position is legendary.

With 85% of global Intel, this basic cycle implies a constant

microprocessor sales, Intel is by far the need to innovate, and to ramp up production
world's leading producer. In 1996, Intel capacity as quickly as possible for each new
recorded revenues of $20.8 billion and net generation of processor.
income of $5.1 billion. Since 1987, the
company's average return to investors has This logic of expansion has also led Intel to
been roughly 44% a year; its cutting-edge develop an impressive string of overseas
chips were selling in early 1997 at gross facilities. By the time it began contemplating
profit margins of nearly 60%. what would become an investment in Costa
Rica, the company already had wafer
Even more impressive, though, than Intel's fabrication plants in Ireland and Israel, and
numbers is its undeniable position as the assembly and test plants in Malaysia, China
industry's technological and strategic and the Philippines. Unlike many other
leader. Nearly since its founding in 1968, firms, Intel customarily does not invest
Intel has been the first to introduce the abroad in order to service local markets or
latest and fastest lines of microprocessors. to reduce transportation costs. It simply
Driven by founder Gordon Moore's well doesn't need to. Because a case of
known "law" that the power of these com- microprocessors is worth more than its
puter chips doubles every 18 months, Intel weight in gold, the cost of transporting
has consistently created successive chips is a minute percentage of final costs
generations of ever more powerful chips. and semiconductor manufacturers have
Its competitors, meanwhile, simply follow little incentive to reduce these costs by
Intel's engineering lead, imitating new locating their production facilities close to
What's better than dominating a market? designs (called "architectures" in the trade)
without having to invest the massive
regions of high chip demand. Instead,
investment abroad, like investment in
Dominating a market that's fast growing and research and development funds that general, is motivated by a desire to build
high margin. That's the formula behind No. 1 support each Intel launch. These large amounts of new capacity as quickly
Intel, whose microprocessors reside inside competitors then compete with Intel almost and cost-effectively as possible and to
PC's everywhere. Despite its near monopoly exclusively on price. And as this rivalry reduce risk by producing in several different
position, Intel leaves nothing to chance. It's inexorably drives its own prices and plants.
vigilant in guarding against incursions by margins down, Intel moves on to the next
rivals, and its marketing prowess is legend. generation of processors. Speed in particular is critical. For Intel, a
Witness the Intel inside campaign, which chip fabrication plant (fab) typically requires
created a brand identity for a product that In recent years, Intel has also worked
consumers never see and only vaguely aggressively on the demand side of its
understand. industry. Rather than risking a downturn in
demand for its new, more powerful chips,
In 1971, the Intel Corporation introduced the Intel encourages other companies, such as
4004 chip, the world's first microprocessor. Microsoft, to design software that requires
This introduction revolutionized the faster processing capabilities. This
computer industry and set off the encouragement creates a unique but
phenomenal growth that both the industry profitable dynamic, described by one Intel
and Intel have enjoyed ever since. In 1995, executive as akin to "a wrestling match and
the worldwide production of computers was a dance that occur simultaneously. Intel
valued at $237 billion, up 13.5% from the helps create the demand for its product and
1994 total. Semiconductor sales alone were enables its partners to share in its
valued at $123 billion, and were predicted to extraordinary success. In 1996, the
continue growing at 20% a year between company spent $500 million to fund
1995 and 2000. These growth figures are software start-ups and to prod the
driven by the diverse and increasingly development of other potential users of
pervasive applications of microprocessors, new-generation microprocessors. This two years to construct and costs upwards of
the advanced and complex semiconductors investment came on top of its own $5 billion $1 billion. Yet once this plant is up and
that form the core of Intel's business. expenditure for capital projects and running, the chips it produces will almost
research and development. certainly be cloned by Intel's competitors
Essentially, microprocessors are the
within a year or two, forcing Intel to move on
"brains" that drive most electronic
computing functions. They are integral to
Operations and Expansion to the next generation of chips. This, in turn,
requires Intel to upgrade existing plants or
the function of mainframe computers, Intel's distinctive position in the in the case where expansion is no longer
personal computers (PCs), wireless semiconductor industry has led it to pioneer feasible, to develop a new site. The
communications, and a host of consumer an equally distinctive strategy for "ramping-up" of new production capacity
electronics products. Because of their operations and investment. Essentially, the must be rapid and blend seamlessly with
growing applicability, microprocessors are strategy is driven by cutting-edge existing capacity if Intel is to maintain its
generally regarded as a key component of technology and blistering speed. Every nine technological lead and earn the returns to
industrial growth—and a symbol of months or so, Intel builds a new plant. which the company has grown accustomed.
