Intel's Largest Assembly and Test Plant: A Business Analysis

Team:
Calvin, Jorge, Sylvia, Stefan, Robert, Roy, Yamini

Intel: Company
BACKGROUND
In 2005, Intel was the largest semiconductor manufacturer in the world, supplying about 80% of CPUs and accounting for 90% of its profits.
GOAL
Intel plans to build its largest Assembly and Test Plant to date (2005) to expand its global presence, decrease costs and increase profits .

Intel: Criteria to Select Plant Site
CONDITIONS
 Market Location
 Raw Material Location
 Labour Costs
PESTE ANALYSIS
CAGE ANALYSIS
DIAMOND
CLUSTERING

Intel: Location Options

Dalian, China

Ho Chi Minh City, Vietnam

Chennai, India

Amata, Thailand

PESTE Analysis
Rank 1-4 (1 is the best)

Thailand

China

India

Veitnam

Political

Corruption,
Political
instability,
Inefficient
government

Continuous improvement in laws and regulations Stable environment Investments encouraged Successfully transformed economy, Low
Inflation, high economic growth

Economic

Strong
Constant growth manufacturing Strong
Stable
sector, development in IT environment, contributing to and manufacturing
Strong IT sector
40% of GDP

Highest GDP growth in the region 90% Literacy rate,
90% literacy rate,
Changing
English widely demographics, Literacy rate 75%, spoken,
70% of
Educational
Aging population population under reforms, Growing
35, Work ethic wages Sociocultural

High 95% literacy rate

Technological

Poor technological education

Innovator in production and distribution One of the strongest in IT

Investment in
Infrastructure,
Foreign
Investments

Environmental

In line with requirements In line with requirements In line with requirements In line with requirements CAGE Analysis
Cultural
United States

China: Dalian

Vietnam: Ho Chi Min

Language

English

Mandarin

Vietnemese

Ethnicities

White, Hispanic

Chinese

Asian/Pacific

Religion

Social Norms

Protestant/Christian, Confucianism, Taoism,
Islam, Judiasm
Buddhism

Individuality, freedom and rights, western ideology Respect for Elders,
Modesty, Return of favors Confucianism, Taoism,
Buddhism

Family, Collectivism,
Hierarchical, private, punctual CAGE Analysis
Administrative

Colonial Ties

United States

China: Dalian

Vietnam: Ho Chi Min

UK

None

French

(Stable), Federal RMB (Stable), Socialist
Monetary or Political DollarPresidental
Association
Constitutional Republic Single Party State
Political Hostility
(W/USA)
Governmental
Policies
Institutional
Weaknesses

Varied

Medium

High/Heavily Regulated High/Heavily Regulated tarrifs, sales caps,
JV,many plants

Dong (Stable),
Communist/Socialist
Medium
Medium
young and undeveloped talent, language skills, lack of leadership talent, government policies

CAGE Analysis
Geographic
United States

China: Dalian

Vietnam: Ho Chi Min

Very Far

Very Far

Yes

Yes

Many Ports

Port or River Access

17 KM from Port

Large, High Population

Large, Extreme
Population

Medium, Medium
Population

Excellent/Excellent

Excellent/Excellent

Weak/Weak

Minor

Medium

Physical Remoteness
Lack of Common
Border
Lack of Sea or River
Access
Size of Country
Transportation/Com
munication
Differences in
Climate

CAGE Analysis
Economic
United States

China: Dalian

Vietnam: Ho Chi Min

Consumer Incomes

High

High/Varied

Low/Varied

Natural Resources

Medium

Medium

Medium

Financial Resources

High

High

Low

Human Resources

High, Well Educated

Medium, Well
Educated

Medium
(underdeveloped)

Infrastructure

Excellent

Great

Weak

Information/
Technology

Great

Good (IP concerns)

Average

Clustering
China: Dalian

Vietnam: Ho Chi Min

 Infrastructure
 Long history of Industrialization o Manufacturing o Electronics o Petro-chemical
 Ease of capital & business formation
 Networked Institutions
 GE, MSFT, Dell, Sony, Accenture
 Neg – area focus is on software

 Govt. incentives and grants for clustering  Lack of high tech industrial mfg
 Cluster focus on assembly
 Sector fragmented – no champion
 Lack of legal support & disparity of local governance
 Pos – Intel can be a forerunner for cluster formation

