may widen," said Roger Kay, president of market researcher Endpoint Technologies. Kay believes that AMD will have trouble keeping up with the feverish pace, referred to as "cadence," that Intel sets as it moves to each successive generation of chip manufacturing technologies--which, in turn, allows Intel to quickly introduce performance and power efficiency improvements in its processors. "AMD tends to be six months to a year behind Intel," Kay said, citing a statement made by AMD CEO Dirk Meyer at the company's analyst meeting on Wednesday. AMD may begin to close the gap more in the future "but there's no telling whether that will happen," Kay said.

Will AMD's 'Fusion' lead to a resurgence?

(Credit: AMD)

And if it doesn't happen, AMD becomes little more than a foil to keep Intel honest. "This settlement is actually proving the very point that Intel wants to keep AMD alive and able to compete at least in some small subset of the market, otherwise Intel will be faced with regulatory issues that they would rather avoid," said Avi Cohen, managing partner at Avian Securities.

AMD's best technology play to avoid this fate is "Fusion," Kay said, referring to a technology that combines the two key processors inside a PC: the main CPU processor and the graphics processor, or GPU. Fusion, however, isn't slated to come to market until 2011, according to the road map that AMD disclosed on Wednesday.

And what about today? Dan Ackerman, a senior editor at CNET Reviews and someone who regularly reviews AMD- and Intel-based laptops, makes an important point about the challenges AMD faces in the here and now: Intel-based laptops not only dominate the high end of the market but the low end, too. "Intel CPUs are found in almost all of the high-end systems (such as Core i7 laptops), and the low-end systems (Atom-powered Netbooks)," he said.

Ackerman said that AMD will be hard pressed to beat Intel head to head. "AMD has some room in to maneuver in the middle of the market--laptops from $600 to $900--but unless they can offer better performance for the same price, or a significant price discount to consumers, it'll be hard for the company to gain additional market share."

Rich Brown, a senior editor for desktops at CNET Reviews echoes Ackerman's sentiment: AMD competes by offering lower prices than Intel, not better performance. "From a tech standpoint, AMD's...desktop chips haven't been competitive since Intel launched Core 2 Duo. Instead, AMD has had to compete on price," Brown said.

The best action plan for AMD is to keep executing on key technologies and hope this eventually translates to market share gains. "AMD is rapidly developing a reputation for timely execution of marquee products/platforms," said Doug Freeman of Broadpoint AmTech in a research note. "AMD revealed that its newer platforms...are on track for [the first half of 2010]," he said, referring AMD's high-end server chip lines.

Advanced Micro Devices CEO Dirk Meyer on Wednesday addressed the latest antitrust lawsuit filed against Intel, saying his company's claims about Intel's alleged illegal behavior have been "ratified" worldwide.

AMD CEO Dirk Meyer addresses analysts on Wednesday.

(Credit: AMD)

"We've said for a long time that our success in the marketplace was hampered by anticompetitive behavior on the part of our competitor [Intel]," Meyer said. "And I think it's clear over the last 12 months that we've seen our statements be ratified...by regulators around the world. We've seen action in the EU take place this year. And just last week we saw the action of New York State's attorney general office," he said.

Meyer made the comments at the AMD Financial Analyst Day, which was streamed live from company headquarters in Sunnyvale, Calif.

"As you know, we have a court date scheduled in March," Meyer said. "So, in summary, I'm looking forward to a future in which our ability to succeed as a business is really governed by the quality of our products and the quality of our customer relationships. And I can tell you that hasn't always been true. But in the future that will be increasingly true. So, access to customer demand is key. "

Intel declined to comment.

New York Attorney General Andrew M. Cuomo filed a federal lawsuit against Intel earlier this month accusing it of paying computer makers rebates to illegally maintain its monopoly power and preventing AMD from gaining business with PC makers.

In a similar case earlier this year, the European Commission fined Intel $1.45 billion, alleging illegal rebates to PC makers such as Dell and Hewlett-Packard. AMD also made analogous allegations in its case filed against Intel in June 2005 that is slated to come to trial in March 2010.

And this may not be the last major case filed against Intel that makes these allegations. The Federal Trade Commission may also bring charges against Intel, according to reports.

