Intel: Strategic Decisions in Locating a NewAssembly and Test Plant

(External)

The Semiconductor and Microprocessor Industry in 2005

226 billion in revenue worldwide. The industry was expected to hit over $300

billion by 2008 Intel, Renesas Technology, Samsung and

Texas Instruments market had been historically dominated by

Intel, which held a market share in excess of 80%.

Brief history

Founded in Mountain View, California in 1968 by Robert Noyce and Gordon Moore

first commercially available dynamic random access memory (DRAM) chip in 1970.

2005 Barrett became chairman of the board and Paul Ottelini was named CEO.

Intel supplied about 80% of the central processing units (CPUs) used in PCs, workstations and servers

Problem statement

Finding a suitable location for next AT factory considering the Cost,work force and customer satisfection.

The new facility would be Intel’s largest AT plant to date, doubling the size of any existing AT plant and providing the company with more efficient capacity.

Criteria to choose location

local infrastructure costs (power, water, labor) transportation cost security and environmental conditions Government Policies

External point of view

Situations in the countries under consideration

(China,India,Vietnam) Competitior's point of view.

1.Samsung

2.Advanced Micro Devices(AMD)

3.TSMC

4.Texas Instruments

1.Nearly all worldwide semiconductor market growth in 2005 was due to new electronics systems production occurring in China.

2.Demand in China for semiconductors was responsible for 90 percent of total worldwide market growth.

3.36 of the top 70 suppliers to the worldwide semiconductor market had below-average shares of the Chinese market in 2005.

Why China ?

Samsung Merchant market

component sales 35% of Samsung Electronics’ total revenue.This contrasts with Intel, which generates virtually all its revenue from merchant market component

Intel currently gets 93% of its revenue ($49.4-billion in 2012) from microprocessors and other logic devices. By comparison, Samsung Electronics generates an estimated 18% of its merchant market component revenue from logic devices

1.In 2003 AMD had a large and successful flash memory business

2.Was facing aggressive microprocessor competition from Intel

3.After dotcom burst AMD spun-off its flash memory business

Advanced Micro Devices

AMD's Strategy

AMD Adopted fabless strategy to survive in business and tied with TSMC ( world's larges dedicated independent semiconductor foundry).

Why India ?

India seemed Promising considering the growing economy

Absence of semiconductor policies is one of the big hurdels.

Why India ?

The economy was one of the fastest growing in the region, with annual growth of about 7%.

A untapped Market for semiconductor industry.

Factory wages were about $60 to $80 a month, less than in China.

Why Vietnam ?

GDP Growth (India,China,vietnam, Philippines)

Why Vietnam ?

Texas Instruments

Texas Instruments’s $1 billion assembly plant in the Philippines

Reasons :

1.To avoid direct contest with Intel

2.Constantly rising land prizes in China

3.Comparatively low labour cost in Philippines

Conclusion

All the advantages and disadvantages of the location has been studied from an external and internal point of view.

Finally intel established AT plant in Vietnam: Ho Chi Minh City