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Is the $22 billion graphics card and chip industry next on the Department of Justice's (DoJ) antitrust radar?
The government has already taken on dynamic random access memory (DRAM) chipmakers and scored arrests, convictions, fines and prison terms based on price fixing convictions within the industry. The list of the guilty includes Korean-based Samsung and Hynix, Japan's Elpida and Infineon of Germany.
The DoJ is also investigating possible antitrust violations in the static random access memory (SRAM) industry. Subpoenas have been issued to Sony, Samsung, Mitsubishi and Cypress Semiconductor.
Nvidia is the market leader with approximately 53 percent of the graphics chipset market, according to Jon Peddie of Jon Peddie Research, which specializes in chips. The Sunnyvale, Calif.-based AMD, however, thanks to its July $5.4 billion cash and stock purchase of ATI Technologies, holds 47 percent of the market.
AMD arch rival Intel was one of the two customers for ATI's graphics chipsets. With ATI under AMD's fold, Intel could likely show preference to Nvidia, further widening the Santa Clara, Calif.-based company's market share.
"I don't think there's much to this except it's going to make lawyers richer," Peddie told internetnews.com. "There's lots of data on sales and we don't see any evidence of price fixing." Peddie said prices are very similar between AMD and Nvidia. "But the reason the prices are tightly bunched is intense competition," he said.
Nick Aberle, an analyst with Caris & Company, agreed with Peddie. "[Price fixing allegations] are little unfounded," he said. "We've done research and can't find anything that indicates antitrust behavior. We don't believe there is any collusion because these companies hate each other and both are throwing huge amounts of money into research and development."
Analyst Nathan Brookwood, the founder of research firm Insight 64, said he didn't know what the DoJ was looking for in the subpoenas but noted integrated chipmaker Intel did not receive one, possibly indicating the DoJ may be focused on "cards for medium and high end computers."
While Intel hasn't been subpoenaed by the DoJ, it is up to its neck in monopolist complaints alleged by AMD in civil court. AMD claims Intel unlawfully protected a monopoly in the x86 microprocessor market by shunting customers away from AMD.
According to an iSupply Corp. preliminary ranking of this year's global top 25 semiconductor suppliers, top ranked Intel holds 12.1 percent of the world market. Samsung (7.4), Texas Instruments (5.0), Toshiba (2.9) and STMicroelectronics (3.8) round out the top five.
AMD marks a milestone in the rankings, jumping eight places to crack the top ten for the first time, racking up $7.5 billion in sales, up $3.6 billion from $3.9 billion in 2005, and making AMD the world's seventh-largest chip maker.
AMD's acquisition of ATI is an integral part of that growth as it focuses on combining multiple processors for what AMD calls, "general-purpose, media-centric, data-centric and graphics-centric performance."