Editorial: A Worthy Chip Deal

Editorial: A Worthy Chip Deal
Copyright by The New York Times
Published: August 6, 2010
http://www.nytimes.com/2010/08/07/opinion/07sat2.html?th&emc=th


It took a long time, but the settlement between the Federal Trade Commission and Intel, the microchip company, on Wednesday stands a reasonably good chance of curtailing the company’s tactics to keep its dominance of the microprocessor market and of bolstering competition and innovation in this vital segment of the economy.

The settlement of the suit brought by the F.T.C. in December forbids Intel from rewarding computer makers that use only Intel computer processing chips and punishing those that buy processors from Advanced Micro Devices, its main rival. But the deal extends beyond the market for processing chips — computers’ core building blocks — where Intel has an 80 percent share. It also aims to ensure that powerful graphics processors made by Intel’s rivals can work well with its computer chips, the industry standard.

Graphics chips, which can process lots of information at the same time, are at the cutting edge of computing technology. Intel has about 50 percent of the market, but its chips are mostly confined to cheaper PCs and are less technologically advanced than those of rivals, such as Nvidia, that have taken over many tasks from Intel’s chips. The F.T.C. accused Intel of changing processing chips so that rival graphics chips would not run smoothly on them and selling bundles of processing chips and graphics chips below cost to keep rivals out.

The agreement forbids these sorts of tactics. And it orders Intel to maintain an access point to its chips — known as a PCI Express Bus — for at least six years to ensure rivals’ processors will be able to work atop Intel’s chips without suffering any diminished performance.

The settlement does not compel Intel to license its x86 chip technology so rivals could build their own innovations to work on it. But it aims to ensure competitors reasonable access to Intel’s intellectual property.

Rivals like A.M.D., Nvidia and Taiwan’s Via Technologies should be able to outsource the making of their chips — which rely in part on technology licensed from Intel — without fear of Intel suing the manufacturers for patent infringement. If A.M.D. or Via were to merge with another company, Intel would be forced to enter negotiations to extend the licensing agreements to the new entity.

A settlement as complex as this one will be difficult to police. Still, the settlement and the increased oversight that comes with it offer a fair chance that Intel won’t be able to suppress competition in the future. The deal gives makers of graphics chips some assurance that their processors will work with the majority of PCs, and could lead to a growing variety of alternative chips. And, after all, lowering barriers to competition and innovation is the ultimate goal of antitrust policy.