Money For Old Rope

There’s nothing new under the hi-tec sun and Intel’s latest wheeze of selling crippled chips which can be fully-enabled for a $50 ‘upgrade’ is a trick pioneered 40 years ago by IBM.

IBM would sell a mainframe with half of its functionality switched off. When a customer’s business grew to the point where they needed a more powerful machine, IBM would offer the customer an upgrade.

 

Along came a guy in white overalls whose job was to fiddle around with the computer for a morning looking as if he was doing something tricky and complex.

 

His only real function was to throw a switch which turned on the extra capabilities built into the computer.

 

Now Intel is selling a voucher which allows you to access the ‘Intel Upgrade Service’ which suggests you: ‘Add some power to your purchase’ by spending $50 to access the increased capabilities already built into the chip.

 

A process generally referred to as money for old rope.

 

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Tags: overalls, tomorrow morning, upgrade service, voucher, wheeze

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14 Comments

  1. Mike Bryant
    September 24, 2010 21:00

    It will be interesting to see if any of the Core i7s can be made into Extreme Editions as those command markups of up to US$500. If I could have that for US$50 I’d jump at it :-)

  2. David Manners
    September 24, 2010 13:16

    Well Yes El Rupester but it all boils down to the customer’s perception. If it’s done too blatantly the customer feels hard done by having bought a crippled chip. With the 486s there were all different kinds of performance grades and customers got pissed off when threy found this was being done by crippling functionality for the low-grade chips. If they hadn’t been told it was done this way they wouldn’t have felt upset. Gordon Moore was asked once what was the difference between microcontrollers and microprocessors and replied: “They’re the same cores we just sell ‘em for less.” That didn’t go down too well with Intel’s marketing people but, as you say, c’est la vie (so long as you don’t make the customer feel an idiot).

  3. El Rupester
    September 24, 2010 13:03

    I don’t see the objection to this.
    As Dave says, if you don’t need the functionality, then you get a $50 cheaper chip. That’s a good thing isn’t it?
    (eg yoiu run Linux instead of M$ bloatware: you get a cheaper chip)
    But everyone in silicon does this: sells the same die at different price points. Torben assumes things stand still: it maybe that when you sample it you are doing biunning, but after a few years of optimization, defect density reduction & process tweaks most of the devices will be the grade you orginial had as premium. Does that mean you sell them all at that price? No, you sell some cheap & some dearer.
    Is Intel’s trick any worse than BA offering you an upgrade to a nicer class if you give them more money? Instead of same chip getting better, that is the same plan, you just get ‘better’ for the cash.

  4. Torben Mogensen
    September 23, 2010 08:29

    I am well aware that IC companies sell several different models made from the same die. But since yield is often an issue, quite often the cheaper models are the chips that failed tests in some components, so these are switched off, or failed at high frequencies, so they are sold with a lower max clock rating. Or, at least, did not get so thoroughly tested as the more expensive models.
    Yes, if demand is higher for the smaller models, the company may ship out fully capable chips as lower-cost, crippled models. But I would consider this a reaction rather than a plan.

  5. David Manners
    September 22, 2010 10:59

    Well you’ve put your finger on it, Dave – it all comes down to the attitude of the customer. If you do this sort of thing in a way that makes him feel like a sucker, then you really shouldn’t do it.

  6. David Manners
    September 22, 2010 10:56

    That made me chuckle, thanks Dave

  7. Dave
    September 22, 2010 10:49

    I also remember years ago back at high school we all had a certain model of Canon calculator for maths. We found that if you cut a hole at a certain place in the casing, you revealed another button which turned your calculator into the next model up, a programmable model. Needless to say pretty soon we all had programmable calculators!

  8. Mike Bryant
    September 22, 2010 09:28

    Actually Torben with mask sets heading north of $10m a go it is usually cheaper to use the same mask set for multiple versions of a product if you can. The FPGA guys have been doing this for years.

  9. Dave
    September 22, 2010 09:27

    Plenty of companies do this. A common example is a microcontroller with X KB of memory physically on the chip which is also sold in a variant with less than X KB. Part of the memory is switched off and a lower price charged to the customer. The reason for doing so is that it can be cheaper for the manufacturer to only need to produce the one physical product rather than two.
    I suppose Intel, with all those big 300mm fabs, would be a prime candidate for this kind of cost optimisation, because at 300mm the bigger the production runs the better.
    Looks like the mistake they made was offering the “upgrade” option, which twigs the customers to what is going on. But really, look at it from the other way – the customer who needs the lower functionality is getting a $50 discount on the chip rather than forking out for extra functionality they dont need.

  10. Torben Mogensen
    September 22, 2010 08:30

    This is not unlike the “trial” versions of software you often find pre-installed on new PCs. Thee trial versions usually have the full functionality, but some features are locked or will be locked after some time of use. By paying for the “full” version, these features get unlocked.
    For software, this makes sense, as adding software to a hard disk costs next to nothing once it has been developed. But hardware is not free to produce, so the extra hidden functionality adds to the cost of chips for the people who never upgrade. You can not put all the extra cost onto the people who do upgrade, as upgrades would be too expensive.
    Overall, you can only do this if you have a de facto monopoly — like IBM did, when they used the “magic screwdriver” upgrade.
    In any case, I’m sure someone will crack the upgrade codes and sell upgrades cheaply on the internet.

  11. David Manners
    September 21, 2010 17:52

    A fiddle a day is the marketing way, Vikram, they’re more tricksy than a barrel of monkeys.

  12. Vikram
    September 21, 2010 17:42

    Does it mean people should think twice before buying Intel chip. This is again showing how Intel is misusing its power. Must be an idea of some “intelligent” Marketing guy,who initially paid to Dell for using their chips. When INTEL was fined by federal commission for unfair business practices, they cut quarterly bonuses of hardworking engineers. Anyway marketing department has to do something to get their pay checks.

  13. David Manners
    September 21, 2010 17:32

    Interesting, George. Maybe this trick is a lot more widespread than I ever thought. Even in its marketing trickery Intel isn’t being innovative.

  14. George
    September 21, 2010 16:22

    Back in the days when I worked for division of Schlumberger that produced automatic test equipment to test ICs, we had a manager who wanted to pull this trick with testers. The marketing people ran it by a few customers and they were having none of it. That was even before they knew that the “switch” was just going to be a software patch. The hardware would have been capable from day one. The software would have been throttling it.
    The cost of the “upgrade” was so high that it was a capital expense and no customer was willing to ask for approval of a capital expenditure when it did not involve the purchase of some new tangible physical asset. If there was no new hardware to install, they were not going to purchase it.

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