economic and industrial prowess. Thus Nearly all of these plants are constructed to Intel cannot afford to waste any time in the
although firms from the United States and meet future, rather than existing, demand. planning or construction of its facilities. Or
Japan continue to dominate the industry, As Craig Barrett, the company's newly- as one Intel manager explained, "A delay of
the governments of Republic of Korea, installed president acknowledges, "We build just one week can cost tens of millions of
Taiwan (China) and Singapore have all factories two years in advance of needing dollars in lost sales—and a critical lead over
actively supported the development of their them, before we have the products to run in rivals.
home-grown semiconductor companies, them, and before we know the industry's
and China, Ireland, Israel, and Malaysia have going to grow." In addition to speed, Intel (like other cutting-
eagerly pursued investment from leading edge technology firms) relies on a
foreign firms. For developing countries, the Such optimism is rational, even required, in dependable and well-educated labor pool.
semiconductor industry carries perhaps the the fast-paced semiconductor market. For Although chip fabrication and test and
ultimate promise of positive externalities— this is an industry where producers reap the assembly are essentially capital-intensive
of jobs and technological innovation and the bulk of their profits early, usually in the first operations, the plants nevertheless demand
kind of long-term returns that have made six months following a product's specific and fairly complex manufacturing
Intel one of the most profitable companies introduction. During that time, skills. Consequently, Intel will only build
in the world. manufacturers can charge up to $1,000 per plants where it is assured of access to a
chip. After six months, however, lower-cost highly technical and highly trainable supply
The Intel Corporation imitations tend to exert significant of labor. And once it has invested in this
downward pressure on prices, customarily work force, Intel is unlikely to leave, even as
Within the semiconductor industry, Intel's pushing them towards around $200. For the technology in its plants quickly
becomes obsolete. Instead, the company in any case suggest an eagerness to solicit unrelenting attention to production
traditionally has preferred to re-invest in the best possible "offers" once it has efficiency and quality. To illustrate this,
existing sites, using its trained work force to
compiled a short list of acceptable sites. consider Intel's “Copy Exactly” process.
launch production at a revamped facility as Instead of first using a development facility
quickly as possible. Or as the company's For Intel, these incentives can occasionally to get processes correct and subsequently a
president Barrett explains, it determine the economic feasibility of an production one to adapt these to volume,
is
"considerably easier to phase in future investment, especially for fabrication plants, Intel fine tunes for both dimensions at the
generations of chips at existing facilities which are considerably more capital same time in the same fab.
with experienced staff rather than starting intensive than assembly and test facilities.
from scratch with new and untested people. In 1981, for instance, Intel broke ground for Once things are perfected, all of Intel's many
its first foreign fab, located in Jerusalem, labs around the world copy the process as
Evidence of this preference is obvious. In Israel. That same year, for the first time, Intel exactly as possible. This not only speeds
1972, Intel opened its first overseas watched its revenues fall. As the development lime, it also means that
manufacturing facility in Penang, Malaysia. semiconductor market continued to drop problem solving can be replicated
For the next 25 years, even as it was
growing at a record-setting pace, the
company continued to expand and retrofit

into the mid-1980s, and the capacity of the throughout the system almost instantly.
Israeli plant lay dormant, Intel was forced to While Intel has been challenged at the low
rely upon Israeli government capital grants. end of the market in recent years, and lost
the plant at Penang. In 1996, acknowledging As president Barrett recalls, "We were also share as a result, its problem has not been
that at last they had "basically exhausted short of cash, which made the capital grants the ability to compete at a profit, but rather
the available work force [in Penang]' Intel there very attractive. More recently, Intel has just how much of its existing profits it
built a $100 million green field facility—25 announced its interest in building a new wanted to sacrifice. Intel's profits are in fact
miles away in Kulim Hi Tech Park. A similar $1.6 billion fab in Kiryat Gat, an Israeli extremely high. Before the recent fight with
pattern appears in Ireland, where a 1989 special economic zone. According to a pre- AMD began, its margins were in the range of
system board manufacturing facility was existing incentive package passed by the 40 percent—amazing for a capital intensive
followed, in 1997, by a $1.5 billion Israeli government, investment in this zone business. And that leads us to Intel's third
fabrication plant. would qualify for a grant covering 38% of advantage, cash on hand—billions and
the investment— worth in this case billions again. If ever Intel is beaten, it won't
In choosing sites for its overseas plants, approximately $600 million. be because it lacks the resources to invest.
