Friday, 13 April 2012

Intel Corporation Monopoly



By: Riley Dipucchio and Sophie Puccetti 

Intel Corporation

Background:
·         Intel is an American corporation based out of Santa Clara, California that specializes in the manufacturing of multinational semiconductor computer chips
·         They are considered to be the world’s largest and highest valued semiconductor chip maker based solely on their revenue
·         Intel was founded July 18, 1968 and worked its way up to having and sustaining a monopoly power in the microprocessors industry
·         Through their founders and executive leadership committee, Intel uses advanced chip design and innovative manufacturing capability to separate themselves from the other competitors
·         Using new ideas for advertising like “Intel Inside” and the Pentium computer processor made Intel a house-hold name brand for personal computers (laptops  and desktops)

Pure Monopolyà“exists when a single firm is the sole producer of a product for which there are no close substitutes”

How They Gained Monopoly Power:

Legal Barriers:
·         As Intel entered the semiconductor chip manufacturing industry; the founders and executive board were filled with ideas as to how they can become the best in their market. With their innovative ideas, Intel decided to receive patents on their products to make their technology and ideas untouchable to other competing companies.
·         This allowed Intel to have an exclusive right over their memory chips and semiconductors making it difficult for other companies to compete as well as giving Intel significant monopoly profit.
·         There are not many companies that have patents that interfere with the ideas put forth by Intel in an attempt to be patented for their own brand
·         Although Intel had many patents, they were faced with many law suits from their main competitor AMD (Advanced Micro Devices)
      as it was to believe that their patents had infringed on some of their ideas. This lead to Intel and AMD coming to a cross-licensing agreement in 1976 allowing both companies to use the others technological innovations without charge.



Economies of Scale:
·         Intel started off as a very small company with patents on its new technological ideas for semiconductors and processors. In 1971, Intel created its first microprocessor chip which later became its primary business idea as a result of PC’s success. During the 1990’s Intel was aggressive in their innovation towards the chips and became the dominant supplier of all PC computers. Intel and PC had a ten year deal in place to ensure the brand name of Intel would grow being PC’s number one supplier. As a result of this partnership (which is still going on), Apple decided that they would need the new x86 processor from Intel to power all their Macintosh computers.
  • This relationship between Apple and PC with Intel made it very difficult for other companies with new ideas to enter the industry as Intel supplied the 2 largest computer manufactures with semiconductor chips

·    As well, the production of these chips are a very expensive task and new companies with low budgets have a tough time competing in the market with Intel and other mid to large sized companies  

Pricing and Strategic Barriers:
·         Intel has very unique price and strategic barriers when it comes to the way they are able to “create” barriers to ensure they stay a monopolistic company.
o   Intel has been in constant law suits with many companies about their patent infringement on their computer architecture and other technologies. In an attempt to save the business, Intel sued the companies back for using their patented ideas. Both companies would drop the law suits and Intel was given the right to use the current and future patented idea
o   As well, they would arrange agreements with competing companies to allow a cross-licensing to ensure both companies would profit from the innovative idea

Do They Still Have a Monopoly?
1.       Intel has been able to keep their relationship with PC and Apple to maintain their monopoly power. Even though they have been sued by many rival companies; Intel has branded their name into being a household company for computer chips.


Bibliography
Videos:

Websites:
"Intel Monopoly." University of Notre Dame. Web. 13 Apr. 2012.             <http://www.nd.edu/~mgrecon/datafiles/articles/intelmonopoly.html>.
 "Intel CanadaEnglish | Français." Intel Canada. Web. 13 Apr. 2012.             <http://www.intel.com/en_CA/index.htm>.
"Intel." Wikipedia. Wikimedia Foundation, 13 Apr. 2012. Web. 13 Apr. 2012.             <http://en.wikipedia.org/wiki/Intel>.
"IT News Post - The World's Technology News in One Place." Windows-on-Intel Tablet Share      Small for near Future. Web. 13 Apr. 2012.    <http://www.itnewspost.com/microsoft/windows-on-intel-tablet-share-small-for-near-            future/>.

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2 comments:

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  2. It looks to me as if AMD only wins a trick if there is some reason for Intel to allow it - the sort of thing that George Galloway or David Ike would call ' two cheeks on the same bottom ' But it doesn't explain why Russia, China or Iran shouldn't buy a lot of R&D and if necessary a lot of lawyers and save us from all this freedom. After all, freedom isn't supposed to have this kind of result and it doesn't have it in any other gutter of the market.

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