Intel Creating Sound Technology-Focused Initiatives for Intel

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Creating Sound Technology-Focused Initiatives for Intel

Intel, a manufacturer and designer of microprocessor chips, is one of the leading technology companies critical in the global evolution of electronic products. But how so? What strategic initiatives are in place that allows Intel to execute its business strategy, remain competitive in an ever-growing competitive market, and continue to innovate? If Intel's strategies are in place, how do they propel Intel's products that will create new opportunities, new innovation, and the next generation of microprocessors?

This paper analyzes the strategies that Intel currently has in place, core competencies that feed those strategies, and how those strategies lead to product innovation and protection with the ultimate goal of creating technology-focused initiatives that Intel should be engaged in. The emphasis for Intel is to be able to adapt to a changing (and sometimes chaotic) industry, thus technological revolution must always be around the corner for Intel, lest they become obsolete in record time.

Technology-Focused Initiatives for Intel

Intel is one of the largest semiconductor chip manufacturers in the world. According to their 2010 Annual Report (2011, pg. 1) they are the "largest chip manufacturer in the world based on revenue." This is understandable as their marketing strategy has branded them in virtually in every Western hemisphere household. Intel's products are not only microprocessors, but include chipsets, motherboards, wireless and wired connectivity, and platform technologies (Intel, Annual Report, 2011, pg. 2). Through the use of these products, Intel provides much of the computer industry's CPU's and motherboards for computer and electronic manufacturers across the globe. Intel's competitor and rival in the chip manufacturing industry is Advanced Micro Devices (AMD) (Intel, 2010 Annual Report, 2011).

For Intel to continue its success as a technology leader and manufacturer, it must do several things -- 1) identify its core competencies which feeds into well-planned technology-focused initiatives, 2) understand the industry dynamics in the marketplace and be able to react and adapt to them, 3) identify and understand the processes for internal innovation within Intel's campuses and manufacturing centers, and 4) aggressively pursue practices to protect their innovations, products, and similar intellectual property. The four factors should serve as a base to be able to create technology-focused initiatives and strategies and continue to dominant the market share both globally and domestically.

Technology Strategies for Intel

In order for Intel to successfully develop and innovate products, there are fundamental strategies that a business in this industry must conduct in order to drive its innovation forward. They are in no particular order of importance -- focus-driven research and development, acquisitions, licensing, setting the standard in manufacturing and leadership, and "green" initiatives.

Focus-Driven Research and Development.

Every company that develops electronics has its own research and development unit; however Intel is in a unique position, that as leader, it must use its capital and resources to find the newest products that will meet not only market share goals, but also create intrinsic value with its customers. For example, in Intel's 2010 Annual Report (2011, pg. 25), its current strategy on remaining a leader in chip manufacturing is to focus on three areas -- energy efficient performance, connectivity, and security. These not only provide value in the market, but customers will value the intrinsic value of Intel's products through them being viable in today's times. Customers need energy efficient products because power consumption impacts usage of electricity which creates a domino effect of using up more fossil fuels toward supplying electricity and eventually impacting the environment (Intel, 2010 Annual Report, 2011). Energy efficiency should be a cornerstone of any technology manufacturer to prevent overheating and unnecessary power consumption. In this day and age of social media and the evolving use of the Internet, Intel's drive for connectivity is viable in developing chips that increase the speed of information, ensure its reliability of uninterrupted service, and broaden its reach into other markets, such as its acquisition of the WLS business of Infineon (Intel, 2010 Annual Report, 2011). Security through protection of both software and hardware is critical in today's marketplace. Developing products that not only meets energy efficient needs, promotes connectivity, and are secure will help drive Intel's growth and dominance.

In addition to Intel's own strategy toward innovation, other types of focus-driven research and development are critical. Intel should look into areas of physics research (toward breaking down barriers involved in nanotechnological mass-scale manufacturing), materials (developing alternative materials to continue Moore's Law), and more environmentally friendly products where waste does not become a health problem.

Acquisitions.

Intel is currently in a mode of mergers and acquisitions and remains a core business strategy for Intel (Intel, 2010 Annual Report, 2011). According to the 2010 Annual Report (2011), Intel recently acquired McAfee, the WLS business of Infineon, and in 2009, bought Wind River Systems. There is good justification for engaging in acquisitions as a viable technology-focused strategy. Intel's acquisitions can be summed up in that they allow expansion into new markets, create vertical / horizontal chains, and create additional synergies between companies now under Intel.

For leader companies such as Intel, continuous growth in their core products is not a sustainable model. While products in the industry tend to become obsolete fairly quickly, the product cycle is long enough that Intel should be in other markets to drive growth and have continuous revenue streams. By creating vertical / horizontal chains in manufacturing to end-user, Intel has greater opportunities to expand its business by owning companies that uses it chipsets and microprocessors. For example, the acquisition of McAfee by Intel was to expand Intel into the security services market and to acquire McAfee's own patents and IP for usage on further strengthening the security in their other products (Intel, 2010 Annual Report, 2011). Also, the acquisition allows Intel an avenue to reach the individual consumer directly who purchases McAfee's products. Lastly, collaboration between companies that come under Intel's acquisition can merge their core competencies, their IP, and their resources together to further the aims of technological innovation, product development, and even approach serious challenges with a fresh perspective.

Sometimes, an acquisition may not be in Intel's best interest. Factors that determine that could be that the target acquisition maybe too expensive for the rate of return Intel is likely to generate, integration may prove to more trouble than it is worth, or that expanding into that particular area of business does not mesh with Intel's core competencies and strategies. Bolaji Ojo in his article with the Electronic Engineering Times (2011) speculates that Intel's merger with a company that specializes in field-programmable gate arrays such as Xilinx or Altera may not be in Intel's or the target company's best interests.

