Intel suspends Egyptian PC assemblers after audit visit

Giant freezes payment, status on Intel Inside programme

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By  Published  October 20, 2006

Chip giant Intel’s recent audit of Egyptian PC assemblers has resulted in a number of partners being suspended from its Intel Inside programme.

After the audit, which occurred during July and August 2006, Intel informed some assemblers that they were achieving CPU integration rates below set targets, prompting the vendor to freeze their status on the programme.

At least three Egyptian assemblers confirmed to ITP publication Channel Middle East that Intel has stopped some of their payments and in some cases backdated this freeze — costing them hundreds of thousands of dollars in lost marketing funds.

Leading Egyptian assemblers including Moonstone, IBS, Better Business, ETE and Emak are all understood to have received visits from Intel’s audit team.

One assembler confirmed that prior to a visit by an inspection team consisting of up to seven members of Intel’s Europe, Middle East and Africa (EMEA) and local management it had received a letter informing the company that the audit would take place.

Intel suggested to the assembler that it wanted to validate the integration rates to ensure the CPUs being purchased were being used for PC assembly and not re-distributed into the market.

While the reasons for the specific timing of the visits still remain uncertain, Intel’s approach has been criticised by some partners.

Hazem El Zorkany, CEO at Boraq, which was visited by the Intel team on August 6 and 7, said: “The outcome of the audit was an unfair judgement from Intel’s side. They came in August, which is the holidays when there are no orders, no commitments or no government fulfillments — nothing.”

Essam Adel, vice president at Egyptian assembly outfit Better Business, added: “The Intel sales team in Egypt knew that this action would cause problems because the people that came in were not sales people they were auditors and accountants who care only about numbers and regulations, despite the fact that the market itself is not controlled by these factors alone.”

During the audit, assemblers say that Intel checked a range of documents, including payroll details, certification records and purchasing invoices.

They also spent time on the manufacturing floor assessing the production process.

Rola Zaarour, communications manager at Intel Middle East, Turkey and Africa, issued the following statement: “Intel conducts regular audits of all Intel Inside Programme licensees as part of our normal business procedure. These audits are part of the terms and conditions of the programme.”

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