Intel's Manufacturing Strategy

1. Intel's Manufacturing Strategy • World's largest semiconductor company • Two dominant products: • Microprocessors • Flash memories • Multiple manufacturing sites for the same product • Huge volumes at each site

2. Reasons for Semiconductor Alliances • Competitive Alliances: • share costs, resources and technology • reduce risk and time-to-market • raise customer confidence in success • improve customer sourcing position • Non-Competitive Alliances: • diversify into new business or technology • guarantee source of supply

3. Copy EXACTLY! • Transfer of new technologies in both new and existing factories accomplished in record time • Less startup problems and faster time to resolve them • Equal productivity from the start • One learning curve • Less problems, therefore more resources per problem Source: C.J. McDonald, Intel

4. The future of AT&T in Europe depends on its alliances • AT&T is building a strong network of partners in Europe • Unisource (Sweden, The Netherlands, Switzerland) in 17 countries • Telecom Italia (Europe and Latin America) • Local Partners (France, Germany, Italy) • Our services development depends on our alliances • Business services (Communications, On-line) • Consumer services • World Partners for global reach • The growth of European customer base is the keystone to develop • US skills transfer • Value added services • Commercial attitudes Source : AT&T

5. PERDC PTI PTI/Technoresearch Office MIERL PTI/Boston Office PTI/TAD-East AVTC PTI/TAD-West CSTL PTI PTI STL MITL PTI MADC MITT MARL PTI MCC ATVL MTV PDC R&D Center PTI MACRAD KMERL AMS Corporate Laboratories: Global mission Regional mission Division Laboratory Corporate Organization AVIRC ATVL: Panasonic Adv. TV - Video Laboratories, Inc. AVIRC: AV/Information Research Center CSTL: Communication Systems Technology Laboratory MARL: Matsushita Applied Research Laboratory MITL: Matsushita Information Technology Laboratory MITT: Matsushita Electric Institute of Tech. (Taipei) Co.,Ltd. PERDC: Panasonic European R&D Center (Panas. Europe (HQ) Ltd. PTI: Panasonic Technologies, Inc. (parent company for 6 US-based R&D Laboratories STL:Speech Technology Laboratory TAD: Technology Administration Div. Map of overseas laboratories (National/Panasonic)

6. Knowledge Management Matrix Know Don't know Know EXPLICIT Known knowledge Gaps Don't know TACIT Unknown knowledge Gaps Source: Conference MBA, Lars Ch. Smith

7. Knowledge Management Matrix"Chief knowledge Managers" Know Don't know Know Don't know Knowledge that you know you have Knowledge that you don't know that you have Knowledge that you don't know that you don't have Knowledge that you know you don’t have Source: Conference MBA, Lars Ch. Smith

8. Coopetition « If you cannot beat them » Join them ! Prod. by MrJR (-: American Proverb

9. Coopetition « Who is my client in the morning,my rival in the afternoon,and my supplier in the evening? » Prod. by MrJR (-: - Jack Welsh Chairman of General Electric

10. Gemplus, Alliances and partnership The development of alliances and partnerships is part of Gemplus’strategy to benefit from external sources and competencies. The co-operation agreement covers joint marketing sales and development efforts in the smart card market. The agreement brings together the card technology of Gemplus with IBM’s systems capabilities and expertise, and will involve development of multi-application cards, for use in electronic commerce and other electronic business transactions. Cooperation

11. The industry is dominated by well established players…. Chip Manuf. Card Manuf. End User System Integ. Terminal Suppliers S/Ware Sun Microsoft Informax ST Siemens Hitachi Philips Motorola Gemplus Bull G & D Schlumberger Oberthur Ingenico Dassault Hypercom Verifone IBM IBM Bul Ski Data Cap Gemini

12. Strategic Alliances; a vital need... Now that Gemplus has gained sufficient scope and maturity; it is replacing its original sole financial partners with investors from the manufacturing and service industries who have a strategic interest in a link up with Gemplus. Horizontal Integration Sharing Technology Market penetration and development Finance to reach critical size

13. Different priorities of the involved companies 52% Difference in company culture 42% Change in strategies / priorities 39% Lack of technical competence on partner ’s side 25% Difficulties to adapt the cooperation to new commercial conditions 23% Difference in organizational level status of concerned staff 23% Changes in ownership 21% The main difficulties in technology alliances are managerial TYPE OF PROBLEM FREQUENCY Source: Hakanson & Lorange, 1988 by Francis Bidault

14. Innovating all together? Technological Alliances Increasing technological integration: Data-processing and telecommunications Micro-electronics Composite materials and optical technologies Increasing sectors integration: Agriculture, chemistry and energy, telematics and mass media Direct or indirect covering of every potential sector

15. Innovating all together? The boomerang effects of technology transfers THE RISKS

16. Innovating all together? Innovation as a necessaryCompetitive instrument The technology as an innovation support Technology Innovation Competitiveness Key question:How to detect technologies likely to bring acompetitive advantage? Answer:The Technological and CompetitiveIntelligence

17. Innovating all together? The risks: The Infeudation In the case of an exclusive transfer, the companycan progressively increase its dependance on thepartner's technology, and then be assimilated byhim. The risk of loosing its independence

18. Innovating all together? The risks : "the trojan horse" : The partner can have hidden intention • Not transferring everything he promised to give, • Taking more than what he asked for, • Trying to weaken the company or to increase its dependance towards him.

