Intel Case Study Fabrication

Intel Corporation’s operations management (OM) strategy focuses on supporting product development as the basic factor in the 10 strategic decision areas. Operations managers deal with these 10 strategic decisions for the purpose of optimizing organizational processes and productivity. As a leading semiconductor business, Intel already maintains optimized operations that suit strategic objectives. The company’s efficient semiconductor fabrication processes are an indicator of operations management success. A testament to this operational success is Intel’s attractiveness as one of the major global fabricators of chips for other firms. However, the company needs to continue evolving to address rapid market changes associated with rapid technological advancement and obsolescence. This need highlights the importance of successful operations management to support Intel’s product development objectives via the 10 strategic decision areas. While the company has high productivity, changes in market conditions impose challenges that require adjustments in operational approaches. Intel’s operations management implements these adjustments through computer-assisted decision-making processes.

Operations management needs in its global semiconductor business pushes Intel to find new ways to optimize efficiency and productivity. As a technology business, the company takes advantage of its technology savvy human resources to successfully maintain automation to support operations managers’ activities. Through these efforts and a constant monitoring of the global market, Intel remains effective in the 10 strategic decision areas. Such effectiveness depicts continuous success and long-term leadership in the industry.

Intel Corporation’s Operations Management, 10 Decision Areas

1. Design of Goods and Services. Intel’s mission statement and vision statement guide operations management decision-making in this strategic decision area. The company’s objective in this area is to produce profitable and excellent output that satisfies market demand. For example, Intel’s corporate vision and mission emphasize leadership in bringing semiconductor products to every customer around the world. This aim is achieved through microprocessors and other products designed with cutting-edge technologies and distributed globally. Intel’s operations management supports these activities through cost minimization and resource planning to optimize the impact of product designs on organizational stability.

2. Quality Management. The determination and satisfaction of quality expectations are the objectives in this strategic decision area. Intel’s operations managers evaluate quality expectations through market research and feedback from customers, sellers and distributors, among others. The data is used as basis for implementing adjustments in operational policies. For example, to address concerns regarding defects, adjustments are made in Intel’s operations management policy on margins of error. Such action supports optimal productivity while addressing quality issues. Operations management effectiveness in this strategic decision area aligns with Intel’s generic strategy and intensive growth strategies.

3. Process and Capacity Design. Operations managers’ objective in this strategic decision area is to maintain processes through standards compliance and resource adequacy to support productivity goals. In the case of Intel Corporation, such goals are achieved through process automation. As part of the company’s operations management, reviews are regularly conducted on available technologies and related resources to determine capacity statuses and requirements. For example, operational capacity levels are evaluated to develop corresponding solutions to optimize Intel’s operational productivity in its microprocessor fabrication plants. These operations management efforts ensure high-efficiency processes and advantageous economies of scale, which are among the strengths highlighted in the SWOT analysis of Intel Corporation.

4. Location Strategy. Cost-optimal distances from target markets, suppliers and resources are the objectives in this strategic decision area of operations management. Intel’s approach to achieve these objectives focuses on human resources and logistics. For example, the company prioritizes access to talent necessary to maintain the competitive advantage of its semiconductor business. Nonetheless, to complement this situation, sellers and Intel Store locations are optimized for maximum reach in target markets. These locations are included in Intel’s marketing mix or 4Ps. The approach ensures the company’s operations management effectiveness in this strategic decision area.

5. Layout Design and Strategy. Intel aims to maximize efficiency of the flow of resources and information to address this strategic decision area. Through such maximization, the company’s operations management supports high productivity. Intel fulfills this aim by using office layouts that facilitate efficient work and creativity. For example, the company’s office layouts make it easy for employees to meet and share creative ideas for new product development. Also, many characteristics of layouts, including processor fabrication plant layouts, are based on Intel’s organizational structure. Any new product line requires new spaces, layouts, and corresponding components in the corporate structure. This approach shows that Intel’s operations management in this strategic decision area is flexible to accommodate changes linked to business growth and expansion.

6. Job Design and Human Resources. In this strategic decision area, the main objective is to maintain adequate human resources to support operational efficiency and productivity goals. Intel satisfies this objective through an operations management approach that primarily involves human resource management. For example, the HR strategy involves job designs that support Intel’s organizational culture, which emphasizes discipline, results orientation, and other factors. Also, the company has productivity enhancement measures, such as leadership development programs and seminars for better employee output. Thus, Intel’s operations management addresses the aims in this strategic decision area.

