Intel remains committed to R&D in Europe in spite of antitrust ruling

The European Commission has fined computer chip giant Intel €1.06 billion after finding it guilty of anti-competitive behaviour in the market for personal computer microprocessors.

The record fine was announced the day after the official opening of the company’s latest European R&D laboratory, the Visual Computing Institute at Saarland University in Saarbrücken, Germany. Intel is to invest $12 million over 5 years in the institute, its largest European university collaboration to date.

The new institute is part of Intel Labs Europe, launched in January to boost the company’s involvement in European R&D. It is investments such as these that enable Intel to discount its chip prices, argued CEO Paul Otellini in a statement denying wrongdoing and saying Intel will contest the Commission’s ruling.

The reason Intel is able to discount is because of its, “Consistent investment in innovation, manufacturing and developing leadership technology,” said Otellini.

There are fears in the academic world that a humiliating defeat at the hands of the European antitrust authorities might put the American company off spending millions on research here.

But according to senior vice president Bruce Sewell that will not happen. “We remain committed to a long presence here, partly through our Intel Labs Europe initiative,” Sewell said. He praised Europe’s education infrastructure and promised that the company will continue to work with it.

“Our dispute isn’t with Europe, it is with one group within the European Commission,” he said.

Part of the Visual Computing Institute’s mission will be to actively solicit other academic and industry partners to join its research. The number of researchers it employs is expected to grow by more than five times over the next 5 years and include collaborators from across Europe.

Harming consumers

Announcing the fine, Competition Commissioner Neelie Kroes said, “Intel has harmed millions of EU consumers,” adding that the large fine should, “therefore come as no surprise.”

But Otellini said, “There has been absolutely zero harm to consumers,” claiming that the decision, “Ignores the reality of a highly competitive microprocessor marketplace, characterised by constant innovation, improved product performance and lower prices.”

The main abuses involved paying rebates to computer manufacturers and to Europe’s largest PC retailer, Media Markt, in order to shut out Intel’s closest rival, AMD. Although the rebates resulted in a reduction in retail prices, Kroes said that the harm to consumers stems from them not getting the choice of PCs that they would have if AMD wasn’t suppressed.

Otellini said that Intel, “never sells products below cost,” claiming the reality of a marketplace that is controlled by two suppliers is that one of them will always lose any piece of business.

Intel dominates the personal-computer chip market with a share estimated at 81.9 per cent at the end of 2008, while AMD held 17.7 per cent, according to market analysts IDC.

Unlike the Microsoft case, where it appointed a monitoring trustee, the Commission itself will monitor Intel’s compliance with the ruling. While Intel plans to appeal, it said it will comply with the monitoring process.

The €1.06 billion fine is the largest antitrust penalty the Commission has ever levied against a single company. The size of the fine was calculated by taking into consideration the duration of the abuse, the severity of the actions, and any mitigating circumstances the company could offer. Antitrust officials said that there were no mitigating circumstances in this case.

The fine dwarfs that against Microsoft, which was fined €497 million for abusing its dominant position in the software market, though the company was also fined an additional €1.2 billion for failing to respect the antitrust ruling.

The Commission ruling focused on the charges that Intel illegally gave rebates to computer manufacturers in return for buying the bulk of their x86 microprocessors from Intel.

The company was also found guilty of paying computer makers to cancel or delay the launch of machines using chips made by rival, AMD.

Last year the Commission added fresh charges, accusing the chip giant of paying generous rebates to Media Markt, Europe’s biggest chain of IT stores, in return for it de-listing all computers containing AMD chips. These charges also featured in the Commission's ruling.

Europe isn’t the only place where Intel has run into trouble with antitrust authorities. In 2005 the company settled with Japan’s competition office. Last year it was fined nearly $20 million by South Korea’s Fair Trade Commission. At home, the company is under investigation in the US by the Federal Trade Commission.

Life-like graphics

Meanwhile, a key mission of the Visual Computing Institute is to contribute to the Intel’s tera-scale research programme, which is exploring how multiple computing cores can be used to produce higher-performance computing and more life-like graphics.

“Intel has collaborated with the world-class researchers at Saarland University in visual computing for a number of years,” said Justin Rattner, Intel senior fellow and chief technology officer. “Given the growing importance of visual computing technology, it made perfect sense to expand our relationship and form this new institute. We are confident that it will become an internationally recognised centre and a driver for European leadership in the visual computing field.”

The lab will conduct both basic and applied research in realistic, interactive computer graphics and natural user interfaces. By the end of 2009 the institute will employ about a dozen researchers from Intel, Saarland University, Max Planck Institute for Informatics, Max Planck Institute for Software Systems and the German Research Centre for Artificial Intelligence.