brett@cayman.amd.com (Brett Stewart) (11/08/90)
After listening to the last little bit of this news thread, about
the relationship between Intel and AMD, and who did what to whom, and
so on, I am prompted to point out a fact. Intel DOES derive monopoly
pricing from the 386. They sell it at many many many times the cost
to make it. An independent judge says that they contrived to do so
in an unscrupulous fashion. And AMD was damaged. However, AMD was
damaged by being denied the right to sell competitively a chip it
had expected to get under its agreement. If it had got it, as the
agreement would have allowed if not thwarted, AMD would NOT have
made a *monopoly* profit, it would have made a *normal* profit.
AMD's presence in the market would have caused 386 pricing to fall
to normal profit levels, not the ridculous levels permitted by
Intel's position as a monopoly supplier.
Not only was AMD damaged by Intel's thwarting of the agreement, but
each and every purchaser of something with a 386 inside was damaged.
AMD can be angry, because Intel cheated on a deal. But YOU can be
angry, because they did so to exploit YOU. Some commentary here suggests
that its authors LIKE being exploited. I dont. And, I own and use
PC's. Probably, many of you on the net paid about $800 more for your
386-unix PC than you would have if Intel had honored its deal.
Again, these are my own opinions, based on my reading of the judge's
entire decision and my education in economics. I am prepared to
change them if anyone can demonstrate:
1.) The judge did not find Intel liable for breach of its
agreement with AMD (impossible, because he did find them liable)
2.) Someone can argue that 386 pricing is near the level where
it would be had not Intel breached, per 1. above. I think
this will be tough. The 386 is about 70K square mils. The
29000 is about 175K square mils. Silicon, folks, is
silicon, and the 29000 perversely costs a lot less than a
386. The costs to make them go as die size, and that's just
how it is.
3.) (A tough one) Someone can argue that they are somehow
better off for having hundreds of dollars less than they
would have, or if someone can argue that it is better that
Intel and AMD between them did not make more 386's at a
lower price. Basically, this is what an economist might call
'consumer surplus,' the value everyone gets when prices get
pushed down to sustain a 'normal' profit rather than a
'monopoly' profit; it is the very same consumer surplus
that gets eliminated by taxation that effectively raises a
price to a level above the pure competion point where
marginal revenue = marginal cost. Intel caused there to be
fewer 386's out there (at a higher and more profitable price)
so they eliminated value to consumers both by exploitively
high pricing and by denying the market the benefit of
greater volume. A monopolist cannot charge any price;
eventually some consumers balk. What a monopolist does is
pick the price point it wants and then sell what it can at
that price.
I do not work in the part of AMD that has something to do with iAPX
architectures.
Best Regards; Brett Stewart
Advanced Micro Devices, Inc. 1-512-462-5321 FAX
5900 E. Ben White Blvd MS561 1-512-462-4336 Telephone
Austin, Texas 78741 USA brett@cayman.amd.comchedley@eecs.cs.pdx.edu (Chedley A. Aouriri) (11/08/90)
In article <1990Nov7.184237.22840@mozart.amd.com> brett@cayman.amd.com (Brett Stewart) writes: ... > 2.) Someone can argue that 386 pricing is near the level where > it would be had not Intel breached, per 1. above. I think > this will be tough. The 386 is about 70K square mils. The > 29000 is about 175K square mils. Silicon, folks, is > silicon, and the 29000 perversely costs a lot less than a > 386. The costs to make them go as die size, and that's just > how it is. However, you are NOT including the R&D costs incured by INTEL for the 386. While it is true that silicon is silicon, the logic/microcode which goes into that silicon is an essential added value. And the cost to develop that logic is by no means nil!!! So, regardless of the contractual legalities, INTEL does have a point in refusing to share the spoils of its R&D outlays and risks with another company who did not contribute a dime to the R&D costs of the 386. Following your logic, a Boeing-747 should cost only a few thousands dollars. Metal is metal, is n't it!!!??? Or are you advocating that Boeing should give free licence to any manufacturer who wants to build the 747, even if it did not contribute to the R&D cost of the airplane ??? >.... > greater volume. A monopolist cannot charge any price; > eventually some consumers balk. What a monopolist does is > pick the price point it wants and then sell what it can at > that price. No! a monopolist tries to maximize its profit or revenue, regardless of the price or the demand for its product. A monopolist is NOT a price taker or a price picker. It sells at any price and any quantities which maximize its profit. So, the monopolist sells quatitities at the price solution to the equation: marginal revenue = marginal cost. And that's exactly what INTEL is doing. It is maximizing its profit and return on investment in the 386, by selling as many 386's as it can manufacture, at the highest price it can get. ..CHEDLEY..