Diamond
China: Dalian









Demand factor - high in China
Established infrastructure
Inputs
Multiple IT education centers
University/Firm linkages
Government incentives
Competition & Cooperation high
Neg – Legal framework & IP concerns

Vietnam: Ho Chi Min
Young educated workforce
Connected to global economy
Demand growing
Investments in infrastructure
Ease of Availability of capital
Related & complementary firms growing  Firm structure & rivalry :
 Neg – Universities and institutions lacking hi-tech focus







Decision: Vietnam

Vietnam IC Cluster Analysis

Decision: Vietnam
Vietnam’s Industrial Output By Region in 2006, and Map of Provincial
Competitiveness Index

Sources: Vietnam GSO and Malesky, Edmund (2007), Provincial Competitiveness Index.

Q&A
.

APPENDIX

Complete CAGE Analysis
Home Country

Language
Ethneticities
Religion

Social Norms

United States

China: Dalian

India: Chennai

Thailand: Amata

Vietnam: Ho Chi Min

Cultural
English
White, Hispanic

Cultural
Mandarin
Chinese

Cultural
Hindi, some English
Indian

Cultural
Thai
Asian/Pacific

Cultural
Vietnemese
Asian/Pacific

Protestant/Christian, Islam,
Judiasm

Confucianism, Taoism,
Buddhism

Hinduism, Buddhism, Jainism,
Sikhism

Buddhism

Confucianism, Taoism,
Buddhism

Individuality, freedom and rights, western idealogy

Colonial Ties
Monetary or Political Association

Political Hostility (W/USA)
Governmental Policies

Administrative
UK

Administrative
None

Dollar (Stable), Federal
Presidental Constitutional
Republic
Varied
High/Heavily Regulated

RMB (Stable), Socialist Single
Party State
Medium
High/Heavily Regulated

tarrifs, sales caps, JV,many plants Institutional Weaknesses
Geographic
Physical Remoteness
Lack of Common Border
Lack of Sea or River Access
Size of Country
Transportation/Communication

Respect for Elders, Modesty, Dress conservatively, fluid time, Highly reglious, sacred objects,
Family, Collectivism,
Return of favors high respect, family courtesy, private, hierarchial Hierarchial, private, punctional

Many Ports
Large, High Population
Excellent/Excellent

Administrative
UK

Administrative
None

Administrative
French

Rupee (Volatile), Federal
Parliamentary Constitutional Bhat (Volatile), Constitutional
Dong (Stable),
Republic
Monarch
Communist/Socialist
Low
Low
Medium
Low
Low
Medium
undercapitalized infrasctucture, constrained education, young and undeveloped talent, complex regulations and tax weak institutional language skills, lack of strutures and beaucracy, power infrastructure, human rights leadership talent, government and water violation, unstable government policies Geographic

Geographic

Geographic

Geographic

Very Far

Extremely Far

Very Far

Very Far

Yes
Port or River Access
Large, Extreme Population
Excellent/Excellent

Yes
Port or River Access
Large, Extreme Population
Excellent/Excellent

Yes
Yes
46 KM from Port
17 KM from Port
Medium, Medium Population Medium, Medium Population
Excellent/Good
Weak/Weak

Clustering
Thailand: Amata
 ASEAN largest production of electrical appliances – 800 firms
 Robust mfg base for HDD & IC
 HDD Cluster & Complementary industries (IC design, testing)
 Govt & association supports for industry  Neg - ???

India: Chennai
Automotive mfg in area
VCIC electronic cluster (R&D)
Complementary industries
Institutions are prevalent o Engineers / hi tech workers
 Strength of Indian IT/IS sector
 Neg – political policy uncertainty





Diamond
Thailand: Amata









Infrastructure – ports & roads
Skilled labor
Home demand increasing
Many related industries
Ease of company formation
Rivalry and competition high
Government promotion
Neg – Stability of government

India: Chennai
 Domestic Demand – potential growth
 Inputs o Resources and labor costs low
(Engineers / hi tech workers)
 Related & supporting ind –high
 Strategy & rivalry – area has limited
IC mfg penetration
 Neg - Infrastructure lacking

Porter’s 5 Forces Analysis
Low
Substitute

Medium

Low
Bargaining Power
(Suppliers)

Competitors

Barriers to Entry
High

Low
Bargaining Power
(Customers)