Asus and Intel's relationship hits a rocky patch

IN EVERY romantic relationship going through a troubled patch, the biggest fear is of dumping, and so it is with Asus and Intel, although the dumping in this relationship pertains more to what Asus is doing with its inventory of Atoms in China.

Intel, like a suspicious spouse, has apparently been keeping close watch on Asus lately and on the China market in general, to see whether hundreds of thousands of its little chips have been flooding the market as the notebook maker and its high inventory levels play away from home.

Asus apparently became overconfident in 2008, ordering massive number of Atom chips and stockpiling Eee PCs, motherboards, VGA cards, DVD ROMs and more, thinking it was too big to ever be affected by the credit crunch. Turns out Asus was wrong and was left 'holding the baby' with excessive inventory of finished products, CPUs and chipsets since Q4 last year. Whispers have it that the firm's recent restructuring was a direct result of its overstock issue, in attempts to streamline the organization and get back to bringing in the big bucks.

With Intel's CULV-based notebooks nearly at full term and about to pop out, Chipzilla is apparently increasingly worried that CPU distributors and notebook makers with excess Atomical inventory will turn to Chinese white box makers to take the previous litter off their hands. After all, demand for Atoms in china is said to far exceed the supply. One may ask what figures we're talking here - thousands? tens of thousands? hundreds of thousands? Truth be told, it's unclear, but it certainly is enough to make Intel upset.

"Stay away from that cheap Chinese temptress!" appears to be Intel's hysterical shriek to its Taiwanese partner, with Chipzilla reportedly going as far as banning Asus from accepting any China-based white-box orders. A recent Intel dictat is said to forbid distributors from selling processors to customers outside their local market, especially on the shady Chinese grey market.

Intel, which likes to maintain a veneer of class about it, doesn't want to spread its Atoms into notebooks being sold below the $399-499 price range, but once the petite chips get sold off at near wholesale cost to ruthless, price competitive white boxers, you can bet your boxers the systems they're bunged into go for about half that much.

But Asus, like a pathological love rat, doesn't seem to have taken much heed of Intel's hurt feelings and its threats to cut off supply or raise prices. Intel's new geo limitations are certainly a pain in the Asus, but the Taiwanese giant still thinks itself untouchable as Intel's number one customer with the biggest buying power and posse around.

We've even heard rumours that, in efforts to make Asus jealous, Intel has been cosying up and flirting with several other big Taiwanese notebook makers, including MSI and Gigabyte. Intel, of course, not a fan of airing its laundry in public, hasn't commented on those rumours, but the gossip queens of Taipei are having a field day.

If Asus continues to dump its inventory, the real risk is that it will just kill the Chinese market. Prices in China are already so low that Intel wouldn't have any room for upselling higher parts there, and that is a real concern. Even AMD is worried about China, with sources telling us the firm has absolutely forbidden their reps or partners to talk about core unlocking and so on.

To be honest, there's not really much Intel can do, as it can hardly take its biggest partner to court. The best the firm can hope for is that the threat of retaliatory action and giving some loving to Asus' rivals will do the trick.

What can we say? Love hurts. µ