Intel is also apparently not immune to the
enticements of capital incentives. Strengths and Weaknesses
Semiconductor fabrication, assembly and
testing are, after all, extraordinarily Intel has some powerful advantages in
expensive; and between 1994 and 1997 the manufacturing and marketing
price tag for these facilities has tripled. microprocessors. First, it has the software
Unlike its competitors, moreover, Intel tends "legacy." To quote Carl Sagan. there are
to build these expensive facilities before "billions and billions'' of dollars worth of
demand for its product has even emerged. software programs out there that are
This implies, potentially at least, a very risky designed to operate only with Intel's x86
investment strategy, and one which Intel is architecture. Even if Intel's CPUs slipped
eager to mitigate through incentive behind in performance relative to the So what are Intel's weaknesses? One is
packages from local governments. Early in competition, it wouldn't be enough to cause technology. Its CPU's have typically just
the , 1990s, for example, when Intel was all those software developers to go to the equaled the most ambitious cloners, and
seeking locations for two new fabrication tremendous expense of rewriting their have rarely been performance leaders vs.
facilities, it sent formal requests for programs to run on a different CPU family the RISC world. This is deceptive, however.
proposals (RFPs) to several western U.S. (one of the problems they would have is Just as the legacy software is an advantage
states; according to an Oregon newspaper which different CPU). So. Intel would have to for Intel, it is also a problem; the company
report, "at the time, Oregon couldn't offer not merely slip, but really fall behind, to can't easily follow radical new design
major tax incentives. Intel chose Rio make people reconsider its CPUs for either strategies because it always has to worry
Rancho, New Mexico, which offered to waive software development or purchase. about "backwards compatibility." So far, it
all property taxes on Fab 11, which then was has done a great job of both staying
valued at $1 billion. While this particular Intel's second advantage in the market is its compatible and keeping its best CPUs near
account may bear the geographical bias of tamed skill at manufacturing. Unlike many the top in power. It has also consistently
its source, Intel's systematic practice of big companies that get sloppy when they beaten everyone in price/performance ratio.
soliciting RFPs for potential locations does dominate a market, Intel has given fanatical,
Intel's other weakness is the breadth and
direction of the microprocessor market as a trends," he suggested, "and in three years consuming more power or generating
whole. You would expect a company with the chips will rival a nuclear reactor, in two additional heat. Real-time voice and face
more than 80 percent market share to be more years, a rocket nozzle, and in another recognition, computing without keyboards,
engaging in regular discussions with flinty- two years, the sun's surface." What does and smaller computing devices with higher
eyed lawyers from the Justice Department. this mean? According to Intel, a failure to performance and improved battery life are
In fact, Intel has had very little scrutiny, find a radically different way to build chips examples of the applications the TeraHertz
largely because it is a manufacturer of would bring Moore's Law, and advances in chip is expected to make possible.
microprocessors, not just CPUs for desktop the personal computer (PC) industry as well,
computers. Viewed from this broader to a screeching halt. How were Intel's researchers able to
perspective, covering devices from develop the TeraHertz chip? What process
mainframes to cell phones, Intel's share is Intel had significant resources to face this does Intel use to consistently and
strong but not dominant. challenge. First, the firm had built a successfully innovate so it can generate
substantial R&D capability, especially in the new products such as the TeraHertz chip?
form of its stable of scientists and
Evidence shows that Intel's innovations,
including the ones leading to development
of the TeraHertz chip, result from a four-step
process:
(1) carefully and correctly defining the
problem to be solved through
innovation,
(2) assigning the "right" people to each
project,
(3) eliminating project-specific barriers
between R&D and manufacturing, and
(4) balancing autonomy with guidance for
each project's researchers.
In terms of the TeraHertz chip, here's how
the process worked. First, the limitations of
existing technologies were specified as the
problem or constraint when it came to
continuing to fulfill Moore's Law. To deal
with this problem, a performance goal of
quickly designing the world's fastest
transistor was established. Second, in 1998,
a small group of "elite" scientists was
formed and assigned to the project. To
break down barriers between R&D and
manufacturing, the scientists were located
adjacent to a full chip-development factory
and were encouraged to immediately test
new ideas in a "clean room" environment.