19. Global alliance in Smart Cards systemswill provide benefit to all actors Build and operate new businesses Terminals & Applicative Software Suppliers System Developpers Card Suppliers Chip Silicon Suppliers By creating new markets opportunities ! But Silicon suppliers should be much more involved at the beginning of the process : Standards Definition of key products Value added on Silicon

20. The future of Smart Cards businesses depends on Partnerships 1 • Build a new business environment : • Smart Card replacing Paper • Computer processing replacing manual or semi automatic processing& Information System • New era of interactive information systems: • VISA, Master Card... or Microsoft, Oracle, Netscape, etc. • Card manufacturer should be able to provide complete • solutions byeffective alliances with terminals providers • Software companies • System integrators 2

21. 2 1 2 3 1 Smart Cards partnership programs : Distributors & value added resailers (VAR) Silicon Supplier Internal License JV Internal JV Partnership programs -Terminals -Suppliers -Integrators Design of new products Buying components & modules Production Cards & Printing Personalization Commer- cialization Direct sales to key account

22. Trademark licence Common Research Engineering contract Patent licence Consortium (common marketing) Common purchase Common production Research contract Subcontracting Designing Producing Marketing Delivering Supplying General cooperation agreements : anchor point Distribution agreements Waysof...

23. Is it a tactic or a Marriage? A Long Term Marriage Broad Scope ofAllianceActivity A Short Term Tactic Narrow Short Long Expected Duration

24. What do you want from your partner, after the deal is done? A One Time Transfer Ongoing managerial Inputmatched by us Nothing All we wanted was the cash, the nationality, the brand name, the patents rights, access to your distribution Just teach us Touse your technology A true partnership Combining brains and resources

25. Keeping an Alliance Healthy • Monitor the state of the partner relationship, • and adjustpayoffs and processes as you go. • Watch for "strategic space" collisions, between • alliance andparents. • Put some of your best managers in alliances and at the partnerinterface. "Good cop, bad cop" bard members. • Recognize and manage cultural differences. • Communicate, more than you think is reasonable. • Do not "micro" manage, from the parent level. • If the alliance has served its purpose, end it.

26. What are the alternatives? Go it alone... Form an alliance... Make an acquisition... Pros Working with familiar people and resources Fast decision making Control Cons May be too financially risky May be too slow May need help Pros Risk sharing Economies of scale Quick access to resources and skills Political necesity Learning opportunity Cons May be difficult to manage well May prove inflexible Pros Achieve major change quickly Control Cons Expensive Integration may be difficult Irreversible

27. To Get Partnership and Alliances "Right"... Operating over time Should we? Alliance Design What do we really need? What are the options? Rewards and risks of each? Scope and duration Type of alliance Partner choice Ownership Payoffs Reacting to unexpected events Adjusting original design and payoffs

28. Desired Partner Characteristics The "Three C's" Importance Level Low Medium High Low Medium High Capability Compatibility Commitment

29. Implementing Technology Transfer strategies AUTONOMOUS WAY COOPERATIVE WAY Joint R&D agreement Common R&D subsidiary company R&D consortium Internal R&D « Intraprenariat» DEVELOPING Licence SWAP Joint licence purchasing Joint acquisition of an innovating company Subcontracted R&D Licence purchasing Investment in an innovative company BUYING

30. Definition Alliances Stand alone Transactions Joint venture Merger An alliance is any formal arrangement between two or more independent or organisations for purposes of mutual gain through cooperation for a limited period of time Source : KMPG

31. Forming global alliances and Network organisations • Companies try to find new competitive space and build business outside their business column • New surprising combinations of Technology areas; more and more converging branches • Changing configurations between companies towards active networks • Trans cultural collaboration becomes more rule that exception • Learning organisations are better equipped to master the business dynamics « The Company of the Future combines all these elements » Source : KMPG

32. In general strategic alliances are underperforming • Success rate of alliances is only a meagre 30 – 40 % • Alliance-formation is not a common management skill • Underestimation of ‘soft’ aspects(company culture, chemistry of persons, commitment) Nevertheless sharp increase in number of alliances is to be expected Source : KMPG survey 1996/97

33. ?! Alliances brings management in paradoxal situation Past way of thinking: Control + To be in control is normal practice in business Companies can’t do it all alone anymore; too much to handle Alliances are a way out, but at the same time you loose control a low ‘Comfort level’ But…… Challenge: Increasing the level of comfort Source : KMPG

34. The Base for alliances: Commitment • Reputation • Teamwork • Act, without escapes • Small steps • Contract Commitment Contract « Think in terms of credible commitments »  Source : KMPG

35. Gradually the importance of ‘soft’ issues is regocgnised ‘soft’ importance ‘hard’ t Source : KMPG