Next Gen Journal

by Thomas Grant

Anyone familiar with the PC market these days knows that two companies dominate the microprocessor market: AMD and Intel. Together, those two giants account for 99.6% of worldwide microprocessor shipments, according to researcher International Data Corp, with 77.3% belonging to Intel and 22.3% for AMD. The two companies have been at each other’s throats ever since AMD released their first truly successful microarchitecture, the K6 microprocessor series, in 1997. Currently, as one can see from the market share numbers, Intel is dominating: their Core 2 series of processors decisively outperform AMD’s rival Phenom chips, and the February 2009 launch of AMD’s Phenom II series was overshadowed by  Intel’s earlier release of the much-anticipated Nehalem architecture.

Intel Pentium II Microprocessor (Public Domain)

So, Intel has been a step ahead of AMD in innovation for the past few years. Most consumers will also agree that Intel’s processors just plain outclass AMD’s in terms of performance, and benchmarking tools consistently place Intel chips quite ahead their AMD counterparts.

It seems that Intel is doing better in just about every aspect. But is it a better company? Will it finally bury AMD? Not necessarily, says this humble college student. For one thing, the microprocessor market has ever been a continuing race, with one company outdoing another only to become complacent and be beaten within a few years. AMD may be down, but no one can say whether they’re out, or what the market will look like a year or two from now. It’s just too volatile to predict. And furthermore, AMD may have an easier time gaining ground due to the trouble Intel has managed to land itself in lately.

Intel has a long and sordid history of using its clout and its money to influence the markets. It has participated in numerous lawsuits against competitors, and many of those competitors (who have since been driven out of business) allege that Intel files unfounded lawsuits with the purpose of bankrupting competitors with legal fees. Still, until something of that nature is decided by a judge in a federal court, those allegations will remain just that – allegations, and not fact.

What is fact, however, is that in the last four years regulating bodies in Japan, the European Union, and South Korea have found Intel guilty of breaking antitrust law or utilizing anticompetitive practices, such as paying off PC manufacturers to use their products instead of AMD’s, or offering retailers ‘rebates’ in exchange for promises to buy fewer AMD products. All three of the above-named foreign entities have assessed fines, the largest being the one levied by the European Commission. They ordered the company to pay up to the tune of 1.06 billion Euros, a hefty sum by any measure. But most importantly, both the state of New York and the Federal Trade Commission have also begun antitrust investigations of Intel, and AMD has filed suit against Intel in the U.S. District Court in Delaware.  These domestic inquiries into Intel’s business practices could prove disastrous for the company if not handled properly.

History has shown competition to be good for both businesses and the economy. It leads to better allocation of resources as the inefficient companies go out of business and their assets are reassigned to more efficient uses. Although microprocessor technology has advanced tremendously in the last few decades, who can say whether it could have advanced even more quickly and prosperously if Intel had more competition to deal with? This is especially true if other microprocessor start-ups were bankrupted not by their own inefficiency but by Intel’s less than honest business practices.

AMD contends that their market share would be greater if not for Intel’s anticompetitive practices. Whether this is true or not remains unclear until resolved by the FTC or the District Court, but regardless, one company owning so much of an industry is dangerous at best. Whatever the future holds for the microprocessor market, more competition is certainly a good thing.

Thomas Grant is the NGJ Business & Tech editor and a student at the University of Notre Dame. The laptop computer he used to write this piece runs on an Intel Core 2 Duo T9550 processor.

The opinions expressed in this article are solely those of the author.