AppId is over the quota
By Jason D. O'Grady | October 31, 2011, 10:00am PDTSummary: Are Intel’s aging exclusivity agreement, the rumored 2010 testing of AMD processors at Apple, and Intel’s new “Attack of the Air Clones” really a coincidence?
A guest blog by Justin:
Am I the only person who is wondering why Intel seems bent on using Ultrabooks to undercut sales of Apple’s MacBook Air? After all, thin PC notebooks are nothing new. Why did Intel suddenly decide to throw hundreds of millions of dollars at non-Apple manufacturers to make thin laptops? And why do they all look like MacBook Airs?
I think I figured it out!
I have linked together several events in the last few years that may reveal a fascinating, underlying motive behind Intel’s Ultrabook initiative:
1. Most consumers and Apple fans do not know that Intel actually succeeded in locking Apple into an exclusivity agreement in 2005 - in exchange for porting Apple’s computers and laptops over to the X86 platform. For the last several years since that rumored event, Apple has not put a single AMD central processor in a single Apple computer.
Naturally, Intel hasn’t exactly complained about the illusion from consumers that Apple doesn’t think AMD’s CPUs or APUs are suitable for Apple products. In reality, Apple sacrificed their freedom of choice, in exchange for Intel’s help with porting.
2. Exclusionary requests are nothing new at Intel. In 2010, Intel got into antitrust trouble in Europe and America (after getting in trouble in Asia as well) for engaging in numerous, secretive, billion-dollar “carrot and stick” schemes to coerce and compel manufacturers and even retailers into not making or selling AMD-based products. Intel even secretly paid Dell 6-billion dollars (among many other complying manufacturers and even retailers) in exchange for not using AMD processors. European regulators took an unprecedented SWAT team approach to their investigation and raided the corporate offices of retailers. They found that Intel was bribing tech retailers not to even stock AMD-based systems.
Wow! No wonder AMD doesn’t have any money left for proper R&D these days! AMD even had to sell their factories to stay alive!
Intel apparently avoided antitrust scrutiny for many years by allowing most manufacturers (except Dell) to produce a few intentionally-low-end AMD systems, as their existence helped Intel avoid antitrust scrutiny yet and were little threat to Intel’s image of superiority. Based on subpoenaed emails in the NY Attorney General’s complaint, HP’s executives were so scared of Intel’s unwritten yet enforced punishments that they refused a gift of thousands of free processors from AMD.
When manufacturers violated Intel’s demands by using too many AMD processors, Intel would exact punishment in many creative forms on the manufacturers. Thus, Intel has a long history of punishing manufacturers for attempting to break free of Intel’s monopolistic demands.
3. The Federal Trade Commission’s Consent Decree in 2010 was forward looking, so Intel’s exclusivity with Apple was probably allowed to continue to its unknown end date.
4. How long was Intel’s secretive exclusivity agreement with Apple? In order to figure this out, we must of course speculate about how long Apple would be willing to sacrifice their freedom to Intel in exchange for Intel’s porting service. Maybe five years?
5. Just as a note, AT&T’s well-known exclusivity agreement with Apple was five years in duration. So perhaps the Intel/Apple agreement was a similar duration?
6. In mid-2010 (coincidentally five years after Intel succeeded in locking Apple into an exclusive relationship), very few people noticed the news that Apple started testing AMD processors in their labs.
7. Thus, Apple apparently seriously considered AMD inside Apple products in 2010. Or perhaps Apple even started making plans for AMD inside Apple products?
8. Since we know that Intel has a long history of devising carrot and stick schemes to encourage manufacturers to cooperate with Intel’s monopolistic demands, is it possible that Intel’s true motivation behind Ultrabooks (MacBook Air clones) was to punish Apple?
It seems like a plausible explanation for why Intel is getting all the non-Apple manufacturers to make MacBook Air clones, and it also may explain the unusual 300 Million dollar fund that is probably enabling the Air-Clone manufacturers to undercut Apple MacBook Air on price?
The end result is that Apple is between a rock and a hard place: Apple must either lose market share in the “Air and Air Clone” segment of the market, or they can compete with Intel’s artificially-low-priced clones by reducing MacBook Air’s prices to unprofitable levels. Of course, Intel knows that Apple’s only painless option is neither of the two; the only painless option is for Apple to drop any plans for AMD and therefore return to Intel. Thus, the MacBook Air would then officially become an Ultrabook!
In a recent interview, an Intel executive said that “it is up to Apple” to decide whether or not the MacBook Air is an Ultrabook. Did the executive mean that it isn’t too late for Apple to return to Intel’s arms and take a seat at the 300-million dollar Ultrabook dinner table?
The FTC’s recent Consent Decree to Intel clearly states that Intel is not allowed to threaten or punish manufacturers for using a competitor’s processors. However, Ultrabooks and the accompanying 300-million dollar fund may be a brilliant, if not rather ingenious, monopolistic punishment from Intel, as it just narrowly avoids direct conflict with the terms set forth by the FTC’s Consent Decree.
By claiming that they just want to “innovate” by creating a not-so-new product category, Intel may likely sidestep conditions set forth in the Consent Decree. Lawyers at the FTC will probably have difficulty proving that Ultrabooks are nothing new, and Intel just created the category to wriggle through a Consent Decree loophole to get at Apple.
Additionally, paying the non-Apple manufacturers to undercut the MacBook Air on pricing may be argued as “using venture funds to market and create the products”, rather than predatory pricing. Pressing the manufacturers to make steep reductions in their Ultrabook retail prices will make their margins dependent upon “advertising and development payments” from Intel Ultrabook Fund, but that could be argued as aggressive pricing on a not-so-new product.
And, of course, the fact that these Ultrabooks look almost exactly like MacBook Airs? Well, that’s just… coincidence?
Jason O'Grady+ is a journalist and author specializing in mobile technology. He has published six books on Apple and mobile gadgets and his PowerPage blog has been publishing for over 15 years.