Topics: Andrew Grove, Intel Corporation, Intel 4004 Pages: 10 (2429 words) Published: June 19, 2015
Intel: Strategic Decisions in Locating a New Assembly and Testing Plan
Intel was founded in Mountain View, CA in 1968 by Robert Noyce and Gordon Moore, two physicists who worked at a San Jose-based Fairchild Semiconductors. Intel, which stands for “Integrated Electronics”, began producing semiconductors. Company timeline

1970 – Created the first commercially available dynamic random access memory (DRAM) chip 1971 – Produced the first commercially available microprocessor, moved their HQ to Santa Clara, CA and went public raising $6.8 million. 1972 – Opened an assembly plant in Malaysia, their first operations outside the US 1979 – Andy Grove, who had been with the company since its founding, was named president 1983 – The company recorded $1 billion in annual revenue

1987 – Andy Grove named CEO
1991 – Debuted the famous “Intel Inside” marketing campaign 1997 – Andy Grove steps down as CEO. Under Grove the company’s revenue grew more than sevenfold and the stock appreciated more than 1,600% 1998 – Craig Barrett named CEO

2003 – Transitioned from manufacturing 200mm to 300mm wafers 2005 – Barrett becomes Chairman of the Board and Paul Ottelini named CEO By 2005 Intel had become the largest semiconductor manufacturer in the world supplying about 80% of the central processing units (CPU’s) used in PC’s, workstations and servers which accounted for 90% of the company’s revenue. By 2005, the semiconductor industry generated approximately $226 billion in revenue worldwide and was expected to hit $300 billion by 2008. Dell (19% of total revenue) and Hewlett-Packard (16%) were Intel’s largest customers. Intel’s competitive advantage consists on introducing faster and better microchips with its high-paced innovation making the competition perpetually one step behind their technology. Microprocessor manufacturing

There are 2 types of plants used in the manufacturing of microprocessors - Fabrication Plants (aka “fabs”) and Assembly and Testing (AT) plants. Much of the production in fabs is automated which rely on robots working on clean room environments. The typical costs to build a 300mm wafer fab ran about $3.5 to $4 billion in the US and about $2.5 to $3 billion for international locations. The operation costs for these fabs are roughly $1 billion per year and they require highly skilled engineers to run. AT’s on the other hand are technologically less advanced than fabs, are less capital-intensive to build, and relies on low-cost labor to operate. AT’s can be operated by two college-educated personnel and required less educated labor to operate the facility. AT’s are typically located near customer’s facilities rather than near fabs. Intel’s standard AT’s were 250,000 sqft and required about 2,000 people to run initially with that number growing to about 3,500 employees further on. Certain US regulations prohibit companies from building certain fabs outside of the US, as a result by the end of 2004, Intel had 70% of its production of wafers in the US, about 13% in Israel, and about 17% in Ireland. AT’s on the other hand didn’t have these regulations and thus were located internationally due mainly to the lower costs to run the plants. New plants can take 3 to 5 years to build which is the same time it takes to convert an existing plant to new requirements. Intel’s guidelines mandated than no plant should account for more than 40% of its revenues to mitigate risk in case of a catastrophic event. Locating a new plant

In the fall of 2001, Intel began gathering data on possible sites for a new AT plant projected to be double from their standard (500,000 sqft) and would eventually employ 4,000 to 5,000 employees. The first item to be resolved was whether to build a new plant or update an older facility. Intel decided to build a new facility and make it larger than their current standards. Then, the next item in the list is to decide whether to build it domestically or internationally. In the case of Intel, the decision was...
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