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Fairchild Semiconductors, Inc. Briefing Book
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Fairchild Semiconductors
Briefing Book
ANN BARRICK JAMES BRITT
BRIAN CARPER DAVID GUENTHER
August 20, 2012
BBUS 480
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EXECUTIVE SUMMARY
PROBLEM: Fairchild sales continue to expand as the semiconductor market continues to grow creating a backlog of orders totaling approximately $540 million. Fairchild needs to find opportunities to establish a new production facility.
SOLUTION: Brazil has established itself as a strong emerging market in semiconductors creating a supply-‐side scale economy in the form of an inexpensive yet experienced industrial labor pool. Alternatively Bulgaria has seen an increase in electrical engineer design students.
OPPORTUNITY: Fairchild has the option to establish a production facility in Brazil taking advantage of the supply-‐side scale economy in order to reduce production costs on a range of products through the available labor pool. In addition Fairchild can pursue the establishment of a design firm in Bulgaria again utilizing the local emerging talent market in order to maintain competitive advantage in product efficiencies.
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COMPANY, PRODUCTS, & SERVICES DESCRIPTION OF PRODUCT & MARKET PRODUCT1
SEMICONDUCTOR DESIGN AND FABRICATION IN THREE MARKET SEGMENTS
1. ANALOG PRODUCTS
2. FUNCTIONAL POWER
3. STANDARD PRODUCTS
MARKET2
CURRENT MARKETS
1. EUROPE, THE AMERICAS, ASIA/PACIFIC REGION, JAPAN, SOUTH KOREA
CURRENT TARGET MARKETS
1. MOBILE, COMPUTING, CONSUMER, COMMUNICATIONS (MCCC)
2. POWER CONVERSION, INDUSTRIAL AND AUTOMOTIVE (PCIA)
3. STANDARD DISCRETE AND STANDARD LINEAR (SDT)
1 http://www.wikinvest.com/stock/Fairchild_Semiconductor_International_%28FCS%29 2 Fairchild Semiconductor 2011 10-‐k 2 Fairchild Semiconductor 2011 10-‐k
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DESCRIPTION OF PRODUCT & MARKET
PRODUCT 3
1. The analog products segment designs, manufactures and markets high-‐performance analog and mixed signal integrated circuits. These analog products monitor, interpret and control continuously variable functions such as light, color, sound and energy.
2. Functional power, Fairchild's largest segment, netting more than half of its revenue, is responsible for providing power switches including the IntelliMax, MOSFET, and IGBT (insulated gate bipolar transistors) and rectifiers.
3. The standard products group comprises of four smaller product groups: logic products, standard diode and transistor products, optoelectronic products, and standard linear products.
MARKETS4 1. Fairchild primarily sells to distributors on nearly every continent. Their MCCC segment focuses on analog and mixed
signal devices. Recently Fairchild has developed their GreenFPS product line to promote a more environmentally friendly power conscious outlook.
2. Industrial and automotive represent Fairchild's move lucrative segment and focuses on analog and mixed signal ICs. Fairchild has seen a strong demand from customers for solutions that reduce power consumption for products in standby mode.
3. In this market Fairchild continues to see demand growth for analog signal solutions as digital technology needs to interface with real world signals.
3 http://www.wikinvest.com/stock/Fairchild_Semiconductor_International_%28FCS%29 4 Fairchild Semiconductor 2011 10-‐k
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MARKET SIZE & ESTIMATED POTENTIAL
MARKET SIZE
1. Global Sales of Semiconductors
2. Asia Leads the Way in Semiconductor Production
ESTIMATED POTENTIAL
1. Global Growth
2. Middle Class Electronics Consumption Fuels Demand
3. New Product Innovations Create More Demand
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MARKET SIZE
1. Worldwide semiconductor sales are roughly $300 Billion each year and continues to grow
2. Asia accounts for the majority of global semiconductor production
ESTIMATED POTENTIAL5
1. Global demand for semiconductors grew 8% in 2010
and over 15 % in 2011
2. Growth expected to continue as the middle class expands in emerging economies.
a. Purchasing electronics and appliances to outfit urban lifestyles.
b. Increase in Automobile purchases as middle class population increases
3. Number of transistors per chip doubles every two years, increasing semiconductor demand to match consumer’s
need for more computing power.
