mannerisms

Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.

Why Do Intel And Qualcomm Want So Much Control?

Qualcomm appears to be following the same trail as Intel in falling foul of regulators around the world. The behaviour appears to derive from a mental aberration that comes over American companies at a particular stage in their development.

 

Japan’s FTC has sent a draft order to Qualcomm asking them to stop certain anti-competitive practices.

Qualcomm apparently got the likes of NEC, Panasonic and Mitsubishi to sign licences for Qualcomm’s technology which had a clause saying that the Japanese companies would not sue Qualcomm, even if Qualcomm violated the Japanese companies’ patents, and that Qualcomm could use the patents of the Japanese companies as freely as it liked.

 

Frankly, it’s amazing that grown-up people could agree such contracts.

The Korean FTC has already found Qualcomm guilty of anti-competitive practices which are believed to consist of charging licensees of CDMA technology lower prices for Qualcomm chips, and charging companies which don’t buy Qualcomm chips, a higher price for licensing CDMA technology.The EU is currently investigating Qualcomm.

 

Intel, of course, has been found guilty by Korea, Japan and the EU of anti-trust behaviour, notably giving rebates and discounts to customers which don’t buy AMD’s chips, and paying PC companies to delay the launch of AMD-based PCs. The Attorney-General of the State of New York is currently investigating similar complaints.

 

So why do they do it? Here are two companies which were renowned for innovation. Qualcomm has been a ground-breaking wireless pioneer for decades, going it alone on developing CDMA which  turned out to be much the most efficient 3G technology.

 

Intel had a wonderful record of innovation, pioneering DRAM, SRAM, EPROM, E²PROM, Microprocessors and Flash.

 

Both companies were hugely admired and very financially successful, but then the mental aberration appeared to strike: admiration and financial success were not enough – they wanted to control everything.

 

This is where things start to go askew. The lawyers are called in to try and scupper the competition. The customers are bullied into spurning competitors’ chips. Qualcomm, for instance, is said to have 98% market share in Korea. Control is gradually extended over the market.

 

For a while, of course, control is fine and dandy. My God how the money rolls in. But then the authorities tend to step in and stop the fun.

 

It was decided as long ago as the 1890 Sherman Act in America that it’s against the public interest for companies to control markets.

 

And that’s exactly the way it should be.

 

TOMORROW MORNING: THE TOP TEN CONTRACT MANUFACTURERS

Tags: dram, launch, licensees, microprocessors, sram

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2 Comments

  1. David Manners
    July 31, 2009 11:14

    Well, Ozzy, I seem to remember Colin Powell trotting off to Korea and banging the drum for CDMA. Maybe that had an effect. I agree with you that Intel and Qualcomm deserved their dominant positions because of superior products/service but becoming dominant has a downside – you have to be much more careful in how you sell stuff. The EU has certainly spent a lot on R&D over the years, Sarkozy is backing Crolles quite generously, and the ST-NXP-Ericsson wireless JV owes something, I suspect, to encouragement from Brussels.

  2. Ozzy Fulcanelli
    July 31, 2009 09:44

    Does anybody know why Korea decided to go for CDMA instead of GSM like most of the world did? Is it possible that they wanted to keep foreign competition out and give companies like Samsung and LG time to build up strong product portfolios with help from Qualcomm?
    Companies like Intel, Microsoft and Qualcomm might be misusing their now dominant positions but how did they get into these positions in the first place?
    Could it be that their offerings were just more attractive to their customers?
    Nice that the European Union is slapping fines on Microsoft and Intel but I see it as just another form of tax. What I am more interested in, being a European, is what the Union is doing to foster a climate in Europe so that we can build up alternatives to said companies.
    But that is probably too much to ask for?

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