Intel Faces Antitrust Lawsuit as FTC Prepares to Act

Strategic Insights -

The Federal Trade Commission (FTC) is set to unveil its own antitrust case against Intel, the world's largest chip maker, amidst a growing rift between the FTC and the US Justice Department over antitrust jurisdiction. While the Justice Department is locked in a high-profile battle with Microsoft, the FTC is poised to pursue Intel for allegedly abusing its monopoly power in the microprocessor market. Intel, a key supplier of PC chips, has been accused of holding back advanced product information and samples from competitors, a practice that has been likened to a "nuclear weapon for a monopolist."

Key Takeaways:

  • The FTC is preparing to file an antitrust lawsuit against Intel, alleging that the company has engaged in monopolistic practices, including holding back advanced product information and samples from competitors.
  • Intel, which supplies 90% of the microprocessors used in PCs, is accused of using its dominance in the market to gain advantage in new markets, including the graphics chip market.
  • The proposed lawsuit also accuses Intel of using predatory pricing and contract provisions to squeeze its few competitors in the market.
  • Intel's recent efforts to enter the graphics chip market, including a partnership with Lockheed Martin, have raised concerns among rivals that they will see a replay of Intel's 1995 market grab of chip sets.
  • Intel's profit margins are eroding due to declining demand for PCs and the release of faster and cheaper chips by competitors, making it vulnerable to an antitrust lawsuit.

Statistics:

  • Intel supplies 90% of the microprocessors used in PCs in a duopoly dubbed Wintel.
  • Intel controls 69% of the chip sets market, up from zero in just a few years.
  • Intel's share price has been hovering around $70, well off its 52-week high of $102.
  • A $10,000 investment in Intel in 1992 would have seen a stake balloon to $90,000 by today.

Sources:

  • Time magazine, Man of the Year: Andy Grove
  • FTC staff recommendations to pursue Intel in the absence of a settlement
  • Intel's partnership with Lockheed Martin to enter the graphics chip market
  • Cirrus Logic's complaint about Intel's market grab of chip sets in 1995
  • Intel's recent insider sales of shares and declining profit margins