One of the more interesting stories of 2014 was Intel and “contra-revenue funding”, how and why. Since it was first mentioned by Bernstein Research’s Stacy Rasgon, the why has come out but not the how. Let SemiAccurate guide you through a bit of it.
Everyone knows what contra-revenue funding is and has heard of the roughly $1B price tag Intel is paying this year alone. Most understand that it is simply buying design wins, paying OEMs to take product they wouldn’t otherwise touch with a 3,048,000 micron pole. Some believe this sad state of affairs will change in 2015 even after we explained why it won’t.
SemiAccurate even told you many of the numbers Intel was gifting and to whom, but one thing was still missing. That would be how this money is actually given to the various OEMs. If you recall the old way, selling the chips below cost, isn’t actually legal so that isn’t used anymore. Simply bribing them not to use the competition was theoretically outlawed by the FTC/AMD/lawsuit/settlement/mess so that can’t happen either. OK it still does but the methodologies used now technically meet the spirit of the law even if they directly avoid it’s intent. How are things done now in a ‘legal’ and ‘ethical’ way?
Note: The following is for professional and student level subscribers.
Disclosures: Charlie Demerjian and Stone Arch Networking Services, Inc. have no consulting relationships, investment relationships, or hold any investment positions with any of the companies mentioned in this report.
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