Experts say Intel has been instrumental in driving down PC prices, one of the key indicators of competition and one charge New York's Attorney General cannot easily level against Intel in its antitrust lawsuit.

New York Attorney General Andrew M. Cuomo on Wednesday filed a federal lawsuit against Intel accusing it of paying computer makers rebates to illegally maintain its monopoly power and preventing AMD from gaining business with PC makers.

One of the operative charges in the complaint centers on prices. "Intel launched an illegal campaign to deprive AMD of distribution channels and consumers of product choice and lower prices," the complaint alleges.

Not so fast, say some experts. "Prices are falling, buyers are not complaining about Intel's loyalty discounts, and the lower prices produce obvious and immediate benefit for consumers," said Joshua D. Wright, professor at George Mason University School of Law, and a scholar in residence at the Federal Trade Commission until 2008.

"Given the intuitive and easy to grasp nature of the consumer benefits of discounting contracts in the Intel case, I suspect that judges will be less likely to condemn these practices without real proof of actual consumer harm. I'm skeptical that AMD, (New York), or the (Federal Trade Commission) will be able to produce that here," Wright said.

And prices continue to fall. One of the most recent examples of steep downward PC price pressure is ... Read more

Nvidia CEO Jen-Hsun Huang seemed unsurprised by allegations made Wednesday by New York's attorney general that Intel has illegally tried to maintain its monopoly.

Nvidia CEO Jen-Hsun Huang.

(Credit: Nvidia)

"Where there's smoke there's probably fire. It blows my mind that's it's taken this long," Huang said in an interview Thursday, just after the graphics chipmaker posted solid fourth-quarter earnings. Nvidia competes with Intel in the PC graphics chip market.

"Even bribes and kickbacks can't stop somebody from buying our graphics processors," he said, referring to the allegations made in the lawsuit.

When contacted, Intel had no comment.

"Tactics good for AMD are tactics good for Nvidia," he added. "We have far superior products to Intel, that's how we survive by innovating far ahead of (Intel)."

Nvidia is locked in a legal battle with Intel, preventing Nvidia from making chipsets for Intel's "Nehalem" Core i series of chips--the lastest and greatest line of processors from Intel. Nvidia's Ion chipset--used in Apple MacBooks and Hewlett-Packard Netbooks, for example--has been very successful.

Huang also commented on the wave of next-generation tablets and media pads expected to hit the market next year, such as the rumored Apple tablet. Nvidia is already working with device makers who will use its Tegra chip in these designs next year.

"I think that's going to be the next big form factor," he said. "More and more people that use the iPhone would like to have a bigger iPhone. And the fact that 4g is coming--20 megabits per second. What can't you do. I think this (market) space is about to go nuts," he said.

"I really think we're on the cusp of our second personal computer revolution," he said.

Intel and Advanced Micro Devices filed motions on Wednesday in the U.S. District Court in Delaware, seeking sanctions against each other. Both motions are related to the retention of information in the antitrust case filed by AMD in 2005.

Intel's motion asserts that AMD failed to adequately retain documents in the case it filed against Intel in 2005. "AMD misrepresented its efforts and tried to hide its failures from the court and Intel," according to an Intel statement Wednesday.

The chipmaker alleges that AMD's claims about document retention were exaggerated. "Ever since Intel disclosed its problems in 2007, AMD claimed to have an 'exemplary' scheme to retain documents in this case. It is now clear that AMD did not, and that some AMD executives and employees failed to retain thousands of documents and e-mails," according to Intel spokesman Chuck Mulloy.

In the legal filing, Intel summarized its argument under the heading: "Summary of Argument: AMD Should Be Ordered To Do What Intel Long Ago Did Voluntarily." Intel stated: "At least by January of 2005, AMD reasonably anticipated its lawsuit against Intel and did everything a future plaintiff would to do to prepare for that case...But (it) did not start retaining relevant documents, the one thing the law obligated it to do."

Intel said its effort to "remediate or correct" mistakes it made in the discovery process cost the company tens of millions of dollars. It said it believes that it has complied with the plan and successfully corrected the problem. "As a result, Intel delivered nearly 200 million pages of documents to AMD."

AMD motion cites Intel's "auto-delete shredder"
In addition to dismissing the Intel motion as having "no merit," AMD filed a separate motion on Wednesday about Intel's "failure to preserve evidence."

