Intel‘s first two products were introduced in 1969: two semiconductors, but neither product was a commercial success. These two semiconductors were called SRAM
- the 3101 (a 64-bit bipolar static random access memory, or SRAM and the 1101 (a 256-bit MOS - metal oxide semiconductor - SRAM
In 1971 Intel introduced a new semiconcuctor, (the 1103, a 1-kilobite DRAM (dynamic random access memory) chip which became in the following year the world‘s best sellig semiconductor product, accounting for over 90% of the company‘s sales revenues.
From the beginning, Intel had followed a product leadership strategy in the DRAM market by developing new technology designs that allowed it to charge higher prices by being first to market.
Because basic DRAM technology was widely diffused, patents were generally not considered effective at blocking entry.
Until 1979, Intel‘s strategy appeared to work well. Across four generations of DRAMS, Intel succeeded in introducing devices and process technologies that were ahead of the competition and in commanding significant price premiums. But then Japanese competitors began to introduce new products more rapidly:
Intel experienced this when it introduced a single power supply 16K DRAM but lost share to Fujitsu’s higher capacity 64K DRAM. This scenario repeated itself in 1982 when Intel introduced an improved 64K DRAM but lost share to a 256K- DRAM product from Fujitsu and Hitachi.
Intel was also at a cost disadvantage to Japanese manufacturers who spent 40% of revenues on manufacturing as compared to 22% for US companies. This allowed the Japanese to gain a technology advantage in the photolithography process and develop superior equipment that was not available to US companies until later. Japanese DRAM producers were able to generate higher yields of 70-80% as compared to 50-60% for US firms. In 1984, DRAMS generated only 5% of Intel’s revenues while accounting for 33% of R&D expenditure.