Intel Case Study Costa Rica

 

 

 

 The Intel corporation is a leader in the field of semiconductors and more precisely microprocessors and electronic board manufacturing but they are also present in the digital storage, graphics card, super computers, the memory market and networking installations. They also make  software like security systems. To develop all those products, Intel spends huge amounts of money in research and development and has bought many companies that are now sub companies of Intel such as McAfee, an anti-virus software company bought in 2010 for 7.6 billion dollars and became a fully owned subsidiary of Intel. Or Wind River which is an operating system designer which was bought by Intel in 2009 for 880 million dollars.

Intel is providing its products all around the world by dominating the market at around 80% of market share in the processor industry going from entry entry level to the high end and enterprise grade equipment.

The Organization of Intel

       Intel’s headquarters are situated in the  in Santa Clara in the Silicon Valley next to most of the other leaders in the technological sector in the US. At the head of the company is a board of directors composed of 12 members with the CEO Bryan Krzanich, in this position since 2013 being the 6th to take this position. The 11 others are composed of a chairman for the board and 10 of the directors of the sectors of the company.

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Intel is one of the leader in processor manufacturing, they are currently  creating  new faster and more power efficient chips for the market. Intel has been the or at least on of the leaders on the market since the 80’s when they started to overthrow the Japanese competitors in this sector. Since then they have  always had a small but still significant advantage on other companies such as AMD, their rivals, in speed, power efficiency, heat management or transistor sizes in the processors. Their research, manufacturing and assembly process is almost entirely done in-house by having their own facilities from fabrication facilities to research and development facilities and testing and assembly facility. They share those sites between the United States which is Intel’s home country and Asia.

Intel does not directly sell their products to clients.Instead they sell their products through physical retailers in electronics store or also by internet with retailing websites and stores such as amazon.com or websites specialized in electronics like newegg.com.

Intel’s Global Reach and Size

Intel is a leader in the high-tech industry, they have been leading the semi-conductor industry for decades now. They are evolving alongside other technological or electronics worldwide giants like IBM, Apple or Microsoft in the USA by being present in the Dow Jones since 1999. The “Dow Jones Industrial Average” is a stock market index that shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in thestock market. This index is one of the most notorious stock market index, it shows how much Intel is important to the economy by generating a net income of 16 billion dollars in 2015.
Intel has a total number of direct employees of 106,742 in 2016. This includes 53200 in the USA and 53542 abroad. All their assets is estimated to be worth 110 billion dollars.

 

Influence of Intel on its Host Countries

As Intel has a lot of influence in the regions it operates in but by being as large as it is, Intel does not only have some positive influence in its host countries. By having such influence, TNCs have a much more sensible situation to deal with when wanting to dismantle a facility or with offsets.

A perfect example of Intel’s impact on a host country is with Costa Rica. Intel had a facility manufacturing Intel microprocessors in Costa Rica since 1997 and was responsible in 2006 for 20% of the Costa Rican exports and 4.9% of the country’s GDP. But Intel wanted to dismantle this factory 9 years after the decision to invest andnd had to promise to keep 1200 jobs in Costa Rica, so they decided to implement offices. Intel’s investment and FDI in general have been advantageous for Costa Rica and its people, generating economic growth, higher paying jobs, exports and market raises.

Intel has been affected by several controversies in the past but the most notable one was from the advertisement campaign of one of their processors in 2007. We could see 6 black sprinters bowing to a white man. “The white manager stands under the headline “maximize the power of your employees.” This ad has clear obvious parallels to plantations and slavery. It shows as if the African Americans are still the slaves and that the white man is still the boss, or owner. This has led to very negative responses by everyone and Intel tried to stop the campaign despite it already having been already launched and just apologized for their mishap.

 

Intel also had problems with other companies by using patented technologies like with the Transmeta Corporation lawsuit where Intel had to pay a fine of 250 million dollars to the company for using some of their manufacturing techniques illegally.

Positives and Negatives of Intel in its Home Country, the USA

Intel is unique among American manufacturers as Intel has a widespread economic impact throughout all sectors of the USA’s economy due to its massive domestic operations, investments, supply chain ecosystem and distribution channels. Unlike many manufacturers and tech companies, Intel chooses to locate its leading-edge fabrication facilities in America, but they are still generating more than three-fourths of its revenue outside of the USA, mostly in Asia. They are using their unique advantageous position in high-tech manufacturing to keep at a maximum their activities in the USA providing jobs and growth. For example, Intel has been responsible for a total impact on GDP in the USA of around 410 Billion dollars between 2008 and 2012.

These efforts made by Intel in the USA are considerable since they are amongst the largest investing companies in the USA in different domains such as research and development or induced jobs or working conditions. Intel is an economic engine of its own in the USA investments are widely known to have important effects on GDP and employment growth. Intel’s cumulative economic impact includes direct, indirect and induced impacts:

• Intel’s direct impact on USA’s GDP in 2012 was 26 billion dollars. Extending through Intel’s supply chain and distribution channels reveals a positive impact of more than 96 billion dollars on USA’s GDP in 2012 alone.

