Total Recall
None of the motherboard companies we contacted had a complaint about the way Intel handled its stop-shipment. As one person said, “It’s just business.” However, everyone wishes that Intel had briefed them earlier.
There are several reasons why Intel couldn’t disclose the chipset bug before Jan. 31. Recall notices are subject to federal regulations and customer protection laws. Once Intel committed to a stop-shipment, it was legally bound to make the disclosure public before its motherboard partners were informed.
Intel could have placed the problem under a warranty program for those cases when the chipset would fail. If you examine the numbers, Intel shipped 8 million chipsets by the time the problem was discovered. Even if we are pessimistic, 15% of 8 million chipsets is 1.2 million potential failures. The problem was that any chipset warranty would have been a long-term logistical nightmare. Unlike CPUs, the company doesn’t sell its chipsets directly to customers. So, warranties would have involved coordination with motherboard manufacturers. According to our sources, the fear was that, in the long run, some customers would abuse the program to get new boards at the slightest sign of a problem, even if their problem was completely unrelated to the SATA bug.
From a legal perspective, Intel does not have an explicit duty to issue an official recall. See Patton v. Hutchinson Wil-Rich Manufacturing Company (Kansas 1993), Tabieros v. Clark Equipment Co. (Hawaii 1997), and Gregory v. Cincinnati Inc. (Mich. 1995). But even though a manufacturer may not have an affirmative duty to conduct a voluntary recall, it does have the responsibility to warn its customers imposed upon it by virtue of post-sale responsibility, which includes the possibility of class-action lawsuits. Lawsuits are, by definition, uncertain outcomes. Class-action lawsuits can be very expensive. After factoring in the warranty program, the addition of a class-action lawsuit would have easily exceeded the initial $700 million price tag. Practically speaking, the recall allows Intel to avoid implementing a lengthy PR campaign to preserve brand image. It also has the additional benefit of keeping the problem out of the courts.
And you'll notice we keep calling it a stop-shipment. Intel is very sensitive about the verbiage used to describe its actions (likely a result of the legal implications). With that said, we have no problem referring to the effects of its actions by the motherboard vendors as recalls. When a piece of your car is found to be defective and you get a letter in the mail stating that a dealership will fix it free of charge to you, that's a recall. And that's exactly what motherboard vendors were offering to their customers after Intel's own action.