7. Supply Chain Management. A high-efficiency and adequate supply chain is the objective in this strategic decision area of operations management. In Intel’s case, supply chain is automated to maximize efficiency. For example, the company has computer systems and databases for monitoring and determining areas that need immediate adjustment. In addition, Intel’s operations management efforts influence suppliers through policies that extend to their business activities. For instance, the company develops and implements policies to improve the sustainability and environmental impact of the entire supply chain, inclusive of suppliers and other relevant organizations. These operations management efforts are part of Intel’s corporate social responsibility strategy. These efforts are also partly responsible for the company’s high operational productivity and economies of scale that contribute to Intel’s competitive advantage in the semiconductor industry.

8. Inventory Management. Intel’s operations managers are concerned with inventory holding and ordering to support business productivity goals. The objective is to ensure that the inventory satisfies capacity requirements alongside market demand. Intel’s operations management approach for this strategic decision area involves a serialized inventory and the “first in, first out” (FIFO) method. For example, the FIFO method addresses issues with technological obsolescence, especially with regard to intermediate products in semiconductor fabrication processes. Correspondingly, serialization allows Intel to track every item in its inventory. The resulting combination ensures the company’s efficiency and effectiveness in satisfying changes in market demand. This operations management approach supports increasing R&D investment, which is a significant technological external factor (Read: PESTEL/PESTLE Analysis of Intel Corporation).

9. Scheduling. In operations management, the objective in this strategic decision area is to establish short-term and intermediate schedules that satisfy market demand. An appropriate approach in Intel’s case involves short-term schedules for immediate concerns and generalized schedules for regular processes. For example, the company uses short-term schedules for microprocessor fabrication processes involving batches or projects. On the other hand, generalized schedules are for regular processes like equipment maintenance and product development iteration. This approach ensures that Intel’s operations management and productivity efforts satisfy dynamic needs and relatively steady needs in the semiconductor business.

10. Maintenance. Process stability and reliability are the objectives in this strategic decision area of operations management. Intel has a multi-pronged approach to ensure effective solutions for these concerns. For example, operations managers coordinate with HR management teams to maintain an adequate workforce. In addition, Intel supports high operational productivity by maintaining cutting-edge technologies, such as equipment used to fabricate semiconductor chips. Another operations management approach involves high R&D investment to maintain technological competitive advantage, which addresses the external force of competitive rivalry (Read: Porter’s Five Forces Analysis of Intel Corporation).

Productivity at Intel

Considering its global business and a growing product mix, Intel Corporation uses various sets of measures or criteria for evaluating productivity. Some of these criteria refer directly to individual employee output, while others measure group or organizational productivity to guide operations management decision-making. The following are some of the quantitative productivity criteria applicable at Intel:

  1. Batches produced per day (Fabrication productivity)
  2. Problem tickets processed per day (Customer service productivity)
  3. Units delivered per month (Distribution productivity)
  4. Units sold per month (Intel Shop productivity)
References
  • Brown, S., Bessant, J. R., & Lamming, R. (2013). Strategic operations management. Routledge.
  • Ceko, E. (2014, May). Relations between Strategic Management, Operations Management and Environment Protection. In International Conference: Fostering Sustainable Development through Creation of Knowledge Society (Vol. 17, p. 18).
  • Gundersen, T. F. (2017). Best Strategic Decisions in Management of Complex Operations. In International Manufacturing Strategy in a Time of Great Flux (pp. 85-104). Springer International Publishing.
  • Intel Corporation – Official Website.
  • Intel Corporation Form 10-K.

10 Decision Areas of Operations Management, Case Study & Case Analysis, Computer Technology, Information Technology, Intel Corporation, Operations Management, Semiconductor Industry

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For Intel, the country’s largest single tech employer, a strong relationship with Israel was always in the cards – or rather, in the chips. Although few remember now, nearly fifty years on, it was an Israeli engineer working for Intel in California, Dov Frohman, who in 1972 paved the way for computing as we know it when he invented the EPROM, the ultra-violet light, erasable, read-only memory chip that eventually led to the creation of flash memory.

Frohman’s accomplishment, as well as other important Intel Israel milestones, now live again, with the collation of a large number of photographs that lay out the history of the company – from its first Israeli office, opened in 1974 (with Intel hoping to find more Frohmans), until today, when the company has nearly 10,000 workers in half a dozen development centers and fabrication plants around the country. The photos were collated by Intel Israel’s public relations department in honor of Independence Day.

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Intel’s presence in Israel is set to get even bigger than ever, with the signing of a deal between the company and the Finance Ministry last September. Under the deal, Intel committed to refurbishing its Kiryat Gat chip fabrication plant to produce the company’s newest generation of chips, in return for substantial tax breaks.

What would Israeli tech look like without Intel? It’s impossible to know, of course, but chances are the picture would be dramatically different.