By quickly developing and testing actual
prototypes in the production facility,
scientists could immediately determine what
Intel's Innovation Process engineers. Supporting these individuals' did and didn't work. Lastly, Intel's top-level
work is Intel's more than S4 billion annual executives resisted the temptation to
Moore's Law suggests that the number of allocation to R&D. In fact, Intel tends to micromanage the project. This temptation
transistors (the microscopic, silicon-based spend more on R&D during recessions (as could have been great, given the project's
switches that process the digital world's was the case during 2000, 2001, and 2002) significance to Intel's future. During
ones and zeros) on a chip roughly doubles than it does when the economy is robust, in quarterly review meetings, executives
every two years. This doubling creates more order to take advantage of opportunities provided feedback to verify that the
features, increased performance, and available when competitors are likely to scientific team's work remained on target.
reduced cost per transistor. But in the spend less.
1990s, it became obvious that the limitations They also assigned additional personnel to
of existing technologies would rather Intel's continuing work on the problem with the project that could help solve unexpected
quickly prevent continuing repetition of current chip technologies yielded significant problems outside the team's expertise.
Moore's Law. Essentially, the problem results in late November 2001, when the firm However, the top-level managers did not try
facing chip manufacturers such as Intel was announced that its researchers had to unduly influence the direction of the
that as microcircuits continue to shrink pioneered an innovative transistor structure group's work.
while becoming more powerful, they run and new materials that enabled "dramatic"
improvements in transistor speed, power Intel's scientists continue to work on the
hotter and hotter, making it impossible to
TeraHertz chip. However, the firm believes
that its four-step innovation process has
helped it develop a chip that will prevent the
PC industry from grinding to a halt and that
has the potential to make Moore's Law a
continuing reality. In addition, the firm
believes the chip will help it win its
marketplace battles with competitors.

Intel: Crossing the Semiconductor

Technology Generation Cap
Intel is an example of a firm that
successfully transitioned itself across one
technology to another. In Intel's case, the
generation gap was the technology shift
satisfactorily provide cooling. In 2001, Intel's from dynamic random-access memory
chief technology officer crisply specified the efficiency, and heat reduction. This (DRAM) chips to microprocessor chips. Intel
long-brewing problem by noting that Intel's innovation led to the creation of the invented DRAM chips in 1970, followed in
then-current chips "generate about as much TeraHertz chip. This chip runs at least ten 1971 by the microprocessor. Gordon Moore
heat as a hot plate. Extrapolate recent times as fast as existing chips without became CEO of Intel in 1975, which led to
the ill-fated foray into digital wristwatches, business volume in 2001. Its headquarters R&D made in 2001.
which after three years produced a are in the middle of Silicon Valley and
disastrous $15 million in losses. Intel exited almost all of its revenues come from micro- Particularly in recent years, Intel's approach
the wristwatch business. It was the leader in processors. It was founded in 1968 by to innovation has become increasingly open
DRAM chips until Japanese chipmakers former employees of Fairchild to outside inputs. Among the various
began to attack its dominant market share Semiconductor, Gordon Moore, Robert channels only two are used extensively:
position. By the time IBM introduced the Noyce, Andy Grove and Leslie Vadasz. Intel university research and corporate venturing.
first PC in 1981, Intel was losing so much encountered early success with its dynamic A third one is the consortium Sematech.
money on DRAMs that its future was in random access memory, DRAM, a field that Participation in this consortium appears to
jeopardy. The wristwatch debacle combined Samsung later entered with remarkable be more an opportunity for Intel to
with the vicious attack on its core DRAM success, and from which Intel eventually participate in a club to influence choices of
business by Japanese chipmakers had Intel withdrew. Today, it may be said that Intel, the industry rather than to access external
on the ropes. Moore, faced with this dire together with Microsoft, drives the massive expertise.
situation, decided to exit the money-losing electronics industry, especially since IBM Intel has developed a very close connection
DRAM business and gambled Intel's future reduced its involvement with with university research. Each year the
on microprocessors. The rest is history. The semiconductors in the 1990s.
meteoric rise of the PC, based on Intel's
microprocessors, made Intel the world’s
biggest and most profitable chipmaker.
