Intel Offer Could Bring Woes for Various Firms
Cunniff, John, THE JOURNAL RECORD
Intel Corp.'s offer to replace its flawed Pentium chip at a potential costs of hundreds of millions of dollars establishes a new and probably unsustainable standard for products.
It could cause headaches for makers of a vast variety of other goods that are sold with inherent flaws and unforeseen consequences. It could tie up the courts, and send already high litigation costs soaring.
Depending on how the industry works out its quality standards, the added precautions and fear of uncertain consequences could show up in higher future costs, not just of computer chips but of many related products.
Intel is held to a high standard. It estimates the problem is likely to pop up but once in 9 billion random calculations. While independent estimates aren't as optimistic, they too suggest the problem is hardly common.
Contrast that, for example, with thousands of automobile recalls, unintended side effects from pharmaceuticals, faulty medical devices, routine confiscation of foods with bacteria and warnings about dangerous toys.
Unlike the Intel product, defects in items such as these often can be tied directly to serious injury or death, leading to litigation costs that in 1991 reached $132 billion, or 2.3 percent of that year's economic output.
At the rate of increase at that time, said Robert Sturgis, a legal-cost analyst, the total bill is destined to exceed $300 billion and 3.5 percent of total economic output by the year 2000.
Should that forecast become reality, it conceivably could become a serious factor in the ability of U.S. companies to compete internationally, since comparable costs in other major countries are considerably lower. …