- The Washington Times - Monday, May 18, 2009

Last week, Neelie Kroes, the European commissioner for competition, announced that the European Union has levied a $1.45 billion fine against Intel Corp., the Santa Clara, Calif.-based chip maker, for obstructing sales of computer chips by other makers, specifically Advanced Micro Devices, headquartered next door to Intel in Sunnyvale.

If the fine stands against a promised appeal by Intel President and Chief Executive Paul Otellini, it would be a dark day for technological innovation, and for the free market. Innovation, the Eurocrats seem to think, must come from the judicial bench and not the laboratory.

As has happened in other antitrust matters, most notably that of Web browsers, real innovation is passing the European Union and its antitrust lawyers by at record speed. Both AMD and Intel are developing new chips; Apple Inc., which switched to the Intel platform, is hiring its own coterie of chip designers for the iPhone, iPod and similar items. None of this metamorphosis is coming from a judge’s chambers.

Moreover, the Intel chips that the EU is complaining about are being supplanted by other chips of greater power and lower cost, from both AMD and Intel. According to DigiTimes, a Taiwan-based IT newspaper, Intel has its road map, including faster, less-expensive chips for ultralight “netbook” computers. Thus, the products over which the EU is fighting will be outclassed shortly.

I’m not a lawyer, but I have watched this business closely since 1983. My personal preference is for open and fair competition, and the more players, the better.

But the market has spoken: Intel’s processors have greater market share than AMD’s, although the AMD chips remain quite popular. The accusation that Intel is unfairly pricing its product and using other strictures to seal up market share is what’s at stake here, but it seems to me that such claims ignore a crucial aspect of market reality.

As much as Intel may (or may not) wish to “dominate” a certain market, it’s the quality of the product, and not only the “bill of materials” cost that will keep a computer maker on their side. If Intel’s processors didn’t perform the necessary tasks quickly and well, Intel’s customers would go elsewhere. Period.

Instead, as we’ve seen in recent years, the opposite has taken place. Four years ago, Apple Inc. stunned much of the world by saying it would move its computing platform, and operating software, from the IBM-spawned PowerPC chip to Intel’s processors. Today, you can’t buy a Macintosh computer from Apple without it containing an Intel CPU. Customers seem happy, and there’s no indication that Apple is ready to switch again.

Unless, of course, you count the iPhone/iPod chip-engineer recruitment drive Apple’s been on lately. Right now, the firm uses processors based on technology from ARM Holdings, which specializes in what are called 32-bit RISC, or reduced instruction-set computing, chips. Many media reports indicate Apple is looking for a new team to design processors for iPhones and iPods that, presumably, Apple itself can make, or have made.

So far as I can determine, Apple’s move has nothing to do with any desires on the part of the European Commission.

That being the case, one has to wonder what the Eurocrats really want in this case, as well as the earlier action this year regarding Microsoft Corp. and its Internet Explorer Web browser. If its goal is to create some kind of “open market” where one doesn’t exist, it’s my opinion that the folks in Brussels are already behind the curve.

If you don’t like the iPhone, for example, there are lots of alternatives, the most popular of which seem to be Research in Motion’s BlackBerry line of phones. If you don’t like, or want, the chips found in most notebook or desktop PCs, the “netbook” has many flavors of CPU options. Do you think Microsoft is a front for Satan and his legions? The Linux operating system and, even under Windows, products such as the Firefox Web browser, Thunderbird e-mail and OpenOffice.org productivity software, as mentioned recently, are all available, and free for the asking.

In short, in case after case, time after time, the free market has remedied the purported failings bureaucracies have gone tilting after. That should provide a lesson for someone up there, but I have the feeling it won’t.

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