But what did Intel do to exit the DRAM
business and focus its business model
solely on microprocessors? What changes
to its business model, business and IT
architectures, and metrics were required to
successfully engineer this replication
initiative? One could argue that Intel's
replication initiative was not that dramatic of
a shift, that focusing its efforts on
microprocessors, which Intel invented, was
simply a concentration of resources on an company invests $100 million in a number
Intel's founders were frustrated with the of 'academic' projects. From Dupont to now
emerging product line that it already had. development activities of their previous
The core business processes, core defunct Digital, many companies have this
employer, Fairchild. That company had a practice, usually housed in a 'university
capabilities, and technology innovation very strong research capability, but its
were already present in Intel's corporate relations' department. Intel supports more
corporate R&D was very much a case of the than 200 research projects at various
DNA to allow it to be successful with techno-centric 'ivory tower' of the 1960s. At
microprocessors much the way it had universities. It is more concerned than most
Fairchild it took forever to go from new
previously been the market leader in companies however, in having a good return
product idea to manufacturing. For the on these projects. The firm thus assigns an
DRAMs. In Intel's case, the business model founders of Intel, the lesson was: let us
required tuning to focus its organizational engineer to act as a close liaison person for
concentrate on effective developments for
structure, core processes and capabilities, each project. This enables the provision of
the manufacture of high quality products. guidance to the external project and also
and resources on one set of products rather
The semiconductor industry depends
than dilute its R&D, engineering, product channels the results back into the company.
heavily on technical breakthroughs to
development, manufacturing, and marketing This practice resonates with Procter &
progress. This kind of research is an
and sales efforts on money-losing products Gamble's campaign of 'connect and
such as wristwatches and the more matureexample of how blurred the boundary is develop' for its product development
DRAM products. between the categories of 'basic' or 'applied' activities of the 1990s. In this motto,
research. It involves understanding matter 'connect' refers to connecting the firm with
Intel: Innovation Inside? at the atomic scale, but in a manufacturing external technical developments.
engineering perspective. As a result,
The other channel, corporate venturing, was
The world's leader in semiconductor process development absorbs the majority
created in 1991 at Intel. It was a natural
manufacturing, Intel, had a $26 billion of the close to $4 billion of investments in
move for a company located in the middle of exception to the rule. This is because few double roughly every two years. Intel uses
Silicon Valley, where the venture capital companies in this industry can match Intel's ‘Moore’s law’ to inform its development
industry flourished. This unit is now called technical and management know-how, strategies. This case study focuses on
Intel Capital. In 2002, it had a portfolio of entrepreneurial energy, as well as its Intel’s integrated mix of research and
more than 500 investments, making it one of financial muscle and strong brand position. development (R&D) and manufacturing. This
the largest venture capital funds in the enables Intel to implement the ‘tick-tock’
world. In this, Intel behaves like a venture Using innovation to create strategy designed to put it ahead of its
capitalist (VC) and co-invests alongside competitors and maintain that competitive
other VC firms. Most of the investments are
competitive advantage advantage.
made in companies located in the USA, We live in a digital age. Music, video, phone
often in the Silicon Valley area. In this calls, information creation and information Market or product orientated
particular case, the investment is justified consumption are all, by and large, done development
by the fact that the device relies on a digitally. A huge proportion of this happens
sophisticated chip. Optical devices, in on the Internet. People use the Internet and A business can develop its products either
general, are also a promising area for the its content via computers: As Internet through product-orientated development or
future. content becomes more sophisticated with, market-orientated development:
for example, film, music and podcasts, more • Product-orientated development focuses
Intel Capital primarily makes investments in
computing power is needed. The computer on developing the production process and
companies that support the development of the product itself arising from for
an environment that will enhance the usage chips inside computers need to keep pace
example, new use of technology or
of Intel's current products. Intel calls these with that demand.
innovation.
'ecosystems investments'. The criterion of Intel is best known for producing the chips • A market-orientated approach identifies
good financial performance is, however, and analyses customer needs. It then
that deliver this increased computing power.
never far away. A small minority of the develops products which meet them.
Computer chips are essentially collections
investments aim at securing windows on of transistors - tiny electronic devices that Both approaches are important. Right from
new technologies, according to the so- control the flow of electricity to create the 1s its early days, Intel realised the importance
called 'strategic' rationale. In mid-2003, the and 0s that underpin computing. Intel is the of combining product innovation with a
valuation of the Intel portfolio is roughly world’s leader in silicon innovation. Silicon market focused approach.