Licensing.

Licensing is also a strategy that Intel can use to great effect. Instead of acquiring a company, a deal can be reached where the company pays licensing fees for Intel's products and Intel in turn has a stake in the company's own innovation and products. If the relationship is successful, this can be a precursor toward a merger or acquisition. Intel refers to later acquisitions as "strategic investments" (Intel, 2010 Annual Report, 2011, pg. 11).

Setting the Standard in Manufacturing and Leadership.

One of the challenges of a company that is in a leadership position is to where to go from there? A strategy that Intel should always consider to set a standard in manufacturing and leadership that its competitors will have a difficult challenge to meet or exceed while Intel can meet with less resources and/or costs. An example of this strategy in play is Intel's design of the Tri-Gate transistor. According to PC Magazine Online (2011), the chip has set a standard of a new generation of 20/22 nm while Intel's competitor, AMD, is still in the 32 nm generation. For AMD to catch up and exceed this standard, they will have to expend considerable resources and capital. Also, this Tri-Gate transistor is a new type of transistor never before invented. It is a transistor this is provides a "37% performance increase at low voltage" (Intel, Press Release, 2011. It is these kinds of manufacturing standards (20/22 nm transistors) and leadership (the Tri-Gate transistor) that sets the bar for other companies to meet and/or exceed in order to compete.

Sometimes, this strategy can be set too high and Intel must become truly innovative in order to meet their goals. Intel's setting of standards in manufacturing and leadership is their drive to continue embracing Moore's Law and their own "tick-tock" standard -- the upgrading their micro architecture every two years (Intel, 2010 Annual Report, 2011, pg. 26). Intel is confident that the Tri-Gate transistor will allow them to succeed in continuing Moore's Law and their tick-tock standard (Intel, Press Release, 2011). The risk of failure is great.

Green Initiatives

One of the strategies that Intel should be pursuing is more environmentally sound products. Discussed earlier was Intel's focus on energy-efficient products. Energy-efficient products are good in that they do not use up as much power and thus reduces fossil fuels burned and/or contribute to global climate changes; however, Intel should do more in that their products, once obsolete, should be easily degradable or environmentally friendly. Waste from electronic products (called eWaste) can pose serious health hazards due to their chemical and physical composition (Intel, 2010 Annual Report, 2011).

Intel's Core Competencies Helps Build Their Technology-Focused Strategies

Intel has many core competencies that it can utilize to drive initiatives that are technology-focused and diverse. Human capital, research and development, and ability to maintain operational efficiency are examples of competencies that allow Intel to maintain its dominance in this industry.

Human capital, typically an asset defined by many corporations, is also a core competency with Intel. Intel knows how to hire and retain talent, focus their human capital into creating product innovation, and continue to set standards. Without the excellent use of their human capital, Intel's choices in acquisitions could hurt the company, research and development would stagnate, and they would fail to retain their leadership position, let alone meet standards they impose upon themselves.

As mentioned earlier, research and development is a strategy that Intel is successfully managing on product innovation. It is also a core competency in Intel's business model. How's so? By devoting resources and capital into research and development, it is a strategy that churns out new products, patents, and other IP -- the lifeblood of Intel's existence. As a core competency, it is a process that Intel knows how to manage efficiently by choosing which projects to research, how to advance existing designs and IP, and shore up weaknesses in existing products and IP (Intel, 2010 Annual Report, 2011). A worst-case scenario in which R&D is a strategy, but not a core competency would be that capital and resources are wasted on projects that produce little to no results, failure to produce products that are innovative or revolutionary, and divergent internal goals within the organization itself. Fortunately, this does not seem to be the case with Intel. Through its efforts in research and development, Intel can continue to meet its tick-tock standards with a new design / upgrade every two years (Intel, 2010 Annual Report, 2011).

Operational efficiency is critical for every business. Intel knows how to integrate its acquisitions and continue to drive revenue growth for it products. Intel has record earnings for their 2010-year (Intel, 2010 Annual Report, 2011). Through operational efficiency, Intel is able to generate cash reserves to handle risks (lawsuits, the recent economic downturn, political action), make acquisitions (McAfee, Wind River Systems), and continue to promote research and development (Intel, 2010 Annual Report, 2011).

Industry Dynamics in the Marketplace

An industry dynamic is what particular types of challenges that Intel faces in the market place. There are two of them are unique in the electronics industry -- Moore's Law and the longevity curve of the products.

Moore's Law.

Moore's Law according to Intel is that number of transistors will double in size every two years (Intel, Press Release, 2011). Because of this, Intel has a standard they follow that they call the "tick-tock" standard (Intel, 2010 Annual Report, 2011). The standard is that Intel must have an upgrade to their micro architecture every two years. Their recent release of the Tri-Gate transistor will allow Intel to further drive Moore's Law (PC Magazine Online, 2011).

Intel's focus on Moore's Law puts them in an interesting position that as long as they are meeting the expectations of Moore's Law, then it continues to raise the bar on the standards they set as a leader both for themselves and their competitors (notably AMD). However, the caveat is that Intel must always develop and implement strategies that will meet this expectation. Should that expectation fail, then the repercussions for Intel's failure could have lasting consequences.

Longevity Curve on New Products.

Intel, in their 2010 Annual Report (2011, pg. 11) describes the risks to their patents and IP "products are often obsolete before the patents related to them expire, and sometimes are obsolete before the patents related to them are even granted." This dynamic is a threat in the industry in that bad decisions on human and financial capital are wasted on product development but become obsolete before any real use can be utilized from the newly created product.