Study: Intel gained $60B in alleged monopoly profits from 1996-2006

By Colleen Taylor, Contributing Editor -- Electronic News, 8/2/2007

An economic study commissioned by Advanced Micro Devices Inc. (AMD) has found that industry-leading chipmaker Intel Corp. has extracted alleged monopoly profits from microprocessor sales of more than $60 billion in the period from 1996 to 2006.

The report's results, which were issued by Michael A. Williams, a director of economic and financial consulting firm ERS Group, were published today. The ERS Group was retained for the study by AMD's' outside counsel, O'Melveny & Myers LLP.

When reached for comment today, an Intel spokesman dismissed the report's credibility and called it a "wildly speculative" marketing ploy by AMD. "If you pay someone enough money, they'll say almost anything," Intel spokesman Chuck Mulloy told Electronic News. "This is a marketing campaign on AMD's part." *

Last week, the European Commission (EC) wrapped a six-year investigation and slapped Intel with antitrust charges, claiming that the company violated European Union (EU) competition laws by allegedly abusing its dominant position in the global microprocessor market and aiming to exclude AMD from the x86 CPU market.

Intel, for its part, has denied any wrongdoing and maintained that its actions in Europe benefit consumers. In a statement released last week, the company dismissed the case as based on "complaints from a direct competitor [AMD] rather than customers or consumers."

But according to AMD, Williams' analysis explains why these pro-competitive justifications for Intel's alleged monopoly profits are "implausible," as the study claims to have found that consumers and computer manufacturers could gain more than $80 billion over the next decade if the microprocessor market were open to competition.

The analysis also found that consumers would save at least $61 billion over the period, with computer manufacturers projected to save another $20 billion, possibly allowing them to “increase their investment in R&D; create improved products and greater product variety; and provide additional innovation benefits to computer buyers around the world.”

"In light of the recent European Commission decision and prior Japan Fair Trade Commission actions, this analysis asks not whether Intel has engaged in anticompetitive conduct, but how much Intel has gained from the alleged conduct," Williams said in a statement.

Meanwhile, AMD executives maintained on a conference call with journalists earlier this week that the EC's action was based not on their company's complaints, but rather a part of a wider justice system in which corporate interests should take a backseat to those of the consumer. "This is not a question of AMD versus Intel — this is between the European government and Intel," Tom McCoy, AMD Executive VP of legal affairs, said.

*Editor's note: This story was updated at 1pm eastern to reflect comments from Intel.