Supply chain
Disgruntled China PC player takes aim at Intel
Joseph Tsai, DIGITIMES, Taipei

Local China-based PC player Hedy recently took to the media to voice its displeasure with Intel and make allegation of misuse of the chip giant's market development fund (MDF) in China. Hedy vice president Junbiao Mao made bold claims to Chinese-language media site that Intel is using its marketing development fund and frequent assessments of companies to increase the dependence of China PC players on the IT giant.

Intel responded to the accusations by stating that it believes its business practices in China have been fair and lawful.

While Hedy is just one company, some of the accusations aimed at Intel ring familiar to past allegations made by disgruntled industry players before Intel reportedly significantly cut back on its MDF in many markets after Intel and Advanced Micro Devices (AMD) ended all outstanding legal disputes between them late last year.

Mao claimed that while perhaps a favored PC vendor in China can sell only 50,000 PCs each month, Intel would provide the company with 100,000 CPUs, with the excess supply going to grey market sales in Hong Kong. This creates a system where vendors lose money on PC sales but earn profits through the sales of CPUs. Mao also accused Intel of judging players in the China market by the proportion of its sales going to Intel- and AMD-based products.

A quick visit to Hedy's English-language website revealed that most of the company's PC models came with a choice of Intel or AMD processors/motherboards, though it remains to be seen – based on Hedy's own evaluation of the market – whether it will continue offering Intel products. Mao claimed in the report that if a vendor's AMD product proportion surpasses that of Intel, supply of Intel CPUs would be cut. Mao also said that Hedy will form relationship with AMD and reduce its cooperation with Intel in the future.

Other accusations made by Hedy seemed to convey the message that the PC vendor is actively trying to end any relationship (if there is still one) it has with Intel. Mao claimed most China-based PC players believe that in 2006 Intel stopped supplying CPUs to China-based Tsinghua Tongfang due to the player expanded its cooperation with AMD, despite Tsinghua Tongfang having denied the rumor (Also, Tsinghua Tongfang currently offers CPU-based PCs). Mao also accused Intel of forcing China-based PC players to buy high-end CPUs to help digest excess inventory at the chipmaker. Some players needing to reach quota will purchase CPUs at the original price and sell them at a cheaper price since demand for high-end CPU in China is weak, thus cutting into profits from mainstream processor-based products.

Mao concluded by saying Hedy had a quarter of its profit coming from Intel's marketing development fund in 2002, though one could surmise that the proportion has dropped in the past eight years.

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