September 06, 2005

Intel's AMD Antitrust Rebuttal: We're Not Bad, You're Just Stupid

AMD Antitrust Lawsuit Against Intel

Intel fired back at AMD in rebutting its antitrust lawsuit, saying the company has only itself to blame for not being competitive as a microprocessor supplier, with an inability to ship products on time, which helped to earn the company a bad reputation as a supplier with a poor track record of manufacturing investments:

Advanced Micro Devices Inc.'s failure to compete effectively with Intel in the microprocessor market is a "direct result of AMD's own actions or inaction," and weren't caused by any illegal actions by Intel, the microprocessor market leader said in court documents filed Thursday.

The filing in U.S. District Court was Intel's first formal response to AMD's lawsuit filed in June that charged Intel with using bribery and coercion of computer makers and retailers to limit the use of AMD processors.

AMD Antitrust Lawsuit Against IntelAMD has used "out-of-context snippets ... to create the impression that Intel engaged in misconduct," Intel said its response. AMD's lawsuit also represents "a case study in legal dissonance. Although AMD has purportedly brought its complaint to promote competition, its true aim is the opposite. Under the cover of competitive law, AMD seeks to shield itself from competition."

Intel claims in its response that AMD is seeking to blame Intel for its own "many business failures ... that have determined its position in the marketplace." AMD's position in the marketplace "reflects its uneven track record, and its repeated failure to deliver on its promises."

Specifically, Intel points to AMD's "playing it safe ... with anemic investment in manufacturing capacity, leaving Intel to shoulder the burden of investment to enhance the usefulness of computers and enhance the market." In addition, Intel claims AMD has been "dogged" by a reputation of being unreliable as a supplier, has traditionally lagged in innovation, and has seen products delayed well beyond original launch dates.

When AMD has been able to deliver competitive products, such as with its Opteron server processors, it has seen share gains, Intel said.

AMD's allegations center primarily on the PC market, where chairman and CEO Hector Ruiz says the company has been unable to increase market share despite having highly competitive products in the past year. According to Mercury Research, AMD has seen its share of all x86 processors shipped, including those used in PCs and servers, rise from 15.1% in the second quarter of 2004 to 16.2% in the second quarter of 2005. When counting only x86 processors used in server applications, AMD has fared better, with its market share increasing 51% in the second quarter, from 7.4% to 11.2%

Intel argued that it hasn't violated any law or committed any wrongdoing. Intel said the AMD lawsuit is full of contradictions, including the claim that Intel's competitive actions could render it "nonviable." Ruiz has stated that the company "is in the strongest position we've ever been in."

Intel said it has demonstrated over a 30-year period that it can deliver faster, better, and cheaper products to consumers, in part because of its continued multibillion-dollar investment in new capacity and research and development even during downturns in the semiconductor market.

"In short," Intel wrote in its response, "AMD's colorful language and fanciful claims cannot obscure its goal of shielding the company from price competition."

Tom McCoy, executive of legal affairs and chief administrative officer for AMD, says Intel's response is "an attempt to divert attention from what this case is really about. Crossing swords of rhetoric is fun, but it's time to put the truth on the table in the courtroom. The industry problem is that [computer manufacturers and retailers] are under threats from retaliatory and potentially lethal price increases by Intel if they give too much business to AMD."

Evidence of Intel's illegal practices has already been substantiated by a prior ruling by the Fair Trade Commission of Japan that found Intel guilty of antitrust violations, and by ongoing investigations in Europe, McCoy says.

"There is an global regulatory focus on how Intel controls the IT industry, and it is plainly a serious industry problem that requires the light of truth," he says.

McCoy dismissed Intel charges that AMD's difficulty in competing was of its own making, pointing to a 25-year history of AMD consistently being a low-price leader in the x86 processor market, and the company's plans to open a 300-mm wafer fab in Dresden, Germany in October.

AMD was quick to respond to the charges. "It is true that with our early K6 processor, we had difficulty ramping one of our steppers. That hurt us for a couple of quarters," Thomas McCoy, AMD's executive vice president of legal affairs told "But it's overwhelmingly true that we've been a worthy competitor for over twenty years, and now we have the technology lead. The problem is that Intel is using its monopoly power to force the world to accept Intel monopoly prices and is illegally insulated from having to compete on price and performance. We know that Intel is not the price leader, AMD is. Intel maintains a very constant monopoly margin it's proud of."

Intel did furnish a backhanded compliment, however, giving AMD credit for its success with the 64-bit Opteron processor for the server market, where it brought out a dual-core offering ahead of Intel. "When AMD is able to combine competitive products with reliable supply, the market responds," said Intel.

"Let's not debate it anymore," said AMD's McCoy. "We brought this case to put light on the truth. We'll put it in a courtroom and the world will see for itself."

"Crossing swords of rhetoric (REALLY) IS fun", "colorful language and fanciful claims" aside - what's not to love about this fight?!

- Arik

Posted by Arik Johnson at September 6, 2005 03:09 PM