5 Trends & Opportunities
54%
18%
16%
12%
Gobal ProducFon
Asia Pacific
Americas
Japan
Europe
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OBVIOUS HURDLES
1. Maintain a backlog of customer orders
2. May not develop products to satisfy customer demand
3. Failure to protect intellectual property
4. 2/3 of sales go to distributors
5. The semiconductor industry is extremely competitive
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OBVIOUS HURDLES
1. Back logged orders could be subject to cancellation by customers, resulting in a loss of sales.
2. It is difficult to know what type of product the customer will demand, and money may be invested towards
creating the wrong product.
3. Failure to protect patents and other intellectual property could result in a loss in valuable technologies.
4. Most semiconductor companies sell directly to manufacturers. When selling to distributors, we ourselves are at
risk of being dropped as a seller without any notice.
5. Most competitors offer similar products, allowing buyers to easily switch companies.
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69.4 18.5
11.4
6.4 5.1
2.4 1.7
Market Capital in Billions
Taiwan Semiconductor Manufactu Broadcom Corp
Analog Devices, Inc.
Marvell Technology
Skyworks Solujons Inc.
IPG Photonics Corporajon Fairchild Semiconductor
INDUSTRY ANALYSIS
INDUSTRY DESCRIPTION
1. THE SEMICONDUCTOR INDUSTRY IS A $250 BILLION INDUSTRY ⋅ USED IN MOBILE PHONES, PCS, VISUAL AND AUDIO DEVICES, ETC.
2. FOUR MAJOR SEMICONDUCTOR DIVISIONS CONSISTING OF:
⋅ EQUIPMENT & MATERIALS ⋅ BROAD LINE ⋅ FOUNDRY ⋅ INTEGRATED CIRCUITS
3. FAIRCHILD CHOOSES TO FOCUSES ON INTEGRATED CIRCUITS
⋅ CYCLICAL INDUSTRY ⋅ GREAT NEED FOR PRODUCT DIFFERENTIATION
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INDUSTRY DESCRIPTION
1. The global Semiconductor Industry is a $250 billion dollar trade producing roughly 10% of the world’s GDP. Semiconductors are the critical components of most all consumer electronics including Mobile phones, PCs, MP3 players, Televisions, etc. Demand for these products is linked to the wellness of the global economy and consumer purchases.
2. The Semiconductor industry is divided up into four major segments: Equipment and Materials, Broad Line, Foundry, and Integrated Circuits where Fairchild Semiconductors focuses their efforts.
⋅ Integrated Circuits Industry is Cyclical o Demand Fluctuates with Economy o Limited Growth without heavy R&D spending
⋅ Industry is Crowded and Competitive o Market is Saturated with Big Competitors o Need Product Differentiation to Grow/Reduce Risk
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5 FORCES
1) Threat of New Entrants. -‐ moderate a) Competitiveness of industry drives engineers to leave and create independent IP b) Cheaper costs to build factories in emerging markets reduces upfront capital c) Positioning in emerging markets creates new strategic distribution alliances d) Rule of law does not always protect the IP in this industry; copycat suppliers are a critical issue.
2) Power of Suppliers. -‐ low
a) Materials required for semiconductor production are considered commodities; therefore suppliers of these materials have little power.
b) Most chip manufactures hold the power intentionally in order to control supply and costs, to spread the risk.
3) Power of Buyers. -‐high a) Just a few big manufacturing companies such as IBM control the majority of the chip industry’s critical segments;
consequently, these buyers have enormous power over semiconductor manufacturers.
4) Availability of Substitutes. -‐ low a) Limited substitutes are available for power conversion, industrial, and automotive semiconductors.
5) Competitive Rivalry. -‐ high
a) Constant pressure on chipmakers to develop something newer, faster, and cheaper. b) The foundries, chipmakers, and designers are in a constant cutthroat culture because industry is volatile and fast
paced. c) There is no choice but to keep innovating and try to stay ahead of your competitors.
