Sources in Taiwan's notebook industry are claiming that one consequence of the recent agreement between Intel and Advanced Micro Devices (AMD) to end all outstanding legal disputes between them is that Intel has significantly reduced its market development fund (MDF) budget.
The sources indicated that Intel has reduced its MDF budget, whereby Intel provides refunds to vendors that promote the Intel brand, and is instead using more direct methods, such as through pricing, to garner support from its customers. To support the claims, the sources cited the fact that Intel is not currently participating in IT Month, a local Taiwan consumer IT trade show that it has participated in year's past.
When asked to respond to the claims, Intel stated that the impression given by the sources is inaccurate.
Intel stated that there is no causal relationship between the settlement and its decision not to physically participate in the Taiwan IT Month Show. Intel said the decision not to attend was based on optimizing ROI and benefiting its customers. Re-weighting marketing investment from indirect to direct activity should not be assumed to be a consequence of the settlement, Intel pointed out.
In fact, the company stated that the settlement between Intel and AMD required no significant changes in Intel's business practices, which Intel asserts have and will continue to be fair, lawful and pro-competitive. While Intel would not comment on any specifics of its MDF program, it did point out that the agreement with AMD states that the Intel Inside program is "conclusively presumed permissible" and that Intel may continue to offer discounts in order to win business.
What is not allowed under the terms of the agreement is conditional rebates or discounts, which are based on a customer's agreement not to use AMD products. However, Intel stated the company never engaged in this practice anyway. Therefore, the settlement in no way affects its decisions regarding pricing and discounting.
Perhaps. But while there may not have been any conditional agreements, there are other ways to dangle a carrot or crack the whip. Preferential pricing and guaranteed supply have always been concerns of notebook makers. Intel says it has never artificially constrained supply as a way of influencing competition, but notebook makers remained wary of their relationship with AMD.
So while Intel says the settlement itself may not affect its decisions, how its partners perceive the settlement may play a role in how Intel moves forward. Market watchers had expected AMD to benefit from the settlement as makers became less worried about offending Intel and, in fact, the sources did indicate that AMD has received increased orders for notebook solutions. However, the sources stated that the increased orders to AMD are a way for notebook makers to test Intel to see if they can receive better pricing.
The technology edge Intel has over AMD is too great for the short-term boost to last, the sources predicted. Notebook makers will chase market demand in the long term. Whichever chipmaker can effectively execute in the market will succeed.