Intel - Delays in Manufacturing Next Generation Chips

I.  Problem Definition

Currently, Intel is not selling as many next generation chips to the consumers as they possibly could because Intel is constantly facing delays in manufacturing next generation chips. These are shipping the new chips, but Intel has not been able to offset their manufacturing demands. Delays have been triggered by production troubles, where a few numbers of the new chips have not been properly working. This delay is producing opportunities for competitors such as AMD TSMC to reduce the market share and sales in the target market and losses in their revenue by about $ 10 billion due to delay in the next generation manufacturing chip by 2020. A major symptom is the high cost of the development of new product process and factories. The developing a new manufacturing process is estimated cost is $5 billion and factory building cost is $ 6-10 billion each.

II. Key Facts

• Intel has put more emphasis on manufacturing with a tiny transistor of a size comparable to the next generation chip and put more advertising for Intel than competitors such as Advance Micro Device and NVidia etc.
• By 2017, Intel had captured 99 % of the popular type of chips used in servers, and a 91 % of the processors used in the personal computer. Therefore Intel captured most of the chip market share in the world. Intel needs to develop new products and diversify the new area to offset the production of chips.
•  Intel increases market share and sales through developing a new product, innovation, strengthening the customer relationships, smart hiring practices, boost advertising, promotion of product and acquiring competitors. Hence Intel offset the production of chips.    
• Intel has the ability to optimize its current manufacturing process, improving its designs and assembly technique so Intel expands into the new opportunities in the market and continuing strong performance is the outcome of the competitive development of the product in the target market.
•  Competitors such as AMD and TSMC have made huge paces with new manufacturing capabilities which could reduce 10-15 % pricing power and its market share by 5 points if Intel doesn’t get its next- generation manufacturing process up to speed in the 12 months. It would lose 5-10 $ billion in revenue by 2020.

 III. Identify and List Alternative Solutions

•  Develop new products and Increase manufacturing efforts for a tiny transistor of the size with comparable chip making technology, which is to capture and broaden the market. Moreover, small transistors allow chip makers to pack circulatory densely, making more powerful chips, lowering the price and using less electricity, so Intel makes an improvement in production yields of the new chips and it would capture the higher market share and sales of the product.

• Advantage: market exposure, faster computing speed, increased profitability, and higher data storage capacity.
• Disadvantage: tough to meet product requirements, Cost of Research and Development, incompatible with the older computer

• Investment an advanced new manufacturing of new generation chips process and factories would have allowed Intel to reduce production costs, increase processing power, and make its chips more power efficient and reduce the production time.  All of this is vital in warding off ever growing competition in the next generation processor. Therefore, Intel increases the market share and boosts the higher revenue from the sales.

• Advantage: more secure, faster, efficiency, reduce cost and time.  
• Disadvantage: a new campaign to promote, security worries with new next generation chip.

• Intel sales and marketing new generation chips primarily to original equipment manufacturers such as Dell, Lenovo and HP Inc. and manufacturing services to the private resellers. Moreover, Intel products are sold to the maker of manufacturing and communication equipment. Its customers also include those who buy personal computer chips through distribution, reseller, retail and original manufacturing channels. Intel’s worldwide reseller sales channel consists of thousands of indirect customers who are systems builders that purchase Intel’s chips and processors from the distributors. So Intel’s largest customer accounts generate about 40 % revenue such Dell, Lenovo and HP Inc.

• Advantage: helps maintain market share, boost revenue, maximize the profit, and strengthen brand loyalty.
• Disadvantage:  increases in marketing expenses, provide for discount and promotion and time consuming.

IV. Select Alternative Solution

• The most genuine alternative solution for Intel would be to develop new products and increase marketing efforts for new generation chips. By launching an entirely new marketing campaign and launching tiny transistors chips to get consumers interested in the personal computers before the products are released. Currently, Intel focuses on creative, tech savvy, for the young generation, powerful, cost effective and electricity saver that is familiar with 10 nanometers tiny transistors chips. Consumers are usually buying the next generation chip that they have always used in the personal computers. The new advertising approach would be redirected to a different target market and demographic such as the business professionals and education organizations. In addition, Intel would be more emphasis to sales older generation chips with discount and promotion so more customer is attracted to buying the older generation chips, increase the sales and Intel keep continue the market share.
• Intel can diversify into a new area that the overall beat is all the more remarkable considering it came against the environment to decrease a personal computer market. Demonstrating Intel's effort to become less dependent on its personal computer business is paying off. Intel's Client Computing Group, which includes its personal computer and mobile businesses, will help to make billions of dollars. The data center group is the fastest growing segment for the sales and market share. While it’s Internet of things group's sales also sprung. The personal computer market is important to Intel because the majority of its sales have generally come from selling chips to personal computers. Now, Intel is finding growth in diversifying the new areas in data-related processors and supplying them for growing markets such as data centers, cloud computing, 5G communication, artificial Intelligence, and independent driving.  The items that address those markets are growing quickly and maximize the sale and revenue of Intel.  

It is notable that Intel has been able to grow the way they have been able to grow in those areas in an environment that's still much undefined, especially in the macro environment. Intel has been diversified a new area into the data center connecting device through the web, artificial intelligence, 5G communication and the internet groups sales increase in the business environment so Intel has balanced the manufacturing chips issue.