INTEL CORPORATION: GLOBAL SUPPLY CHAIN.

Intel Corporation was founded in 1968 and has grown to be the world’s leader in design and
manufacturing of semiconductors. Intel now has over 600 facilities in 63 countries and over 106
thousand employees worldwide. About 98% of the cloud runs on Intel products and about 90% of the
worlds super computers are Intel based. Intel Corp is segmented into the following groups: Client
Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile
Memory Solutions Group (NSG), Intel Security Group (ISecG), Programmable Solutions Group
(PSG), All Other and New Technology Group (NTG).
Each group is responsible for a different microprocessor market segment. Intel’s core assets include:
“silicon and manufacturing leadership; architecture and platforms; software and services; customer
orientation; acquisitions and strategic investments; and leadership in corporate responsibility.” In
addition to manufacturing a majority of their own products, Intel utilizes many third-party foundries,
board-level sub-contractors and a wide variety of external vendors to augment their capacity and
perform products testing.
Intel Corp’s semiconductor supply network is a multi-tiered supply chain with multiple layers
controlled by the same organisation. This supply chain is comprised of more than 19,000 suppliers in
over 100 countries. These suppliers provide everything from direct production materials to the tools
and machines required in assembly and manufacturing. There are also suppliers of logistics,
packaging, office materials and even travel services.
The first tier of the supply chain is that of mining and manufacturing the bare silicon wafers. The
manufacturing stage consists of hundreds of different steps and takes an average of 10 weeks as the
wafers are divided into integrated circuits. Once the integrated circuits are manufactured, they are
then sent to an E-test and Sort which determines if each integrated circuit functions as intended. After
this sorting, all the circuits are inventoried as work-in-progress and then sent to the Assembly/Test
phase. Here the integrated circuits are separated into their individual chips and packaged. Once
packaged, the chips are then inventory warehoused until they are shipped to the customers. This
process, from E-test to shipping to customers takes an additional 10 weeks on average. Although the
entire supply chain takes approximately 20 weeks, more than 50% of Intel’s orders are met within 4
weeks due to an incredible forecasting and inventory management process.
As previously mentioned, the total time for the Intel supply chain is on average 20 weeks, and despite
these long lead-times, over half of the orders are fulfilled within 4 weeks. The demand for
semiconductor components is extremely volatile especially since it only has a life cycle of
approximately 1.5 years. The rapid drops in demand can leave companies with excessive inventory at
the end of the product life, whereas the rapid rise in demand can lead to stock-outs and lost revenue as
consumers turn to the competition.
Another issue with Intel’s supply chain is that of material sourcing. As with most of the electronics
industry, Intel’s products utilize tin, tantalum, tungsten and gold (3TG) for most of the manufacturing
processes. These metals are known as “conflict mineral” and are reported by the US Department of
Labor, to be partially mined by children and in the mines/companies possessed by military officers
and/or armed groups in the Democratic Republic of the Congo. Since the time that Intel became aware
of the link between 3TG mineral extraction and the conflict in the DRC, they responded by requiring
the smelters and refiners in their supply chain to meet a third-party audit program. In addition to
participating with initiatives such as Conflict-Free Sourcing Initiative (CFSI) and the European
Partnership on Responsible Minerals (EPRM), Intel has also collaborated with other companies,
industries, governments and civil societies to address this issue of responsible mining.
Large inventories allow companies to “buffer fluctuation in production and demand, increase order
fill rate and achieve higher customer satisfaction; but on the other hand, keeping inventory involves
costs and risks.” The trend since the 1980’s as been toward “zero inventories.” Which although that is
not literal, it is the concept that companies are motivating their “workers and management to apply
continuous improvement techniques to reduce inventory levels.” The problem with a large inventory
in the microprocessor industry is the rate of obsolescence is only about 1.5 years. Although there is an
attempt to reduce inventory, the problem is that the overall cost of stockout is much higher than that
of the inventory related costs.

Discussion questions.
1) Elaborate 3 global supply chain issue that affecting Intel Corporation operations.
2) Recommend strategies that Intel Corporation may use to overcome the problems related to
global supply chain.