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Compejjve Rivalry -‐ High
New Entrants -‐ Moderate
Buyer Power -‐ High
Subsjtutes -‐ Low
Supplier Power -‐ Low
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INDUSTRY VIABILITY
CONDITION OF THE INDUSTRY
• Demand for semiconductors is cyclical and commodity based • Dependent on purchases of consumer electronics • Competition is fierce between semiconductor manufactures • Strategy is to find a niche product and specialize in development • No loyalty between manufacturers and vendor
COMPETITIVENESS CREATES SMALL MARGINS
• Large R&D costs drive down profit margins • Fairchild operates on very minimal margins, sometimes < 5% • Price Wars drives down margins but increases revenue
FAIRCHILD’S OPERATING INCOME 2009 – 2011
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800
2011
2010
2009
Cost of Sales
Operajng Expense
Operajng Income
Revenue in Millions
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COMPETITIVE ADVANTAGE
COMPANY’S STRATEGIC POSITION
1. LOW COST LEADER
2. HIGH R&D SPEND
3. IDENTIFYING THE DIFFERENTIATOR
4. POWER SAVING PRODUCTS
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COMPANY’S STRATEGIC POSITION
1. LOW COST LEADER a. Minimize production costs by creating innovative manufacturing techniques in production facilities b. Taking advantage of cheap labor and competitive innovations in emerging market economies c. Leveraging low cost leader approach to maintain good relationships with vendors
2. HIGH R&D SPEND
a. R&D Spend is 30% of sales, higher than most other multinational semiconductor manufactures b. Developing new semiconductor capabilities in order to differentiate position in the market
3. MOVING TOWARDS DIFFERENTIATOR
a. Industry wide price wars; semiconductor industry is saturated with competitors b. Strategic Position is to find a Niche and become premier provider and developer of that product
4. POWER SAVING PRODUCTS
a. As middle class consumers purchase more electronics, the need for energy savings in those devices increases b. Through heavy R&D spend, Fairchild is able to capture and hold this niche market by constantly increasing
the efficiency of power savings in semiconductors.
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DESCRIPTION OF MAIN COMPETITOR
TEXAS INSTRUMENTS INCORPORATED – An old giant of the semiconductor industry, TI is the market leader in digital signal processing and a major competitor in analog semiconductors. The reason TI is the most significant competitor to Fairchild is because it competes directly with Fairchild in primary product category and secondary support products in automotive, computer, consumer electronics, industrial, mobile, and communications markets. TI’s of knowledge, reputation, and experience entering foreign markets make it a tough competitor.
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CHOICES MADE BY THE FIRM POST-‐1997Appx2
1. AGGRESSIVE ACQUISITION STRATEGY
2. DIRECT SALES STRATEGY FOR EACH GEOGRAPHIC SEGMENT
3. FOCUS ON RESEARCH & DEVELOPMENT
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CHOICES MADE BY THE FIRM POST-‐1997
1. Fairchild Semiconductors is interested in actively entering into new markets through rapid acquisition of established company segments, including the acquisition of Intersil to increase their discrete power segment.
2. "We believe that maintaining a small, highly focused, direct sales force selling products for all of our businesses, combined with an extensive network of distributors and manufacturer’s representatives, is the most efficient way to serve our multi-‐market customer base."6
3. $153.4 million was spent in 2011 on R&D representing 9.7% of sales. "We work closely with our major customers in many research and development situations in order to increase the likelihood that our products will be designed directly into customers’ products and achieve rapid and lasting market acceptance."7
6 Fairchild 2012 10-‐k Sales, Marketing, and Distribution 7 Fairchild 2012 10-‐k Research and Development
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COUNTRY ANALYSIS
COUNTRY DESCRIPTION
BRAZIL
1. CONSIDERING ENTRY -‐ SEMICONDUCTOR PRODUCTION 2. INCENTIVE PROGRAM FOR THE SEMICONDUCTOR SECTOR (PADIS) 3. STRONG ENGINEERING-‐EXPERIENCED LABOR POOL
BULGARIA
1. CONSIDERING ENTRY -‐ SEMICONDUCTOR DESIGN 2. CONTINUED PROGRESS IN THE FIELD OF INFORMATION TECHNOLOGY 3. FOREIGN INVESTMENT DRIVEN GROWTH
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BRAZIL
1. Brazil has shown strong focus on growth in the technology production industry with a focus on semiconductor production. For this reason Fairchild is looking into the possibility of establishing a production facility there.
2. PADIS represents the legal aspect of the Brazilian government’s focus and "... addresses the development of the local semiconductor industry, furthering the companies devoted to design, diffusion, processing, encapsulation, and test of semiconductors in the country with tax reduction, exemption of capital goods, and remittance to foreign countries."8
3. With Foxconn's recent addition of a production facility in Brazil and its subsequent labor clashes, coupled with government scholarship programs in engineering focuses, Brazil has created as supply side scope economy of fairly inexpensive, experienced labor.
BULGARIA
1. Bulgaria is showing rapid growth in the field of semiconductor design and firms are seeing a solid supply of experienced engineers in the area.
