To: DiViT who wrote (33724 ) 6/10/1998 5:46:00 PM From: John Rieman Read Replies (1) | Respond to of 50808
Intel "dumping" i740s in Taiwan.........................news.com Intel's graphics chip pricing: fair or foul? By Michael Kanellos Staff Writer, CNET NEWS.COM June 10, 1998, 1:20 p.m. PT URL: news.com Is Intel coercive or not? The latest debate over the character of the chipmaker's business dealings centers on its foray into the graphics chip business. On Monday, the Federal Trade Commission filed an action against the Santa Clara, California-based company for unfair business practices. But specific examples of misconduct, especially allegedly predatory pricing, more often than not prove elusive, according to analysts. A case in point is the controversy surrounding the pricing on the i740, the graphics chip the company first issued earlier this year. The i740 is currently selling for between $7 to $18 in wholesale markets in Taiwan, according to various sources, far below Intel's posted volume price of $28. One marketing research firm, 4th Wave, has said Intel is "dumping" the chip to gain market share, according to reports. Others claim the real explanation is more complicated. Two LIVE stock quote Delayed 20 minutes Intel Corp. INTC 68.5625 -2.32% For more details, go to NEWS.COM Investor. Taiwanese distributors are getting rid of their excess supplies of Intel graphics chips by bundling the chip with sales of Pentium IIs and 440BX chipsets, said Jon Peddie, president of Jon Peddie Associates, a Tiburon-based consultancy. These distributors are charging board makers $8 for the i740 in a Pentium II bundle. In turn, the chip is resold to other "add-in" card makers for $18. Distributors, who pay a price in the mid-$20s for the i740, lose money on the chip but pick up the margin with the processor. Accusations of dumping can also be partly explained by a worldwide surfeit in the market for this class of chips that began in March, said Peter Glaskowsky, graphics chip analyst for MicroDesign Resources. "Everybody's got this inventory," he said. Besides, although the price exceeds the manufacturing costs of others, it is likely well in excess of Intel's manufacturing costs because the company has already amortized its plant costs, he added. "The cost of making an additional i740 is well below $10," he said. "They [Intel] can afford to sell them for very low prices."