• With 53,200 U.S. employees, and a multiplier effect of 13 additional American jobs for each Intel job, a total of 774,600 American jobs were supported in 2012 through Intel’s investments in the USA.

As any industrial company, Intel does produce some waste and pollution but with no statistics we can only know about their will to reduce waste and pollution through their named campaigns that are simply affirmations that they are concerned and that they want to change.

An Intel Product: the Intel Core Processors

The Intel Core Processors are today part of the biggest line Intel has. The range from the entry level one’s called “Core i3’s”, the medium ranged one’s called “Core i5’s” and the high end one’s called “Core i7’s”. these processors are consumer products designed for casual to enthusiast levels.

The first part of the process is designing and research and development. The chips are designed in the USA, Ireland, Israel and China. The second part of the process is the silicon wafer manufacturing, they require the most advanced technology since it is the process dealing with the smallest parts. The processors are essentially composed of Billions of small transistors (also called semi-conductors) to operate, as small as 14 nanometers large for the latest processors. They are all printed on a thin silicon board, this is commonly called a wafer. This is the basic board making the chip, all those steps are achieved with automated installations in the facilities. They are produced in the USA, Ireland, Israel or in Dalian in China.

The wafers will then get transported to get assembled and tested in the assembly sites located in south east Asia and more precisely in China, Malaysia and Vietnam. These steps are also done automatically by computer controlled robot arms for the assembly and testing process. The processors are then distributed to retailers on the web or in physical stores.

Global Reach and Effect of The Intel Core Processors

The Core processors from Intel are very important to the electronic needs in the world. Intel provides these processors that are more powerful and efficient than ever. By further investing in research and development, these processors are also becoming more and more accessible with the ratio between cost and performance decreasing continuously although with the lack of competition Intel has been able to afford innovating less, charging more than before, and still keep the lions share of the consumer and professional processor markets. Thans to Intel, more people are open to new technologies that are changing the world. This has a goal of popularizing the use of technology especially for their lower end models like the “Core i3’s” or even lower end models like the Intel atom line. The high-end processors like the “Core i7’s” have a goal of achieving the best performance but it is at a high cost, this line provides the power needed to execute demanding tasks like simulations or calculations in the scientific realm or video production.

 

Case study done by Maxime and edited by Elias

KARLA BLANCO started working for Intel in 1997, when the microchip giant opened its factory in the Costa Rican rainforest. She was hired as a customs and trade expert and quickly climbed the professional ladder. After 17 years with the company, Ms Blanco is one of thousands of Costa Ricans whose lives have been changed by the microchip industry. She now speaks fluent English and Portuguese, holds a master’s degree in international business and serves as Intel’s corporate affairs director for Central America and the Caribbean.

The future looked bright, both for Ms Blanco and for Costa Rica. But on April 8th Intel announced plans to close its Costa Rican factory and move its operations to Malaysia, Vietnam and China. By the end of the year 1,500 jobs will have been lost. Ms Blanco has been dealing with a torrent of bewildered workers and media inquiries. “It’s been really painful,” she says.

The pain will be felt across the economy. Intel’s operations in Costa Rica are worth around $2 billion a year, making up about 20% of the country’s exports. The firm accounted for 11% of net foreign direct investment in 2000-12. Intel says it will hire another 200 staff to work in its engineering and global-services units in the country, which currently employ around 1,200 people. Nonetheless Henry Mora, a congressman and economic adviser to the incoming government, estimates that the closure of the microchip factory will cause a drop in Costa Rica’s GDP of 0.3-0.4% over the next year.

Intel’s arrival helped Costa Rica to develop a lively high-tech cluster which includes companies such as Infosys and Hewlett Packard (which last year announced that it was moving some of its Costa Rican jobs to India). The worry is that just as Intel’s arrival triggered an influx of smaller firms, its departure could cause them to leave. Nor is technology the only industry feeling the squeeze. Hours after Intel announced its departure, Bank of America said it would close its Costa Rican operations as part of a global restructuring programme, laying off 1,400 workers.

It is a grim start for the new government of Luis Guillermo Solís, who will be sworn in as president on May 8th. Mr Solís has promised an international campaign to promote Costa Rica as an investment destination, highlighting its political stability and experience at combining foreign investment with local development that has a low environmental impact. PR campaigns aside, he might address the expensive electricity and ropy infrastructure that many investors complain about.

Asked if she will be able to continue working for Intel, Ms Blanco says that some senior executives have told her she will. “I hope so. But I still don’t know what will I do, or how,” she says. The thousands left jobless will expect the new president to come up with some answers, and fast.

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