Import Ban Philips Seeks Would Exclude 2/3 of PCs, 80% of Processors: CCIA

The proposed import ban would “effectively exclude 80% of the U.S. processor market and 66% of the U.S. computing market,” severely harming “competitive conditions,” said CCIA. “Computers are no longer optional entertainment devices. Instead, they are the main or even exclusive portals through which nearly every American interacts with nearly every aspect of modern life, especially during the pandemic.”

As COVID-19 continues to affect the U.S., excluding laptops and desktops used for telework and remote learning “threatens public health and safety by limiting the ability of the public to engage in social distancing,” said CCIA. CPU manufacturers that compete with Intel “are already facing supply constraints and could not reasonably be expected to more than quadruple their output to replace Intel’s position in the market,” it said.

The patents in this case “raise public interest issues unique to potentially standard-essential patents that justify delegating the public interest inquiry to the Administrative Law Judge and providing additional time dedicated to building a public interest record,” said CCIA. Philips didn’t respond to questions Monday. Its complaint acknowledged that the accused PCs control two-thirds of the U.S. market but said the remaining third were “vigorous competitors” that would easily fill the “demand gap.”

Philips presumes that "the mere existence of other suppliers" means those suppliers "could immediately triple their supply of computers" after any exclusion order, commented market leader Dell (login required). "It is hardly certain the demand gap would be filled at all, let alone in any reasonable timeframe, which would lead to substantial harms to individual consumers and to all sectors of the U.S. economy."

U.S. PC demand has increased significantly during the pandemic, said Dell. "This increase in sales represents only a fraction of the demand for these products, resulting in a nationwide shortage of PCs." Though Philips declares that computers "are wholly fungible products that can be quickly supplied by alternative suppliers, the computer industry’s experience with supplier shortages and customer backlogs during the pandemic demonstrated that even a comparatively small gap between consumer demand and supply can introduce months of delay into the supply chain."

On Philips' acknowledgment in the complaint that an import ban would exclude two-thirds of the U.S. PC market, "for context, two-thirds is roughly 10.24 million of approximately 15.28 million units of PCs shipped in the United States in the second quarter," said HP (login required), citing Statista data. An exclusion order "of that scope would harm public health and welfare, consumers, and competitive conditions," especially amid the increased demand "as a result of remote work, education, healthcare and government services during the COVID-19 pandemic," it said.

Philips’ accusations appear to implicate Intel processors because they incorporate the High-bandwidth Digital Content Protection standard, said the chipmaker (login required). "The HDCP standard provides protection for copyrighted audiovisual content to guard against piracy in the digital ecosystem. The protections enabled by HDCP ensure that all Americans have secure, seamless, and low-cost access to a wide variety of digital streaming content."

That functionality is "implicated in the sale of the processors Intel makes for laptops and desktops in America," it said. The requested exclusion order "would thus not only disrupt Intel’s key industries and its more than 53,000 domestic employees and contractors, but it would also impact critical public health, education, and national security interests," said Intel. "Philips does not sell processors or rely upon its own manufacturing activities for domestic industry, and the asserted Philips patents are nearing expiration. By the time of any decision by the Commission, the patents will have a little more than a year of life left."