Jim, Re: Intel with sweet deals to Dell
You could try to put together a Dogde Neon (or any other cheap car) from the cheapest genuine parts you could find and it would be probably end up costing a lot more than a Mercedes. If you do not complain about Ford's or GM's sweet deals with its component suppliers (I am sure there are lots of these deals) which result in a cheap car for the consumer, what is wrong with Intel's sweet deals with Dell which results in a PC cheaper than what the guy around the corner can provide me? Especially when backed with Dell's excellent reputation for service and warranty.
I know that over time it will drive the "small screwdriver shop" out of business but this kind of stuff happens all the time in a variety of industries. Eventually, its the consumers who make the decision that put local retailers out of business not Intel or Dell.
Personally, I do not like this phenomenon too. But I would not blame Dell, Intel, GM, Ford or Walmart for what's happening except in cases where something is done illegally or at the taxpayer's expense. (For example, attempts by some states and countries to attract industries by providing a 10- or 20-year tax breaks in addition to generous subsidies.) Economies of scale lead to incredible products affordable by the average consumer at reasonable cost. This all the more true for commoditized products.
One could argue that the small screwdriver shop exploited local inefficiencies in the supply chain, which were present only due to the the non-commoditization of the PC, to give certain consumers a cheaper PC than Dell. Now that the supply chain is being squeezed for a variety of reasons it is not suprising that components suppliers like Intel and manufacturers like Dell are wringing these inefficiencies out of the supply chain to maintain their profit margins.
I am sure that before Henry Ford got the River Rouge facility up and running their were a lot of corner shops who would "put together" a car for you. I imagine that pretty soon we will have a Big 3 in the PC industry similar to the Big 3 (Big 2 now) in the US auto industry. My personal predicition is that only Dell, Compaq and IBM will survive this downturn.
So the larger question is: Is the PC industry finally commoditized? Intel is doing the best it can to prevent the commoditization of the X86 microprocessor. (Actually, one could argue that all non-X86 microprocessors have been commoditized.)
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