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Intel can make parts to fit a SKU by (a) sorting them based on what elements are working when they come off the proverbial press, (b) physically disabling working elements, or (c) disabling working elements in software with the option to re-enable them.

I totally understand the argument that (c) is more objectionable since the chip you buy is prevented from using all the elements it left the factory with. However I think it really shouldn't feel different than (b)? The only difference between getting 8 core part with 8 more cores burned out on its way out the door and an 8 core part with 8 more cores disabled in microcode is that you can double the core count of the latter in place for a price that's presumably proportional to the price difference between the 8c and 16c SKU?

Of course there's a slippery slope to a hardware-as-a-service pay-us-x-per-unit-time-or-we-turn-off-your-CPU, but with competition from AMD on x86 and in-house ARM chips from Apple and hyper-scalers, one would think Intel wouldn't want to make their product even _less_ attractive.

5 comments

I think the latter two cases are different because it ultimately comes down to property rights; (b) may be harder to reverse but if you can do it, you still own it (remember the AMD pencil mod? https://www.overclockersclub.com/guides/tbird/) (c) is, being a software decision and thus tied to licensing and such, feels more like "you can't use the hardware because we said so", and that arguably is what people hate. It's a slippery slope in the same direction as the "you will own nothing" movement.

...and what makes you think AMD and others are not going to try the same thing?

>is, being a software decision and thus tied to licensing and such, feels more like "you can't use the hardware because we said so", and that arguably is what people hate. It's a slippery slope in the same direction as the "you will own nothing" movement.

SaaS offerings doesn't seem to gather the same type of hate though? When was the last time people were outraged that the "basic" tier lacked features in the "premium" tier, even though the code for implementing such feature is literally on the same server and gated behind an if statement?

With SaaS, it's pretty clear that you don't own anything.

> ...and what makes you think AMD and others are not going to try the same thing?

Overwhelming competitive pressure? AMD and Intel may be a duopoly on x86 parts, but Apple Silicon has proved, and AWS Graviton has a strong argument, that consumer and cloud compute workloads can transition to ARM. Any attempt by Intel to leverage its market position just accelerates that transition to substitutes.

isn't ARM a commodity market? seems to require a lot of coordination from the entire industry.

You raise an interesting point: Should Intel be allowed to destroy value it produced, in an effort to make more money?

Arguments could be made that it's ecologically criminal to destroy useful things for profit.

This is an interesting take. I think it's clearly unethical to destroy production as a price support for human essentials. Industry shouldn't incinerate insulin, dump milk[1], trash food, etc. in pursuit of current or future profit. I have a hard time extending that argument to processors. Would it be nice for Intel to pass unexpectedly high yields on to society in the form of better parts or prices? Sure, but I have a hard time finding an ethical obligation for them to do so.

[1] of course in choosing this example, we admit that _government_ might ethically choose to destroy production to maintain price floors so that domestically-produced products remain available.

I think the issue is that the economy is supposed to in theory serve people, which most people would think means that if there is no material difference in effort to produce a part, the best most useful technology should be produced and in consumers hands. The theory of market competition says that moves like this should be impossible because it would open Intel up to being undercut by a competitor nearly instantly. However, we can see that monopoly capitalism does not function the way the legitimizing theory does. In fact, it is populated with rent seekers that manipulate the public using market segmentation strategies to profit.

Apply this to software, and everybody will be forced to pay the Office Pro price when they only need Office Home features.

For a certain price, you can buy an Intel CPU with certain known features. For a higher price, you get more features.

This is a concept that’s used in many product classes. The fact that it’s also done for HW is just an irrelevant detail.

The only reason this works is that it's backed up by government enforcement of intellectual property rights. If the government didn't do that, then consumers wouldn't pay anything for office software, Microsoft Office wouldn't exist, and the whole landscape would be very different. The natural price for the second copy of a piece of software is $0.

Something being known and taught in product classes doesn't make it any more acceptable. Planned obsolescence is taught in economics classes, and it's still awful despite that.

> Microsoft Office wouldn't exist

I believe you're wrong. It would absolutely exist, either in cloud form, or as a rented screen-time service before that.

Productivity (and other) software has a real economic value, it's not a movie you can skip and lose nothing.

Is the marginal cost of providing a copy of software really $0, or does the marginal user ask questions, have feature requests, uncover bugs with new usage patterns, ...? Does that non-zero marginal cost vary with the features included in the software? Isn't support a major part of most software product differentiation strategies?

