Why Intel Is Settling With AMD

$1.2 billion may seem like a lot for a company admitting no wrongdoing, but it’s just a down payment against the future.

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There’s more to the Intel-AMD settlement than meets the eye.

While Intel will be paying out $1.2 billion to AMD as part of the settlement—and that’s a large chunk of money in anyone’s book—it’s a relatively small price to pay when it’s amortized over 10 years and can open the door to even bigger markets for Intel. And that’s just what this is, a down payment on the future.

Intel has been smacked by the EU ostensibly over the AMD suit. It also has been threatened by regulators in the U.S., Korea and Japan for its business tactics in the PC business. But the PC business isn’t growing by leaps and bounds anymore, and if Intel were to continue fighting in the PC world it would be endlessly sidetracked from more lucrative battles with its Atom processor and potentially its semi-custom SoC business.

Intel’s chief competitor in the Atom world is ARM. Going into battle against ARM with regulators clamping down on its business practices with its x86 processors isn’t a good thing. This doesn’t mean Intel won’t play to win in those markets. But it’s a lot easier to go after new markets without the label of a monopoly.

Intel needs AMD, if for no other reason than to act as a shield while Intel attempts to gobble up market share in the netbook and smart phone world. And it needs to be seen as just one more player in a competitive market to go after the big SoC makers. The company has almost $13 billion in cash, and these days it’s one of the very few bright spots in the semiconductor world. It has the largest R&D budget in semiconductors, its own fabs and an incredibly aggressive road map that even few ecosystems can sustain. And perhaps even more important, the company has a relentless focus on efficiency and growth that has always been part of the corporate culture.

If this were a game of chess, Intel’s payment to AMD would be like sacrificing a rook to take the opponent’s queen. And after that, it’s just a matter of gobbling up all the other pieces and keeping the king harmlessly out of trouble.

–Ed Sperling


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