The dominance of Intel
When talking about microprocessors, the first name that comes to mind is probably Intel, the world’s largest and highest valued semiconductor chip makers. Intel’s dominance in the computer and laptop CPU market is unparalleled and no competitor is even close to be considered a rival. So why is Intel such a dominant force in this market? Bill Holt, the general manager of Intel’s Technology and Manufacturing Group, pointed out that Intel is three-and-a half years ahead of its nearest competitor in the fabrication of three-dimensional features, an transistor architectural adaptation necessary to reduce the size of the microprocessors (Forbes, 2014). This is crucial for manufacturers to stay competitive as smaller space translates directly in, less power usage, lower cost and most importantly greater performance. In addition, as the the silicon manufacturing process becomes more complex, the cost of a silicon fabric has increased from roughly $3 billion to $12 billion, forcing competing players out of the market. The number of players operating with silicon manufacturing process has declined significantly.
To further emphasize the dominance of Intel, the nearest competitor in the CPU market, Advanced Micro Devices (AMD), has around 17% market share and has been declining every year since 2009. The primary reason that AMD still has this percent mark is due to their exclusive partnerships with players in the console industry, providing processors to the Xbox One and PlayStation 4. However, when looking at the PC desktop and laptop market, Intel’s unit share hit over 95% of the total industry sales in the last 4 quarters.
Unlike Microsoft, known for their monopoly practices in the computer software industry which involved numerous high-profile antitrust lawsuits, Intel has been dominating the microprocessor market almost completely under the radar besides a major dispute in 2009 with AMD. How is this possible? Well there is an old controversial story in the history of microprocessors involving the two above mentioned parties and goes like this. To stay out of the potential antitrust lawsuits from the regulatory authorities, Intel has deliberately kept AMD in the business by licensing them the x86 processors design. After one decade, AMD has grown into a small but reasonable competitor. And around the time Microsoft was sued by competitors, the United States and even the European Union, Intel could simply point out and say that they do have a legitimate competitor and is not a monopolist in the CPU industry. So whenever AMD is doing well, as in the mid 2000’s with almost 20% market share, Intel would just take back their share by aggressive pricing. And whenever AMD fell under the 5%, they would let AMD breath again, just enough to survive. Of course this is just a rumor and there is no hard evidence to be found, however the numbers don’t lie as AMD’s market share went up and down so many times that have to start wondering that there must be some truth to this story.
1. Kay R. Forbes Welcome. Forbescom. 2015. Available at: http://www.forbes.com/sites/rogerkay/2014/11/25/intel-and-amd-the-juggernaut-vs-the-squid/. Accessed October 18, 2015.
2. Cunningham C. The rise and fall of AMD: How an underdog stuck it to Intel. Ars Technica. 2013. Available at: http://arstechnica.com/business/2013/04/the-rise-and-fall-of-amd-how-an-underdog-stuck-it-to-intel/3/. Accessed October 18, 2015.
3. Stevenson D. AMD vs Intel: which you should buy. PC Advisor. 2015. Available at: http://www.pcadvisor.co.uk/feature/pc-components/amd-vs-intel-3528212/. Accessed October 18, 2015.