1. General description
Semiconductor industry comprises of four main product categories. Namely, microprocessors, standard chips, memory and system on a chip. It is relatively young but very dynamic and fast-growing industry.
With the invention of transistor (semiconductor) and integrated circuits, in the mid twentieth century, this industry was born. Since semiconductors started to be used in rapidly growing electronic industry, their production doubled almost every single year. From the USA, this industry quickly spread on Japan and some other Asian, as well as European countries. By the time, semiconductors became smaller and smaller and more powerful in order to meet growing demand for superior chips, used in wide range of electronic devices. Number of transistor on chips approximately doubled every year or two (Moore’s law). In the period between 1985 and 1995 this industry reached $150 billion in sales. Thanks to development of computers, mobile phones and similar products which use semiconductors, in last twenty years, this industry grew enormously, and today it is worth over $200 billion.
Rapid growth and success of this industry have their cost. Semiconductor industry is very cyclical and it depends on overall demand for electronics using semiconductors. In periods of high demand, capacities are increased and industry develops quite fast. However, once the demand shrinks, some companies from this sector face serious difficulties to stay in the market.
Another challenge semiconductor manufacturers face is high cost of research and development. In order to stay competitive, companies have to invest a lot and offer high performing semiconductors with competitive prices. Yet, if they lag with R&D, their products become ...
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For over thirty years, since the beginning of the computing age, the Gordon Moore's equation for the number of chip transistors doubling every eighteen months has been true (Leyden). However, this equation by its very nature cannot continue on infinitely. Although the size of the transistor has drastically decreased in the past fifty years, it cannot get too much smaller, therefore a computer cannot get much faster. The limits of transistor are becoming more and more apparent within the processor speed of Intel and AMD silicon chips (Moore's Law). One reason that chip speeds now are slower than possible is because of the internal-clock of the computer. The clock organizes all of the operation processing and the memory speeds so the information ends at the same time or the processor completes its task uniformly. The faster a chip can go (Mhz) requires that this clock tick ever and ever faster. With a 1.0 Ghz chip, the clock ticks a billion times a second (Ball). This becomes wasted energy and the internal clock limits the processor. These two problems in modern computing will lead to the eventual disproving of Moore's Law. But are there any new areas of chip design engineering beside the normal silicon chip. In fact, two such designs that could revolutionize the computer industry are multi-threading (Copeland) and asynchronous chip design (Old Tricks). The modern silicon processor cannot keep up with the demands that are placed on it today. With the limit of transistor size approaching as well the clock speed bottleneck increasing, these two new chip designs could completely scrap the old computer industry and recreate it completely new.
Capital requirements to set up an assembly line to produce PC's are also relatively low, estimated at roughly a million dollars (Rivkin & Porter,1999 pg. 5) which means that virtually any firm can enter the market easily. Despite sky rocketing demands for PC's, PC producers are unable to capitalize due to increasing number of competitors. The PC industry is also affected by environmental turbulence due to price fluctuations of its components. Constant innovation in PC technology causes older components to be rendered obsolete and prices of older versions to plummet. PC producers who are stuck with inventory of obsolete products incur high costs of dumping these components.
In this paper I will discuss the industry structure and the behavior of firms in the Personal Computer Industry. The personal computer industry has five leaders: Compaq Computer Corporation (CCC), Dell Computer Corporation, International Business Machines (IBM), Hewlett-Packard, and Gateway, (Industry Survey, Apr. 2000). The PC industry, as discussed in the paper, is comprised only of home/business use machines, not mainframes, databases, or any kind of servers or super-computers. The PC industry is a fast-growing, consumer-based oligopoly. I will prove the latter through the use of industry characteristics and firm behaviors by giving an overview of each leading firm and their behaviors', then by combining them into an industry analysis. The companies will be addressed from top leader to bottom.
By 1984, a combination of factors had contributed to lowering the profitability of the DRAM industry. As the DRAM industry matured, DRAMs began to take on the characteristics of a commodity product (Burgelman, 1994; Burgelman & Grove, 2004). Competitors had closed the gap on Intel’s lead in technology development causing the basis of competition to shift towards manufacturing capacity. Gaining market share in an industries where product features had become standardized required companies to agressively pursue capacity expansion, while engaging simultaneously in cutthroat price competition. Also, with each successive DRAM generation, companies wishing to keep pace with the demand for increasing production yields were forced to commit increasingly large capital investments to retrofit their fabrication facilities. Figure 1 contains a snapshot of the DRAM industry between the periods of 1974 through 1984. The important thing to note is that Intel begins to fall behind the competition beginning with the 16K generation and is virtually non-existent in any of the future generations (Burgelman, 1994).