$800 million. This represents a precipitous is made from purified sand that is super-
drop from the $8 billion value of the stocks' Intel responds to both customer demand
heated. Produced as a huge sausage-like
heyday in the Spring of 2000. Such numbers and product innovation. Its products are
shape called an ingot, it is sliced into
greatly bias management's perspective on wafers. The chips are manufactured on therefore ‘user centric’, that is, the product
the fund. these wafers. development meets the needs of the
customer. Intel has anthropologists who
Intel's microprocessor development is Transistors are the building blocks of study how people use technology in their
governed by Moore's law, the progress in computer chips that Intel has been making lives. This information helps Intel’s product
performance of microprocessors along this for 40 years. Intel has been working to make design teams to understand what customer

S-curve is closely related to the ability to these transistors smaller so that more of requirements are. Intel also has a
manipulate matter at a very small scale. At them could be fitted onto the same area of development programme to increase the
some point, this will mean going to the silicon, making the chips more powerful. capacity of a microprocessor. This fits with
subatomic scale of quantum circuits. This came at a price. Until recently, the the two-year cycle in which the
Another S-curve might possibly be biochips. smaller the transistors, the hotter the chips microprocessor is adapted or a new product
The approach of Intel to innovation has tended to run. In 2007 Intel developed a is launched.
been consistent in having an internal focus breakthrough in the materials used to
on process improvements and a small set of construct the transistors. Not only can these Research and development
external collaborations with universities. transistors work faster, they can also do this
while generating less heat. Intel has started Research and development help to:
This is not the approach of distributed
to use this new material for its latest • create new and better products
innovation, which relies on systematically • improve the methods for making the
managed, multi-actor projects forgeneration of processors. These are made
from transistors only 45 nanometres in size. products
breakthrough developments. Indeed, the • develop new market opportunities to
distributed innovation system would This means over 2,000 of them could fit on
sustain or accelerate growth.
provide Intel with a way forward if it decides the full stop at the end of this sentence. A 45
to launch a large development of one of the nanometer transistor can switch on and off Research involves designing new ideas to
technologies mentioned above by bundling approximately 300 billion times a second. A solve a problem or to create an opportunity.
together external and internal forces in a beam of light travels less than a tenth of an An example is the development of a new
major project. As indicated it is difficult for ainch during the time it takes a 45nm microprocessor for a mobile phone to give it
company to shift from one technology to a transistor to switch on and off. access to the Internet.
radically different one, 'jumping' from one S- Gordon Moore Intel’s founder predicted that Intel conducts research in two key areas:
curve to another. Certainly Intel is a the number of transistors on a chip will
company that has the chance to be an
Research into manufacturing capabilities chooses locations
and material. This type of research led to where there is
the introduction of the 45nm high-k metal enough land to
gate silicon manufacturing technology. build such large
plants. These need
More broad research focused on what to be close to
technology can offer. This can cover how skilled labour, its
to integrate multiple different types of markets and to
wireless technology into a single device or customers. For
how to use silicon technologies to act as example, Intel
sensors. The research reaches into areas fabricates 45nm
such as robotics. chips in New
Mexico, Oregon and
Intel invests large sums in its research Arizona in the USA,
laboratories all over the world. Intel’s as well as in Israel.
leadership in silicon technology, combined Each new factory
with the R&D capability to develop new costs up to $3
products and new ways of making products, billion (around £1.5
makes it one of the leaders in its field. The billion) to construct.
result of this research is the creation of The refitting costs for older plants can be Intel’s product research, development and
products customers want, which can be over $1 billion (around £0.5 billion). Intel manufacturing capacity to deliver improved
manufactured easily in large volumes. uses a methodology called ‘copy exactly’. products every year. This regular
Examples include notebook computers This ensures factories are built in exactly improvement will ensure continued market
containing Intel Centrino Processor the same way, no matter where they are, and leadership. In ‘tick’ years Intel will introduce
Technology. gives a consistent approach. This is critical a new manufacturing process (of which the
when manufacturing such sensitive and 45nm process is the latest). ‘Tock’ years will
Research generates many ideas but only the see the introduction of new designs
highly complex devices.
best will be chosen for development. (architectures) of CPUs (central processing
Development involves converting good The manufacturing process requires the units).
ideas into a commercial product, for highest standards of ‘clean environments’.
example, by improving a microprocessor to This is thousands of times cleaner than in Intel is competitive because:
run multiple computer programs at the same an operating theatre. Intel’s employees wear • It has a regular cadence (or rhythm) to the
time. The development of the selected special suits to ensure no dust or hair falls development of new products or
products must meet specific timetables for onto the wafers. The air is so clean that one improvements to existing ones.
