The case seeks to address a proposal of a new site for Intel’s Assembly Test factory. Of importance to this assembly test factory is the cost implications. In the collection of data for analysis of the possible locations, parts of Asia have been considered largely as they have in the past had the lowest operating costs compared to other sites in the world.
Background Facts
Company History
Intel Corporation began in 1968 and ventured into the production of semi-conductors. Later, the company developed the dynamic random access memory (DRAM) and commercially produced the microprocessor. In the subsequent years, the company was able to open up an assembly plant in Malaysia, which was the first operation of the company outside the U.S.
Industry Facts
Intel supplies more than 80% of the central processing units used in personal computers, servers and workstations. The company has research labs and innovations centers in strategic locations around the globe. Intel has about nine research labs in the U.S. In Europe, it has 16 sites. Other locations around the world include Beijing, Bangalore, Guadalajara and St. Petersburg. Innovation centers are located in Dubai, Russia, Turkey and Ireland.
Key Players
Significant players include the general manager of Assembly Test, Intel’s global site selection team, Intel’s Finance and Enterprise Group, Intel board of directors, government agencies in the different sites of the different countries and the company’s Chief Executive Officer. Competitors in the microprocessor industry include Renesas Technology, Texas Instruments and Samsung.
Relevant Issues
The key issue involves the selection of a suitable assembly and test site that will ensure expansion of the companies production and at the same time ensure cost of operations are kept minimum.
Other Relevant Factors
Some other factors that need to be taken into consideration include intellectual property concerns. Furthermore, Intel needs to conduct negotiations with the local officials to ensure that they are not charged excessively and to ensure that they conform to all permits required by the local authorities. Competition from other companies is not that high as Intel continues to produce faster and better quality chips on a more regular basis. Intel has the technological support and facilities, which have facilitated its growth and increasing market share. Because of its dominance, it has been able to enjoy economies of scale whereby reducing prices has resulted in a reduction in production costs and an increase in sales.
Alternatives
Potential sites for the location of the assembly and test plant include Dalian in China, Chennai in India, Amata Industrial Estate parks in Thailand, and Ho Chi Minh City in Vietnam.
Dalian in China
A major advantage of locating the plant in china is the low cost of operation. In China, Intel can be able to enjoy tax breaks provided by the government. Additionally, the labor costs are significantly low. On the downside, the government mandates joint ventures and the company may only be allowed to operate in a specific region.
Chennai in India
India is promising in the sense that it has low labor costs, the educational standards are good, and it provides a high quality engineering talent. Hindrances include a high level of complex regulations, multiple layers of government entities and complex tax structures.
Amata Industrial Estate parks in Thailand
Thailand offers fewer business regulations and has a high level of educated workforce. The disadvantage of locating a site in Thailand is that labor cost are high and the low level unemployment rate creates a shortage of skills in the economy especially the technological skills in high-skilled industries. Additionally, the level of infrastructure development is low especially in the rural areas.
Ho Chi Minh City in Vietnam
This site is promising since labor costs are much lower than those of China are and the workforce is highly motivated. Furthermore, the region is a low disaster risk zone. Obstacles include a high percentage of inexperienced workforce, poor infrastructure and corruption.
How to Measure the Impact of Each Option
The best measure of the impact of each option needs to be done from a financial perspective. Sites that generally ensure that cost of operations are low need to be greatly considered as the company can be in a better position to expand their market share.