Engineering is the cornerstone for human development. Engineers are problem solvers who search for quicker, better, cheaper, and more efficient ways to solve problems. Engineers use their knowledge in mathematics and natural sciences to produce and enhance modern technology. It combines different subsets of mathematics, science, and technology. The profession applies scientific theory to design, develop, and analyze technological solutions. It is generally accepted that the four major branches of engineering are mechanical, civil, chemical, and electrical. There are numerous other divisions derived from the concentrations, combinations, or extensions of the major
...cing crystalline silicon and vertically integrate their manufacturing process, therefore further weakening the bargaining power of suppliers.
Moor’s Law: The number of transistors incorporated in a chip will approximately double every 24 months. (Moore, 1965)
Over the past six years, increases in yearly revenues have consistently reached 12%. Byte Products, Inc., headquartered in the midwestern United States, is one of the largest suppliers of electronic components and is considered to be the industry leader, with some 32% market share. Unfortunately for Byte, numerous companies have entered the market; both domestic and foreign. The high demand from consumers and the high profit margins are the reason behind the competitive firms going into the market.
In the past few decades, one field of engineering in particular has stood out in terms of development and commercialisation; and that is electronics and computation. In 1965, when Moore’s Law was first established (Gordon E. Moore, 1965: "Cramming more components onto integrated circuits"), it was stated that the number of transistors (an electronic component according to which the processing and memory capabilities of a microchip is measured) would double every 2 years. This prediction held true even when man ushered in the new millennium. We have gone from computers that could perform one calculation in one second to a super-computer (the one at Oak Ridge National Lab) that can perform 1 quadrillion (1015) mathematical calculations per second. Thus, it is only obvious that this field would also have s...
The microprocessor has changed our lives in so many ways that it is difficult to recall how different things were before its invention. During the 1960's, computers filled many rooms. Their expensive processing power was available only to a few government labs, research universities, and large corporations. Intel was founded on July 18,1968 by engineers, Gordon Moore, Robert Noyce, Andrew Grove, and Arthur Rock. Rock became Chairman, Moore was President, Noyce was Executive Vice President in charge of product development and worked with Moore on long range planning, and Grove headed manufacturing. The purpose of the new company was to design and manufacture very complex silicon chips using large-scale integration (LSI) technology. Moore and Grove's vision was to make Intel the leader in developing even more powerful microprocessors and to make Intel-designed chips the industry standard in powering personal computers. Moore and Noyce wanted to seek Intel because they wanted to regain the satisfaction of research and development in a small growing company. Although the production of memory chips was starting to become a commodity business in the late 1960's, Moore and Noyce believed they could produce chip versions of their own design that would perform more functions at less cost for the customer and thus offer a premium price. Intel's unique challenge was to make semiconductor memory functional. Semiconductor memory is smaller in size, provides great performance, and reduces energy consumption. This first started when Japanese manufacturer Busicom asked Intel to design a set of chips for a family of high-performance programming calculators. Intel's engineer, Ted Hoff, rejected the proposal and i...
This case traces the strategic decisions of Intel Corporation which defined its evolution from being a start-up developer of semiconductor memory chips in 1968 to being the industry leader of microprocessors in 1997 when it ranked amongst the top five American companies and had stock market valuation of USD 113 billion.
Overall, the computer industry is relatively attractive. The potential for future growth is high but new competitors must face the threat posed by already established, well-known brands. There are relatively few substitutes for computers and the power of suppliers and buyers is low. New companies would likely be able to successfully yield a profit. Companies have been relatively successful in this industry throughout its history. It is important that all firms in the industry are able to keep up with ever changing cutting edge technology, however.
Samsung Electronics Company (SEC) began doing business in 1969 as a low-cost manufacturer of black and white televisions. In 1970, “Samsung acquired a semiconductor business” which would be a milestone that initiated the future for SEC. Entering the semiconductor industry would also be the beginning of the turnaround phase for SEC. In 1980, SEC showed the market its ability to mass produce. SEC became a major supplier of commodity products (televisions, microwave ovens and VCRs) in massive quantities to well known original equipment manufacturers (OEMs). For this reason, Samsung was able to easily transition into a major player in the electronic products and home appliances market (Quelch & Harrington, 2008).
The Semiconductor Manufacturing Industry The specific industry that will be referred to will be the semiconductor manufacturing industry. This industry emerged after World War II, first in the Boston area and then moved westwards into California during the 1950s. Reasons for locating in such areas include flat land, temperature, stable economy, steady government scene, accessible to markets, available raw materials and high skilled labour. Because the industry is high tech it has meant that these factors are decreasing in importance and factors such as the environment, government assistance and cleanliness are changing the pattern of semiconductor manufacturer locations. The semiconductor industry first emerged in the U.S.A, it spread from the east coast to the west coast within a decade.
In modern days, silicon’s primary use is semiconductors in electronics. Nearly all electronics in the world have at least one semiconductor and that semiconductor wouldn’t be possible without silicon. The process of turning raw silicon into a usable resource is still unchanged, like everything, the process has been modernized and quickened with electric ovens and preciously controlled environments.