• It integrates teams from R&D and all areas
launch worldwide. cubic metre of air contains less than one of manufacturing, all working to the same
particle of dust. The production process is a schedules. Intel is the only company that
The end products resulting from an
highly complex one. It takes an average of can combine and optimise manufacturing
intensive R&D programme benefit the process technology, product design,
200 people working full time for two years to
customer. These might include a smaller leading-edge capacity, design tools,
design, test and have a new chip ready for
and faster computer or mobile phones at masks and packaging in-house.
manufacture.
lower prices. Technological advances can • It sets the highest standards in high-
also mean less energy consumption, Intel provides computer chips for many quality clean production. The company
reducing the carbon footprint of consumers different market segments. A market invests vast sums in R&D and
and businesses. manufacturing. This makes it is difficult
segment is usually defined, for example, by for rival companies to match Intel.
age, gender or geographical position. Intel • It designs quality products. Intel
Before manufacturing, Intel produces a
identifies its market segments by product
‘blueprint’ or design of what a particular continually develops new technologies
use, e.g. notebooks, desktops, servers. that combine product-led, user-led, and
microchip will be needed for. This outlines
Some products are for the business market, market-led features.
all the functions it will need to support, such • It is able to leverage its manufacturing
for example, desktop computers and
as wireless capability or image software. capability. This means it can increase
laptops for companies. Other products are
The design has to answer key questions: production to bring product to market in
• What type of chip is needed and why?
for personal use, for example, notebook
large volumes. Increasing volume and
• How many transistors can be built on the computers for students. getting the product onto the market as
chip? quickly as possible are important
Intel is continually developing new
• What is the best chip size? elements in creating and maintaining a
• What technology will be available to
approaches to keep it ahead of the competitive advantage.
create the chip? competition. Vertical integration gives it a
• When does the chip need to be ready? strong advantage. This means Intel does not In order to protect its advantage it is
• Where will it be manufactured and tested? outsource any of its work for research, essential that Intel registers intellectual
development or manufacturing. For property and patents in new product
To answer these questions, Intel works with example, many companies do research and development. This registration is vital for
customers, software companies and Intel’s some development but give the product Intel. This gives legal protection against
marketing, manufacturing and testing staff. design to another company to produce. Intel copying by its competitors. The protected
Intel takes all the responses to define a does all three processes itself. Its time allows it to sell its products without
chip’s features and design. The designs are manufacturing process is capital-intensive direct competition. These help to recover
put together in the form of a computer- because of the specialist equipment. For the investment costs of designing,
simulated chip that can be tested using example, Intel spent more than $7 billion researching and developing the new
Computer Aided Design (CAD). The CAD (£3.5 billion) on manufacturing plants using products.
system tests, for example, how the the latest 45nm process technology. Intel
transistors turn on and off. It also tests how believes this investment is worthwhile, as Conclusion
the chip performs an action such as this highly competitive approach gives it a
launching a computer operating system. competitive edge by: Since 1968 Intel has contributed to
• ensuring quality improving people’s lives, work and leisure.
Manufacturing • protecting its ideas The company’s work is at the heart of the
• meeting its timescales. Internet, personal computing, mobile
Intel has been described as a phones, games consoles and home
‘manufacturing monster’. It can develop and Competitive advantage entertainment systems. Intel products drive
bring a product to market faster than the technology we use in homes, hospitals,
anyone else. Intel’s production process is Competitive advantage means a company schools, offices, factories and airports.
automated using sophisticated robotic has or does something better than its rivals. Intel’s commitment to continual innovation
equipment to ensure accuracy. This is a The ‘tick-tock’ strategy was announced in and investment in research and
good example of production in the September 2006 by Intel’s CEO, Paul development in product and manufacturing
secondary sector of industry. Intel has Otellini. It is a blueprint for Intel to maintain technology ensures competitiveness and
plants around the world manufacturing its technology leadership and competitive growth. It also provides customers around
different processors for different markets. It advantage. It plans to take advantage of the world with the latest developments.