Case Study For Taiwan Semiconductor Manufacturing Company (TSMC) - The History of Intel With Industry Background - Management Assignment Help

Assignment Task - 

INTEL : About the case: 

The case, set in 2019, looks at the history of Intel and the semiconductor industry  background. This provides a starting framework to understand the strategic concepts,  models and resources of Intel and its more agile competitors, including Taiwan  Semiconductor Manufacturing Company (TSMC) and Arm. A closer look at previous moves  shows that Intel has made bets in many different fields that are successful today, yet the  company is still struggling. However, Arm seems to be starting to stagnate, thus raising  doubts about whether its model is really a map to follow. In this context, it is unclear  whether Intel is agile enough to respond to changes in the industries in which it operates &  Based on the Strategic Implementation .

Questions: total answers should be 1000 words, not for the individual questions answers

1. Considering the industry environment, what strategy should Intel choose based on  challenges in the environment and existing resources and capabilities? 
2. Is Intel Corporation pursuing any kind of diversification strategy? 
3. What is the rationale behind their structure and diversification strategy? What strategic initiatives would you recommend for Intel Corporation? 

SEE FULL CASE GIVEN BELOW and  RESEARCH FROM INTERNET IS  ADVISED

IS INTEL’S BUSINESS MODEL FIT FOR THE FUTURE? 

Kirill Astapov, Pavel Vagero,  Takeshi Yamada and Tania  Correia Baptista.“Under Bryan’s leadership, Intel has undergone a fundamental  transformation,from a PC-centric company to a data-centric company.” 

With these words, Gary Shapiro, president and CEO of the Consumer  Technology Association, introduced Intel CEO Bryan Krzanich as he  stood to make his keynote speech at the 2018 Consumer Electronics  Show in Las Vegas. Just five months later, in June 2018, Krzanich  resigned amidst a personal controversy that violated company policy,  leaving open questions on whether the course he set would be the right  one and fit for the future. 

As Tom Warren wrote in The Verge, “Intel must now hire a CEO that  can make the company competitive in the race for AI and ensure its  traditional chip work doesn’t hit delays that could let competitors eat  into its profitable datacenter dominance. Securing Intel’s future growth  will be a tough job for Krzanich’s successor.” 2 

In January 2019, Intel confirmed Robert Swan, former CFO in  Krzanich’s administration, as CEO,3in line with the company tradition  of naming CEOs from within. However, there were doubts about  whether Swan was capable or motivated enough for his new job.4  Financial markets reacted positively to the appointment: Intel shares  were up about 15% during the first two months of 2019, above the  NASDAQ 100 growth of 12%.5  When Swan took over, the company was in the middle of a large  transition started by his predecessor. He would have to decide whether  to follow Krzanich’s strategy of “delivering products that play critical  roles in processing, storing, analyzing, and sharing data to enable  amazing new experiences and competitive advantages” 6or go back to  the drawing board. 

In mid-2019, Swan presented new long-term forecasts for the year  indicating that Intel’s growth would be lower than the previousthree years.  This contributed to a decline in the share price (refer to Exhibit 1). His  comments, during his first investor event as CEO, were poignant and an  acknowledgement to investors that, with the disappointing revised  forecasts, “We let you down. We let ourselves down.”7  Swan faced tough decisions in the months ahead: Was Intel’s business  model sustainable and which strategic options should the company  consider in the tough environment ahead?

Intel Background 

Intel Corp. (hereafter referred to as Intel†) is a digital technology company headquartered in  Santa Clara, California (US). The company was initially incorporated as NM Electronics in  July 1968 by Gordon E. Moore (author of the famous Moore’s law) and Robert N. Noyce in  Mountain View, California. The same year, NM Electronics bought the rights to use the name  Intel from a company called Intelco for US$15,000. Shortly after Intel’s foundation, Andy S.  Grove joined the founders and together they led the development of a new type of computer  memory. Several other innovations followed, including Intel’s first microprocessor, which  sparked a computer and internet revolution.9 

Almost since it was founded, Intel has been the leading microprocessor and chip manufacturer  globally. By 2019, it was the largest semiconductor company worldwide, with business  operations acrossthe Americas, Asia-Pacific, the Middle East and Europe, employing 102,700  people. The company designed and developed integrated digital technology products and  components for the computing and communications industries. Its products were used in  notebooks, tablets, servers, smartphones, desktops, wearables, transportation systems and  retail devices, and were combined with software and services focused on security and  technology integration. Intel sold its products and solutions to original equipment  manufacturers (OEM), industrial and communications equipment manufacturers and original  design manufacturers (ODM).10 Intel’s vision was to build a smart and connected world  running on Intel solutions. 

