I don't understand why people are mad, but I do understand why they'd be surprised. The value of the processor is physical. It's protected by property law. At one point of the manufacturing, the processor is purposefully damaged and devaluated to meet market demands. The force of the market is to take goods, damage them, and sell them as inferior goods. That's not what you would expect an otherwise "reasonably functioning" manufacturing economy to incentivize. Taken out of context, some Chinese school child might be learning "in the great American Capitalist system, goods are damaged on purpose to fulfill the optimum of their system: farmers are paid not to plant anything, and chip manufacturers damage their own goods on purpose. Why do they do this? Because the rules of American Capitalism dictate it.

Students in intro economics courses (in American universities) already are taught this. Most microeconomics courses will have a lesson about how during the Depression, farmers were paid to destroy crops in the field, to reduce the supply of them and raise the price of commodities. Or how today, farmers are incentivized to convert their crops to non-productive uses like biodiesel to keep the price high.

The formation of Standard Oil in the 1880s was a reaction to ruinous overproduction of oil, and its effect was to control and restrict the flow of oil onto the market to maintain prices. Same with the OPEC cartel today.

That people don't already know this says more about the educational system than the economic system. Then again, the educational system is itself a monopoly that seeks to restrict the flow of information so that it keeps itself relevant.

The market demand is for a cheaper processor. That the vendor is able to sell high end ones as lower ends (and volontarilly damaging them in the process...) and still getting a profit is a sign that they are artificially increasing prices by this trick and others, and while in a true free/perfect/unbiased/whatever market this kind of economical evil behavior (from the whole world/humankind point of view) would soon disappear thanks to the great idealized market, there is no such thing in the real world, especially not in the processor field, especially not in the x86 processor field.

So the little Chinese kid will indeed get a kind of wiseness by learning that "in the great American Capitalist system, goods are damaged on purpose to fulfill the optimum of their system: [...] chip manufacturers damage their own goods on purpose. Why do they do this? Because the rules of American Capitalism dictate it."

Because for the most part, that's the most unbiased view you can get.

(But the rules of American Capitalism applies more and more to China too, so the little Chinese kid will either don't be taught that or learn soon enough that he will be part of the very same system regardless... (Not saying that real attempts to organize society by communism was better anyway))

"artificially increasing prices" - if the market, which has heavy competition, will bear the price increase, then there is nothing artificial about it - prices are not a fixed amount - intel is free to sell every single chip at a different price if the market will bear it.

Think of the logic. You want to produce a low end and a high end chip - because that's what the market is eating up. It's cheaper to have one fabrication process rather than two.... and suddenly, instead of busted, inferior chips being sold as lower end chips, we have the same chips in the same market niche, with the possibility of a simple software update to enable the high end features. It might smell funny at first, but as long as they are up-front about it, it's just business.

Do you honestly think that Intel is subject to "heavy competition" in the desktop CPU market?

They have exactly one competitor (AMD), and because Intel is so much bigger and has so much more money, they always have newer and better fabs. The only ways AMD can be competitive with Intel are to be really daringly clever with their chip design (Athlon 64, and hopefully the upcoming Bobcat and Bulldozer cores), sell their chips at lower profit margins, take advantage of Intel's mistakes (Itanic vs Athlon 64), and to pick their battles wisely (AMD has never been able to field a whole product lineup that is competitive across the board). The barriers of entry to that market are so high that even AMD can't fully surmount them, and AMD definitely can't gain ground or even maintain solvency by doing what Intel does but slightly better.

But it doesn't cost Intel more to produce the high-end chip. In fact, maintaining two fabrication lines will cost more than producing a single chip and disabling the premium features. So I don't think "artificially increasing prices" applies here.

In conclusion, from the manufacturer point of view, there is more profit to be made by selling a product at multiple profit margin levels using the same manufacturing process.

But at the same time, doing only low profit margin manufacturing might be: or not profitable; or not enough to drive and push development of new technology.

Because you own the physical hardware, not simply a "license" to use the hardware.

Unless processors are coming with EULAs now?

This could set a dangerous precedent for automobiles or any other physical good.

EDIT: I'm speaking of consumer, not business purchases.

If you buy a crippled processor and hack it, I'd guess that Intel has no cause to sue you, precisely because you own that processor. But they don't have to make it easy to hack.

Until Intel distributes a EULA with the processor. If the courts will hold up the validity of a software EULA, why not one that applies to hardware?

...not that I think that this is an agreeable situation. But I am hardly surprised to see things evolve in that direction.

>Until Intel distributes a EULA with the processor. ... written with a very tiny font in silicon.

Just because it has a restriction built in doesn't necessarily mean it comes with an EULA, or that finding a way to enable or otherwise modify the hardware to your whim is illegal in any way (although I'm sure Intel would take a run at the first grey-market unlocks)

As long as they are up front about the cost & features of the product I'm buying I don't care. As a consumer, I don't like this practice, it smells bad - but it's supply and demand. Intel can price their chips however they want, it's up to them to price them in a way that's the most profitable for them - it's not like they have no competition.

Physical goods come with EULAs already. They should be legally worthless, of course, but they do exist.

As long as the manufacturer doesn't cripple your product after you bought it (think PlayStation 3) this should be perfectly OK.

Modern processors could be considered software as much as they're hardware.

Further, it delivers what the customer expects. It just turns out that Intel nicely provided additional functionality that you can unlock if you pay for your part of the R&D cost of it (which is the real cost of processors).

There is nothing wrong with this practice.

I'm more concerned with functionality being disabled at a later time.

For all we know, every modern appliance is counting down the days until the warranty expires at which point it self immolates, forcing you to buy another.

That isn't the case in this situation, though. The expectations of the device were entirely up front and this was more of an "aha!".

As an aside, my auto has a built in system that monitors car telemetrics, has GPS functionality, a built in cell phone and "lojack" system, etc. I paid for this as a part of the car. It is completely useless the moment I stop paying a monthly service fee.

That's more in line with what I fear, if your "lojack" system has remote disable.

What is to prevent a rogue employee, system error, or virus from disabling your vehicle at the most inopportune time?

"Sorry, your [phone|cpu|car] is bricked. Just have it towed, and I can JTAG it."

Someone has already analyzed the security aspects of this.

http://www.autosec.org/pubs/cars-oakland2010.pdf

Short excerpt: Even at speeds of up to 40 MPH on the runway, the attack packets had their intended effect, whether it was honking the horn, killing the engine, preventing the car from restarting, or blasting the heat. Most dramatic were the effects of Device Control packets to the Electronic Brake Control Module (EBCM) — the full effect of which we had previously not been able to observe. In particular, we were able to release the brakes and actually prevent our driver from braking; no amount of pressure on the brake pedal was able to activate the brakes. Even though we expected this effect, reversed it quickly, and had a safety mechanism in place, it was still a frightening experience for our driver. With another packet, we were able to instantaneously lock the brakes unevenly; this could have been dangerous at higher speeds.

Already happened before: http://www.pcworld.com/article/191856/exemployee_wreaks_havo...

Your iPhone is limited by default but you are free to sever your relationship with Apple (jailbreak) and use it as you see fit.

Software is different.