Speaking at a recent Intel Israel event marking the company’s 40th year in Israel, outgoing Intel Vice-President Mooly Eden cited research conducted by Intel that shows the impact of the company on the Israeli economy. “If Israel is the Start-Up Nation, it’s Intel that had a major role in getting it there,” said Eden, citing a list of a list of hundreds of companies, large and small, that were led by entrepreneurs and developers who got their start at Intel. The study shows that some 10,000 former Intel workers have gone on to help establish 30 new high-tech companies every year – creating 250 new jobs.

Dov Frohman, circa 1976 (Photo credit: Intel)

Intel Israel is also a prolific exporter. “One billion chips can’t be wrong,” Eden said, citing the estimated number of microprocessors and processor components Intel Israel has manufactured at its chip fabrication plants – mostly at its two Kiryat Gat facilities – over the past 40 years.

“Intel is Israel’s ‘smart chip.’ We have had 40 great years together and are looking forward to the next 40. For four decades, Intel has spearheaded Israeli high tech, conceiving and developing novel technologies which have placed Israel on the global high tech map and enhancing the strategic leadership of Intel Corporation. The combination of Israel’s capabilities, Intel’s global innovation and ongoing investment in human capital resulted in an unprecedented success story which will continue to unfold in coming years,” said Eden.

Intel employees, circa late 1970s (Photo credit: Intel)

Five years after it gambled on an Israeli operation, Intel’s investment paid off – big-time – as the team developed the 8088 processor, which was the heart of the IBM PC, the first computer to use Microsoft DOS (Disk Operating System) for an operating system. Because so many were sold, all three parties to the PC – Intel, Microsoft, and IBM – made huge sums of money, but it also cemented at least two of those companies to the future success of what would eventually become Windows-based computing. Only IBM fell behind, as commodity computer manufacturers in the Far East built computers mostly based on the 8088, using a generic copy of DOS instead of PC-DOS, which only the more expensive IBM computers needed.

From the 8088 it was a short developmental leap to the creation of the MMX chip (which powered the Pentium II computers), and the MMX’s modern descendants – Banias, Marom, Yonah, Centrino, and Sandy Bridge and Ivy Bridge, the processors used in most desktop and laptop computers today.

Former prime minister Ariel Sharon with former Intel president Craig Barrett, 2003 (Photo credit: Israel Hadari)

After signing a new deal with the government last year, Intel is set to produce its latest generation of chips and processors in Israel. Under the deal, Intel will be making the biggest-ever one-time investment in Israel, spending $6 billion to upgrade its Kiryat Gat plant for the production of next-generation computer chips. In return, Intel will get grants of up to $600 million over the next five years, as well as a major tax break through 2023.

More valuable for Intel is likely to be the fact that it will have to pay a corporate tax of only 5% through 2023 (the standard rate of company tax in Israel in 2014 was 26.5%). In return, Intel committed to hiring at least 1,000 new employees, at least half of whom will be residents of communities in southern Israel. In addition, the company promised to spend a total of at least $550 million over the period.

Former prime minister Ehud Olmert and Intel Israel General Manager Maxine Fassberg cut the ribbon at the opening of Intel’s new R&D center in Jerusalem, 2009 (Photo credit: Intel)

While some might point out that Intel is basically committing to spend what it is getting from the government in direct grants, Economics Ministry officials were enthusiastic about the benefits of the deal to the Israeli economy. “This arrangement will have a very positive effect on hundreds of small businesses and suppliers,” said Ziva Eiger, director of investments at the Industrial Cooperation Authority.

“Offset agreements such as this are platforms for leveraging public expenditures for the benefit of the Israeli economy, both for training and encouraging further expansion of small suppliers for the local and world market, and to enhance Israel’s brand as an attractive place for foreign investment,” Eiger added. As a result of this agreement, Israelis can look forward to thousands of more jobs being available. It is a model for offset agreements that can provide benefits to all sides.”

Mooly Eden, circa 1997 (Photo credit: Intel)

Besides, said Eden, such deals are very common among countries – like Israel and Ireland, which competed for the new Intel upgrade. “The government here, like governments everywhere, knows how the game is played,” and the jobs that are generated by investments in development centers are well worth it for Israel – especially when it comes to Intel, Eden said in a recent interview. “Over the years Intel has invested $10.8 billion in Israel. Last year, Intel Israel was responsible for more than 9% of Israel’s tech exports, which account for half of overall exports, except for diamonds.”

Regardless, the deal is done, said Maxine Fassberg, General Manager of Intel Israel, and for Intel – as well as for Israel – it delineates the beginning of a new era of even greater cooperation between the company and the country. She called it “a clear expression of Intel’s further contribution to Israel’s economy, and to the development of new technology products in Israel, many of which Intel has assisted in.”

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