Since Intel had to constantly develop new products and solutions, it invested approximately  20% of revenue in R&D ($12 billion to $13 billion annually between FY 2015 and FY 201711).  It spent $7 billion to $11 billion annually between FY 2015 and FY 2017 and $15 billion in  FY 2018 on fabrication capacity. In terms of the combined amount of R&D and capital  investments in manufacturing facilities, Intel spent $20 billion to $25 billion a year between  FY 2015 to FY 2017 and $28.7 billion in FY 2018.12 Intel’s manufacturing plant assets were  heavy on its balance sheets, with “Property Plant and Equipment” amounting to $41 billion in  FY 2017.13 (Refer to Exhibit 2 for Intel’sfinancials.) 

Following the disruption by smartphones and cloud computing, the company’s strategy had  changed: Intel considered that it had “evolved from a PC-centric company with a server  business, to a data-centric company with an expanding portfolio of technology solutions that  address customer needs across platform, storage, connectivity, andsoftware.”1

The company now focused on providing the technological foundation for data around the  world through efforts in: 

•  Developing products and services to address heavy workloads such as AI (artificial  intelligence), IoT (internet of things), virtual reality systems and 5G (5th generation)  network. 
•  Advancements in memory technology and programmable solutions. 
•  Developing and manufacturing products in its own facilities using its own proprietary  technology.15 
• Intel’s strategy was executed through the following main operating segments 

Industry Challenges and Opportunities 

The technology landscape in the 21st century brought challenges and opportunitiesthat market  players had to address and even foresee. A few of these technologies are discussed below. 

The Internet of Things (IoT) is a network of physical objects that can collect and share  electronic information. Examples of connectable devices includes smart televisions, cameras,  medical instruments, industrial systems and other devices in buildings.28 The IoT could  potentially be the tech sector’s next Industrial Revolution, as it facilitates communication  between the cloud and devices, paving the way for new products such as connected wearables,  smart appliances, connected cars and more. As a result, the IoT is expected to impact all  organizations from businesses to government and consumers. At the same time, it creates  increased demand for device manufacturing, information analytics, networks and security  offerings. The International Data Corporation projected that the IoT market would grow to $1.7 trillion by 2020.29 Intel seemed to have understood this potential, even creating its own  internet of things segment, which in 2018 reported an average of 14% revenue growth. 30 

Big data refers to the growth in the volume of structured (collected & analyzed in a structured  way) and unstructured (collected but not necessarily for immediate use/analysis) data that is  gathered in multiple formats from a variety of sources, the speed at which it is created and  collected, and the scope of how many data points are covered. Considering the amount of data  involved, processing often becomes a complex task and requires high-end computing  devices.31 According to estimates, the big data market was worth $31.93 billion in 2017 and  was forecast to grow up to $156.72 billion by 2026, with a CAGR of 19.3%.32 Intel addressed  this opportunity on the memory front with its Optane™ line.33  Cloud computing offers companies in all sectors a number of benefits, including the ability  to use software from any device, either via a native app or a browser. As a result, users are  able to seamlessly carry over their files and settings to other devices. Furthermore, cloud computing services enable users to check their email on any computer and even store/back up  filesin the cloud.34 The global cloud computing market was forecast to grow from $272 billion  in 2018 to $623.3 billion by 2023, with a CAGR of 18%.35 With a Data Center Group that  brought in 32% of the company’s revenue, Intel showed its commitment to addressing this  opportunity and enabling the “global appetite to move, store and process data”.36 

Artificial intelligence (AI) is expected to change the world and become ubiquitous. This  expected development creates a big opportunity for the semiconductor industry because more  and more devices will require universal chips as well as means to connect everything. Intel has  made several investments and partnerships in the area.37

Driverless (or autonomous) vehicles include not only cars but also trucks, mining, ships and  pilotless aircraft. All thisrequires AI, communications, and many chips and processors, as well  as data analysis software. Intel’s acquisition of Mobileye seemed to indicate that it understood  the importance of this market.38  Quantum computing takes advantage of quantum mechanics phenomena to add significant  gains in terms of processing power.39 Given Intel’s expertise in computing, the company could  potentially be well positioned to address this opportunity, and it had established partnerships  in the area.40 In early 2019 IBM launched the world’s first integrated quantum computing  system for commercial use, and other companies were progressing in that direction.41 The risk  that Intel would lag behind its competitors remained realistic. Although it had resources to buy  rivals, it was not yet clear which company would be the first inventor of a more mainstream  quantum computing framework. 

In addition to the abovementioned developments, the demand for chips would also be  supported by new technologies such as virtual reality, augmented reality and the fifth  generation (5G) of mobile networks With its strategic shift from a PC-centric to a data-centric company, Intel was groping to  expand its competitive advantages to adjacent markets. For example, with the acquisition and  integration of Mobileye, Intel was attempting to pursue an end-to-end solution, focusing on vertical integration of its microprocessor products application to computer vision software for  autonomous vehicles, big-data processing and AI-machine learning software solution.

 
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