davidsen@crdos1.crd.ge.COM (Wm E Davidsen Jr) (11/09/90)
In article <1990Nov7.184237.22840@mozart.amd.com> brett@cayman.amd.com (Brett Stewart) writes: | Intel DOES derive monopoly | pricing from the 386. They sell it at many many many times the cost | to make it. Motorola has a monopoly on the 68000. What's your point? If the 386 costs too much the DOS people go 286, the workstation people go RISC. Therefore the price stays down. I don't see all the sources for SPARC making them so cheap people use them in bunches. | I dont. And, I own and use | PC's. Probably, many of you on the net paid about $800 more for your | 386-unix PC than you would have if Intel had honored its deal. Since the retail cost of the CPU is less than $800 I would really like to know how you come up with that number. Partucularly since *my* cost is < $800, and no matter what Intel charges the distributor and retail vendor would still mark it up, as a chip or in a system. | 2.) Someone can argue that 386 pricing is near the level where | it would be had not Intel breached, per 1. above. I think | this will be tough. The 386 is about 70K square mils. The | 29000 is about 175K square mils. Silicon, folks, is | silicon, and the 29000 perversely costs a lot less than a | 386. The costs to make them go as die size, and that's just | how it is. That's just not true. The cost is a factor of die size and process. The cost of the same area in 2.5 micron CMOS (static memory) is a lot less than the same area filled with 0.8 micron CMOS (a CPU). If it was really cheaper to use less area everyone would use 6000 angstrom design rules for everything, right? Since it seems AMD didn't deliver their part of the technology swap (this part didn't make as many headlines), AMD can't claim to be without fault in this case. Therefore why don't the people who are complaining about this, most of whom seem to be from AMD, take this to alt flame. It's not a proper issue for this group, if it ever was. -- bill davidsen (davidsen@crdos1.crd.GE.COM -or- uunet!crdgw1!crdos1!davidsen) The Twin Peaks Halloween costume: stark naked in a body bag
peter@ficc.ferranti.com (Peter da Silva) (11/09/90)
In article <595@pdxgate.UUCP> chedley@eecs.UUCP (Chedley A. Aouriri) writes: > Or are you advocating that Boeing should give free licence to any manufacturer > who wants to build the 747, even if it did not contribute to the R&D cost of > the airplane ??? If they had an agreement ahead of time with that manufacturer to do so, certainly they should. -- Peter da Silva. `-_-' Professional computer nerd, second class. +1 713 274 5180. 'U` Gallery Furniture really will SAVE YOU MONEY! peter@ferranti.com (Have you hugged your wolf today?)
winkler@cunixf.cc.columbia.edu (Andrew Winkler) (11/10/90)
Are you suggesting that Intel didn't understand the significance of R&D costs when it made the agreement? Poor Intel had to agree to give up its technology without being recompensed, and all it got in return was the IBM account.
brett@cayman.amd.com (Brett Stewart) (11/13/90)
In article <595@pdxgate.UUCP> chedley@eecs.UUCP (Chedley A. Aouriri) writes: >So, regardless of the contractual legalities, INTEL does have a point in ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ >refusing to share the spoils of its R&D outlays and risks with another >company who did not contribute a dime to the R&D costs of the 386. Are you saying they didnt make an agreement with AMD? Or that they didnt break it? Neither position is an informed one. Interesting point. I have always thought that rule of law and sanctity of contracts were foundations of our society. I think you might have misunderstood me; I think it is deplorable that they made an agreement then broke it to exploit others. I do not think it is deplorable that they are trying to be monopolists, since every company that sells a differentiated product is trying to do that. Best Regards; Brett Stewart Advanced Micro Devices, Inc. 1-512-462-5321 FAX 5900 E. Ben White Blvd MS561 1-512-462-4336 Telephone Austin, Texas 78741 USA brett@cayman.amd.com