AMD challenged Intel's claim that its remediation efforts (mentioned above) were successful. "Intel could have easily avoided this evidence preservation fiasco, had it and its counsel exercised a modicum of diligence in designing and implementing an effective document preservation program," AMD said.

This "fiasco," AMD said, led to "Intel's much-heralded, high-vaunted, but ultimately unsuccessful, attempt at remediation."

An excerpt from the filing continues: "At the heart of Intel's preservation problems was its failure to disarm an aggressive auto-delete system, despite uncontroverted authority required it do so...It's auto-delete shredder continued to run without any safety net."

AMD also alleged that "Intel has severely and irreparably harmed AMD's ability to present its case. At a company where paper trails are strongly discouraged, Intel imposed a 'move it or lose it' document preservation regime, where any document not manually saved was permanently expunged."

In the conclusion, AMD states that it "has submitted a proposed jury instruction for the court that attempts to remedy prejudice caused by Intel's spoliation of evidence." The instruction provides that the jury be told that Intel "destroyed hundreds of thousands of relevant documents."

Updated at 3:10 p.m. PDT, adding statements from Intel and AMD motions.

SAN FRANCISCO--Sean Maloney has some issues with the European Commission's antitrust case against his company, Intel, which he says must either "thrive or...die."

Last week, Maloney was promoted, along with David "Dadi" Perlmutter, to co-manage the reorganized--and massive--Intel Architecture Group. Maloney, an executive vice president, had been Intel's sales chief, and many observers see him as the odds-on favorite to be Intel's next chief executive. (Current CEO Paul Otellini, though, is likely to be in his post for some time to come.)

Sean Maloney, executive vice president

(Credit: Intel)

On Monday, the European Commission published a "nonconfidential version" of its May 13 decision against Intel, which imposed a fine of $1.45 billion against the chip giant. That decision found that Intel broke EC Treaty antitrust rules (Article 82) by engaging in illegal practices to exclude competitors from the market for x86 processors, which are the basis for a vast swath of consumer and business computers.

The EC action was based on complaints from Intel's chief rival, Advanced Micro Devices. Intel appealed the decision in July to a European court, saying that "evidence was ignored or misinterpreted."

In an interview this week at the Intel Developer Forum, Maloney explained how Intel's business model, forged after a near failure of the company in early 1980s, requires it to be aggressive.

"I joined the company in 1982. We were getting our butt kicked by Asian competitors," Maloney said. "A few years after I joined, [then president] Andy Grove made the decision, let's focus on microprocessors. We exited all the other businesses, we laid off a third our staff. The company was hemorrhaging money," he said.

In 1983, Intel abruptly exited the memory chip business after Japanese manufacturers drove down prices and made that business unprofitable.

"So we picked one thing to do well, and we put everything behind that," Maloney said. "We're not like a Samsung that has 50 different businesses, or a Sony with 20 different businesses, or an Apple with a bunch of different businesses. We were a company that specialized. If you're a company that specializes, you either thrive or you die. You don't have eggs in other baskets."

As a specialist in PC processors, Intel achieved tremendous success. "As a consequence," Maloney said, "the scrutiny has come along with it. Some of the scrutiny is fair. Some of it we're strongly pushing back on."

He continued: "We can show how the consumer has benefited from the microprocessor in terms of constant, constant price reductions. It's pretty unmatched in every other industry. The industry has a long history of cutting prices. And I don't know a single day in the last decade when you couldn't walk into a shop a buy competitor's product. We believe it's an open market."

European antitrust regulators on Monday published internal e-mails that detail alleged antitrust behavior by Intel.

The European Commission Monday published a "non-confidential version" of its May 13 decision against Intel, which imposed a fine of $1.45 billion against the chip giant. That decision found that Intel broke EC Treaty antitrust rules (Article 82) by engaging in illegal practices to exclude competitors from the market for "x86" central processing units (CPUs).

The EC action was based on complaints from Intel's chief rival, Advanced Micro Devices.

Intel appealed the decision in July to a European court, saying that "evidence was ignored or misinterpreted."

