Using innovation to create competitive advantage
An Intel case study

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Page 4: Manufacturing

Intel has been described as a 'manufacturing monster'. It can develop and bring a product to market faster than anyone else. Intel”s production process is automated using sophisticated robotic equipment to ensure accuracy. This is a good example of production in the secondary sector of industry.

Intel has plants around the world manufacturing different processors for different markets. It chooses locations where there is enough land to build such large plants. These need to be close to skilled labour, its markets and to customers. For example, Intel fabricates 45nm chips in New Mexico, Oregon and Arizona in the USA, as well as in Israel. Each new factory costs up to $3 billion (around £1.5 billion) to construct. The refitting costs for older plants can be over $1 billion (around £0.5 billion).

Intel uses a methodology called 'copy exactly'. This ensures factories are built in exactly the same way, no matter where they are, and gives a consistent approach. This is critical when manufacturing such sensitive and highly complex devices. It takes an average of 200 people working full-time for two years to design, test and have a new chip ready for manufacture.

The manufacturing process requires the highest standards of 'clean environments'. This is thousands of times cleaner than in an operating theatre. Intel's employees wear special suits to ensure no dust or hair falls onto the wafers. The air is so clean that one cubic metre of air contains less than one particle of dust. The production process is a highly complex one.

Market segments

Intel provides computer chips for many different market segments. A market segment is usually defined, for example, by age, gender or geographical position.

Intel identifies its market segments by product use, e.g. notebooks, desktops, servers. Some products are for the business market, for example, desktop computers and laptops for companies. Other products are for personal use, for example, notebook computers for students.

Vertical integration

Intel is continually developing new approaches to keep it ahead of the competition. Vertical integration gives Intel a strong advantage. This means Intel does not outsource any of its work for research, development or manufacturing. For example, many companies do research and some development but give the product design to another company to produce.

Intel does all three processes itself. Its manufacturing process is capital-intensive because of the specialist equipment. For example, Intel spent more than $7 billion (£3.5 billion) on manufacturing plants using the latest 45nm process technology. Intel believes this investment is worthwhile, as this highly competitive approach gives it a competitive edge by:

  • ensuring quality
  • protecting its ideas
  • meeting its timescales.

Intel | Using innovation to create competitive advantage
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