It's different in the USA vs. China

Story: Leaked memo from Intel shows Major Linux EffortTotal Replies: 2
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Nov 04, 2005
9:43 AM EDT
In the USA, computer manufacturers are not really selling you a computer so much as they are delivering your eyes to the multitudes of marketing offers that are integrated into the various sample programs installed in the system, or accessed through the default browser home page that is not easy to change (though telco and cable broadband providers manage to do so at times). It's a model not unlike how printers are sold (nearly give away the low end printer, and make obscene profits on cartridges ... e.g. the razor blade practice). Too much business in the USA focuses not on delivering products or even services, but on delivering people to advertisers in a way rather similar to how advertising supported TV broadcasts are done. So they see buyers, particularly home buyers, in the USA as just numbers they can deliver to their marketing partners.

This is also why the are reluctant to deliver desktop computers with Linux installed, because this does not fit their business model. This is why when they do, the price is actually higher. They may pay $30 to Microsoft per unit for OEM licensing, and make well over that, maybe hundreds of dollars, on placement fees for all the stuff they put in there. Not only does that cover the cost of Windows, it covers much of the cost of the hardware itself.

In China, that's not an option right now. So they do have to look at the market there strictly in terms of selling the actual product. Now Linux looks far more attractive than Windows. There are at least two reasons this is not an option. One is that they simply don't have the business partnerships in marketing really established there, yet. The other is that given the effective poverty level of rural Chinese (and Indians, where the same issues apply ... and Africa is next), any such marketing programs are effectively useless. Right now, they want to build a computer using base in these poor areas, and they are, for now, willing to sacrifice locking them in to Windows (something the government in China would more readily pounce on, anyway) to get that base.

The Motion Picture industry (represented by the infamous MPAA) carries out a similar practice with region coding of DVDs. They want to be able to sell a movie in the USA for $40 or so, while selling the same movie in India or China for $3, and prevent those copies sold there from being playable back in the USA (they fact that they would be in PAL format would not matter as that is easily converted now days as multi-standard DVD players only a few dollars more). Remember that once the production investment is done, every dollar they can get out of every copy sold anywhere is one more dollar in the till. A $3 copy in a country where the US dollar is so expensive is still $3 more money, even though they might not profit if that were the price in the USA.

Intel probably doesn't really care one way or the other about Linux. In the USA, more computers are sold by other companies like Dell, Gateway, and HP, than directly by Intel. Those companies use the business model that I described above, which means they choose Windows (which gives THEM control over "your" computer). But in China, they are motivated for a number of reasons, not only to establish a marketing base, but also to educate the Chinese population to generate over the next few years a larger base of computer savvy young people that can be hired (cheaply, of course) in the various engineering and software development centers popping up there (and in India, and eventually even in Africa).

The USA will lose its technological lead because technology itself is fast becoming a commodity that is bargained for strictly on price. With our higher cost of living in the USA, and the very expensive US Dollar (which means they are not going to have as many dollars to buy our products), the USA will be a has-been. The real winners will be the executives and stock holders of large international corporations that manage to make a presence in these emerging countries.

Dec 29, 2005
4:51 PM EDT
Thanks for this insightful little spiel.

Mar 13, 2006
6:06 AM EDT
Yep. Appreciated.

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