Today, the EC fired back. Some of Monday's particulars from the EC press release include:

• Intel rebates to Lenovo during year 2007 "were conditioned on Lenovo purchasing its CPU needs for its notebook segment exclusively from Intel. For example, in a December 2006 e-mail, a Lenovo executive stated: 'Late last week Lenovo cut a lucrative deal with Intel. As a result of this, we will not be introducing AMD based products in 2007 for our Notebook products'."

• Intel rebates to Dell from December 2002 to December 2005 were conditioned on Dell purchasing CPUs exclusively from Intel. For example, in an internal Dell presentation of February 2003, Dell noted that should Dell switch any part of its CPU supplies from Intel to its competitor AMD, Intel retaliation "could be severe and prolonged with impact to all LOBs [Lines of Business]."

• Intel rebates to HP from November 2002 to May 2005 were conditioned on HP purchasing no less than 95 percent of its CPU needs for business desktops from Intel (the remaining 5 percent that HP could purchase from AMD was then subject to further restrictive conditions set out below). In a submission to the Commission, HP stated that "Intel granted the credits subject to the following unwritten requirements: a) that HP should purchase at least 95% of its business desktop system from Intel ..." An HP executive wrote: 'PLEASE DO NOT... communicate to the regions, your team members or AMD that we are constrained to 5% AMD by pursuing the Intel agreement.'"

• The EC also cited "Naked Restrictions" such as: "Intel payments to Acer were conditioned on Acer postponing the launch of an AMD-based notebook from September 2003 to January 2004. For example, in a September 2003 email, an Intel executive reported: "good news just came from [Acer Senior Executive] that Acer decides to drop AMD K8 [notebook product] throughout 2003 around the world...They keep pushing back until today, after the call with [Intel executive] this morning, [Acer Senior Executive] just confirmed that they decide to drop AMD K8 throughout 2003 around the world. [Acer Senior Executive] has got this direction from [Acer Senior Executive] as well and will follow through in EMEA [Europe Middle East and Africa region]".

AMD was quick to chime in with a comment Monday. "This is the first time that Intel has had to confront now publicly available facts of its illegal behavior and it won't be the last. The U.S. FTC and New York Attorney General's continuing investigations and AMD's civil case against Intel will provide other clear demonstrations of Intel breaking the law, and we remain confident that we will win our U.S. civil case against Intel, which goes to trial in March," AMD said.

Intel also issued a response Monday. "There is nothing new here. This Decision reflects the underlying bias we have come to expect from the case team that ran this investigation," Intel said. "The Commission relied heavily on speculation found in e-mails from lower level employees that did not participate in the negotiation of the relevant agreements," Intel said. "At the same time, they ignored or minimized hard evidence of what actually happened, including highly authoritative documents, written declarations and testimony given under oath by senior individuals who negotiated the transactions at issue."

Intel continued: "Also, the Commission consistently construed ambiguous documents in a manner adverse to Intel, while overlooking or dismissing authoritative documents as 'insufficiently clear' when they contradicted the Commission's case. This pattern occurred across the board with respect to documents and statements submitted not only by Intel but also by third parties. The result was that the Commission dismissed or ignored extensive exculpatory evidence."

The European Union's ombudsman has criticized the antitrust regulator in a recent case against Intel, saying the regulator did not include evidence that was potentially exculpatory for the chipmaker, according to a report in The Wall Street Journal.

In May, Intel was fined 1.06 billion euros ($1.45 billion) for engaging in, according to the Commission, illegal anticompetitive practices to exclude competitors from the market for computer chips based on the x86 architecture--the design that both Intel and Advanced Micro Devices use in their microprocessors.

"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," competition Commissioner Neelie Kroes said in a statement at the time.

The investigation was driven by complaints from rival AMD.

The ombudsman, P. Nikiforos Diamandouros, chided the Commission for "maladministration" by not formally citing an August 2006 meeting between Commission investigators and a senior Dell executive, according to the Friday report in the Journal. The Dell executive was providing evidence in the case and "is believed to have told investigators that Dell viewed the performance of Intel rival Advanced Micro Devices Inc. as 'very poor,'" according to the report.

The Journal report concludes that this "could imply that Dell chose Intel chips for technical reasons, rather than because it was muscled into doing so." This would contradict the formal EU decision that claimed that PC manufacturers bought chips from Intel strictly because they did not want to forfeit hefty rebates from Intel.

The ombudsman cannot change the outcome of the case, according to the report.

Intel did not comment.