That's true, and that's continuous labor. However, it's also possible for software to come with no support too (e.g. abandoned games). As software developers, we care that our labor is paid for, but there's no reason there should be some kind of eternal dividend for doing nothing. Nor should there be for bushiness people generally.

Which is why intellectual property rights are time-limited? One can make a strong argument those rights are protected for _too much_ time, and the length of that restriction can be attributed to regulatory capture. But the remedy is shorter copyright terms and patent exclusivity periods, or higher costs to maintain protections (like property taxes on real property), not abolition of intellectual property as a concept.

Similarly, if my aunt had wheels, she’d be a bike.

I don’t see the point in discussing lala land hypotheticals.

Given that most are pushed into the yearly SaaS subscription instead of the more expensive one time Home license, that is already here, no need for future tense.

> Apply this to software, and everybody will be forced to pay the Office Pro price when they only need Office Home features.

Or rather Microsoft makes less money producing pretty much the same products and selling close to the lower price, which is more likely, since their margin is high enough to allow it.

Price discrimination happens all the time even when there's no material difference in providing the good/service (e.g. Uber surge pricing).

Surge pricing of a limited resource is not exactly "price discrimination" in the way that term is used traditionally in economics. Per wikipedia: "Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices..."

In the case of surge pricing, there is just not enough goods or services to sell, so you simply dynamically increase the price in response to demand akin to an auction, not selling it more expensively to a subset of customers simply because they can pay and to others for lower prices (which presumes a supply surplus exists). In other words, an "Uber ride at rush hour" is not a substantially similar product to "Uber ride in off-peak time".

At least surge pricing makes sense - when there are more fares than drivers, the fares have to pay more to be picked up first.

With CPUs, it's less intuitive - The people with DRM-hamstrung CPUs are supposed to be getting a cheaper price subsidized by the people buying the product at full price. The cheaper models otherwise would have to be sold at the full price.

That's not to say that Intel's prices are necessarily fair at any tier...

It only happens when there is not robust competition (even 5-6 big players is not enough), which is the case in pretty much every non-commodity market today.

I have seen price discrimination/segmentation at hotels even though there are tons of hotels (senior citizen discounts, military discounts, AAA discounts, etc), and grocery stores and restaurants price discriminate heavily via coupons.

Mainstream economics argues that the market tends toward equilibrium, not that it equilibrates instantly, and that the structure of specific markets controls the speed of that process. Modern semiconductors are fantastically capital intensive, and so respond slowly.

An Intel leveraging their position to under-invest and earn outsize gains from their leadership position in x86 ... would lose business to competitors (like they have been by AMD), innovators (like they are to Nvidia) and substitutes (like they have to Apple Silicon).

> Modern semiconductors are fantastically capital intensive, and so respond slowly.

That's my point and de-legitimizes the economic model that grants them private control.

There's a substantial leap here from 'Intel might be temporarily able to / trying to exercise a degree of monopolistic pricing power' to 'market capitalism is illegitimate'. The response to a firm with mono{pol,pson}istic pricing power is to encourage competition, require cooperation, or force divestment.

> The theory of market competition says that moves like this should be impossible because it would open Intel up to being undercut by a competitor nearly instantly. However, we can see that monopoly capitalism does not function the way the legitimizing theory does.

Can you quote single mainstream economist claiming that market entry barriers don't exist?

but with competition from AMD on x86 and in-house ARM chips from Apple

Competition only works, if people compete on that market point.

This can be a juicy revenue stream. If intel gets little blowback, expect AMD and others to salivate, then jump on board.

Ignoring the broader economic arguments that paradoxically justify this as productive, (b) seems worse because it’s literally destructive. They’re producing something of value and then deliberately damaging it.

Is creating something of value, then prohibiting someone from using it any better though?

FWIW, I find both b and c objectionable.

It may feel antithetical to the very core of your being, but that's where engineering meets capitalism. Intel is a business (because it has to be), and businesses want to maximize profits, and where b and c aren't materially different, taking something and making it worse is the same failing of capitalism as communism - human nature.

I can make 10 widgets for 10 customers to buy, but between those 10 customers, 2 of them want the cheapest version, 6 of them want the medium option, and the last 2 want the most expensive option. The way to maximize profit is to produce that same distribution, divorced from the actual yield of the production process. Pricing a product is a dark art but looking a bit closer at it, there's a huge psychological or human nature element to it.