Fundamentals of Human Resource Management 5th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright

Exercise 17

Intel's Location Decisions
Unlike many electronics businesses, Intel, the world's largest semiconductor company, does most of its manufacturing in the United States. Nevertheless, Intel is an international business. The company fabricates microprocessors and chip sets in the United States (in Oregon, Arizona, Massachusetts, and New Mexico), Israel, China, and Ireland. Then employees complete the assembly of the microprocessors and test them at Intel's seven assembly test facilities in China, Malaysia, Vietnam, and Costa Rica. Intel also has sales and research facilities around the world, with locations in 46 countries.
Most companies that make microchips have located their manufacturing facilities outside the United States; only about 16% of the manufacturing capacity is within U.S. borders. The main reason is not the cost of labor, although overseas manufacturing is cheaper. Rather, lower tax rates, sophisticated distribution channels, and a large supply of skilled workers make overseas locations attractive.
Intel seeks an advantage by building exceptionally sophisticated plants and locating them near its research and development experts. Its most recent addition is Fab 42, a factory being built in Chandler, Arizona, expected to be the most advanced microchip fabrication plant ever built. Fabrication involves etching integrated circuits onto silicon wafers, which are then cut up into individual microchip. The larger the wafer the process starts with, the more efficient the manufacturing process. Several companies are making microprocessors from wafers that measure 300 millimeters on each side; Fab 42 will be one of only a few plants that work with 450-millimeter wafers. Intel will also gain an efficiency advantage by building Fab 42 as an expansion of an existing facility in Arizona, which is cheaper than starting up a new facility from scratch.
Since Intel also has facilities in China, Ireland, and Israel, future manufacturing expansion could occur there as well. Intel's managers say they would be more likely to keep building in the United States if the government would lower its corporate tax rates and speed up the approval process for new construction, and if U.S. colleges would prepare more engineers to feed the company's need for talent.
In contrast to manufacturing, research and development for microchips mainly takes place in the United States. However, industrywide, the share of R D in the United States is declining relative to the R D growth in Europe, Israel, and Singapore. The sharpest decline in the United States is R D related to making the chips. Intel hires its R D talent from around the world to stay at the forefront in its fast-changing industry.
One challenge with a global R D workforce is how to get employees to share ideas and motivate one another. Intel recently tackled that problem by bringing together 1,000 of its researchers from 22 countries to attend a TechFest in the Oregon Convention Center, near Intel's most advanced operations. During the weeklong event, the researchers attended lectures as well as social events where they could build professional relationships and learn about one another's work.
How can they support the strategy of locating marketing and research employees around the world?