Intel case: Takeaways
Question 1
• To capitalize on the first mover advantage by creating semiconductor memory chips that were sound in product design and technology. They were risk takers and strong believers in the product they design.
• Semiconductor manufacturing is a complex process and involves huge investment in technology and equipment, which caused the production yields, a main driver of the manufacturing cost would fall initially with new processes. Yields would later improve with process optimization and improvement.
• But Intel would charge a premium initially and the prices would fall with the entry of competitors and when the production capacity was at its optimum.
• But with the entry of Japanese competitors like Fujitsu, the product life cycles of DRAM shrank which necessitated the investment in new technology and equipment than never before and Japanese were able to ramp up their production capacity at a rate faster than Intel and were releasing new products to the market sooner. During that time, Intel launched a DRAM with a single power supply design which was a novel feature and they charged a premium again. But competitors’ products during that time lacked this feature but they had higher memory and cheaper. The Japanese increased market share due to higher demand also gave them a manufacturing costs advantage- economies of scale.
• Also, they had a technological advantage in terms of photolithography. The Japanese companies such as fujitsu, Hitachi worked closely in collaboration with Nikon to design superior equipment which was not available in the US until later. This indicates strategic alliance. They had occupied half of the world market in DRAM’S.
“Bottom line, Japanese were better at process optimization and improvement thereby enabling to ramp up production at a faster rate which increased their production yields “

Question 2: