Report: Intel Reaped $60 Billion in Monopoly Profits
August 5, 2007 3:18 PM
comment(s) - last by
An AMD-commissioned report claims Intel's practices hurt the industry on a massive scale
According to a recent AMD-commissioned study by research firm ERS Group, Intel gained approximately $80 billion USD in monopoly profits over the course of 11 years since 1996. ERS Group director Dr. Michael A. Williams, said that while gaining billions in profits is normal for a company of Intel's size, Intel gained an extra $60 billion by using anticompetitive business practices. Essentially, Dr. Williams' report claims that Intel overcharged for microprocessors and other related products.
Intel has been in
a legal situation with the European Union
for the last several years, being a prime target for antitrust investigations. Just recently,
Intel disputed the EU's claims
that its business practices negatively impacted the market and consumer spending. Intel claimed that many if not all complaints were directly from AMD and not customers at all. True enough, most of the complaints filed to the EU have been by AMD and companies that received subpoenas from AMD to release information.
"We are confident that the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive, and beneficial to consumers," said Intel senior vice president and general counsel Bruce Sewell in a statement.
Dr. Williams' report
, Intel collected roughly $141.8 billion USD in profits from 1996 to 2006. The report subtracted normal competitive profits as well as economic profits and something called "assumed advantage profits" of 5%, leaving Intel with $60 billion in monopolistic profits. Despite assumptions using what the report called "standard economic methodologies," it is impossible to determine exactly just how much extra profit Intel gained from a monopoly.
"To be conservative, the study next provided Intel with a generous assumption that 5 percentage points ($28 billion) of its economic return were attributable to legitimate advantages. That left the $60 billion monopoly profit figure," indicated the report.
Assumptions aside, Intel has done very well over the last several years. Its price structure however has not changed drastically -- flagship processors always carry a big premium while lower models always give the better value. Intel's halo processors typically carry a price tag of roughly $1,000 at retail; Intel value processors occasionally fill a sub-$60 price point.
An area outside of the legal system where AMD constantly competes with Intel is in prices. Over the last two years, the price war between AMD and Intel has been nothing less than beneficial to the consumer.
AMD recently cut prices on its multi-core processors
, giving another shot in the arm to Intel. In this back and forth price cutting, AMD essentially reduces its potential profits. Intel traditionally competes by using heavy marketing campaigns that run on a global scale, but AMD's marketing strategy heavily focuses on the U.S. market -- a small percentage of the overall global market.
This article is over a month old, voting and posting comments is disabled
AMD should have bankrupted for a long time
8/6/2007 6:30:27 AM
I think this is so funny. If Intel did not "overcharge" its Pentiums, AMD should have lowered the price of its CPUs even lower; which AMD can hardly survive with the "monopoly" price level. AMD should thank Intel for the life support.
I think Intel was too good at marketing, which customers are willing to spend 4x more money on Pentiums for performance only slightly faster than Celerons.
On the other hand, AMD was unable to make enough fast CPUs, and also making too many slow CPUs.
Another important point is that Intel is selling a complete platform - chipsets, graphics, network and etc.
Not surprised Dell was sticking with Intel for some time.
"This is about the Internet. Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off." -- RIM co-CEO Michael Lazaridis
Intel Responds to EU Charges
July 28, 2007, 12:03 AM
AMD to Can Single-core, Cut Dual-core Prices on Monday
July 7, 2007, 2:06 AM
E.U. Pushes to Charge Intel with Illegal Business Practices
January 17, 2007, 6:41 AM
Google's First Asian Data Centers Now Operational
December 11, 2013, 8:50 AM
IBM to Offer Watson Supercomputer as Cloud Development Platform
November 14, 2013, 12:00 PM
Microsoft May Use Fuel Cells at Rack Level for Greener, Cheaper Data Centers
November 13, 2013, 3:14 PM
Study: Problems with Surgical Robots Going Unreported to the FDA
November 5, 2013, 2:36 PM
Lenovo CEO Shares Bonus with Workers for a Second Year
September 2, 2013, 11:16 AM
Hacking the Gibson: 24 YO Scored Root on Nation's Top Supercomputers
August 28, 2013, 7:14 PM
Most Popular Articles
China's Moon Rover Lands Safe and Sound, Starts Snapping Pics
December 16, 2013, 1:22 PM
Top Microsoft Graphics Genius Defects to Google
December 17, 2013, 4:27 PM
Report: Fusion Fail? Softbank Wants to Merge Sprint and T-Mobile
December 15, 2013, 6:12 PM
NSA Debates Granting Snowden Amnesty if He Keeps His Mouth Shut
December 16, 2013, 1:17 PM
Harvard Undergrad Busted by Wi-Fi after Making Bomb Threat to Avoid Finals
December 18, 2013, 10:37 AM
Latest Blog Posts
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
Global Cyber Espionage Concerns Reveal Growing Cyber Armies
Nov 29, 2013, 11:04 AM
Is The Period Becoming an Expression of Anger?
Nov 26, 2013, 2:02 PM
NSA and Congress -- You Will Never Kill the Constitution, It's an Idea
Nov 10, 2013, 2:00 PM
AT&T Explores $100B+ USD Deal to Acquire Vodafone's European Operations
Nov 4, 2013, 7:34 AM
More Blog Posts
Copyright 2013 DailyTech LLC. -
Terms, Conditions & Privacy Information