2. According to 2010's Global Information Technology Report Bulgaria is making solid progress in its world standing of IT development. A better national IT infrastructure means better support conditions for establishing a facility.9
3. Despite only recently joining the EU Bulgaria has experienced significant economic growth, averaging just over 6% from 2004 to 2008. Much of that growth is attributed to direct foreign investment primarily driven by international tech companies.10
8 Brazilian Government Seeks Momentum for its Semiconductor Industry 9 BULGARIA MOVES UP IN GLOBAL IT DEVELOPMENT RANKING 10 Bulgaria's High-‐Technology Industry Emerges From The Cocoon of Communism
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MARKET FOR COMPANY’S PRODUCTS/SERVICES
BRAZIL
1. CONSUMER PRICE INDEX -‐ RELATIVELY STEADY FOR THE LAST 5 YEARS
2. GOVERNMENT CREATED AND SUPPORTED MARKET 3. HIGH DISPOSABLE INCOME
BULGARIA
1. CONSUMER PRICE INDEX – LOW LEVEL INFLATION FOR THE LAST FEW YEARS
2. CONSUMPTION IS DRIVING A DEMAND SCOPE ECONOMY
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BRAZIL
1. Brazil has had relatively stable inflation levels for the past five years. This suggests that the economy is relatively stable and that investment in high tech products and businesses is feasible
2. The continued development and modernization of Brazil suggests a market need for semiconductors. The
Brazilian government has invested heavily in production facilities for high tech products like semiconductors, both to become an industry leader that supplies the world and to supply its own growth and development with high tech machines and devices.
3. Almost sixty percent of Brazilian households have over $15,000 of disposable income per year, which suggests that they are very capable of spending on high value items that typically contain semiconductors.11
BULGARIA
1. Bulgaria has had low levels of inflation over the last few years, which means that consumers have the ability to make everyday purchases easily and have additional income to invest or spend on more expensive items.
2. Two-‐thirds of the Bulgarian population has over $5000 in disposable income available per year, which shows
their ability to purchase machines, equipment, devices, etc. that require semiconductors.12
11 World Consumer Lifestyles Databook 2012 12 Global Economic Indicators
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MAIN COMPETITORS IN EACH COUNTRY
Brazil Bulgaria CEITEC
ON Semiconductors
FreeScale Semiconductor Melexis Bulgaria
$-‐ $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000 $100,000,000
CEITEC Freescale Semiconductor
$USD
LaFn America Revenue
$-‐
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
Fairchild Semiconductor
ON Semiconductor
Melexis Bulgaria
$USD
European Revenue ($USD millions)
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Brazil
1. CEITEC is Brazilian's own government backed semiconductor design and production company. Established in 2007 as a part of a new initiative they produced the country's first internally designed RFID chip and a new plant in January of 2012. While still comparatively small scale the company is expected to grow through government initiatives and direct partnerships with international firms.
2. FreeScale semiconductors was the first US firm to establish a manufacturing facility in Brazil. The company produces microcontrollers for use in the automotive and automation industries. FreeScale also works in closely with CEITEC.
Bulgaria
1. ON Semiconductors has a very similar product portfolio as that of Fairchild including analog and discrete power management solutions and integrated circuits covering automotive and industrial applications. ON Semiconductor acquired AMI Semiconductor which had established a design firm in Bulgaria in 2005.
2. Melexis Bulgaria established themselves by opening a production plant in 2000. In 2006 they then added a production and design facility costing over 5 million EUR. They experienced an increase of 71.56% in total net operating revenues in 2010 increasing their Current Ratio from 1.13 to 2.62 over the same time period.13
13 Melexis Bulgaria
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POLITICAL, LEGAL, ECONOMIC, AND SOCIAL ANALYSIS IN EACH COUNTRY
BRAZIL – POLITICAL, LEGAL, AND SOCIAL
1. LOW POLITICAL RISK
2. GOVERNMENT THAT IS CONTINUALLY STABILIZING
3. LARGE POPULATION OF 197 MILLION
A. PRIME COUNTRY FOR MANUFACTURING
BULGARIA – POLITICAL, LEGAL, AND SOCIAL
1. LOW POLITICAL RISK
2. STABLE GOVERNMENT
3. POPULATION OF 7.4 MILLION
A. HIGH INVESTMENTS TOWARDS TECHONOLOGY
COUNTRY RATINGS Brazil Bulgaria
Political Stability 5 5
Legal System Upheld 3 4
Education of Workforce 3 5
Availability of Workforce 5 4
Flexible/Adaptable Country 5 4
Economic Resilience 5 3
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BRAZIL – ECONOMIC
1. OPERATES AN EFFICIENT AND ADEQUATE ENERGY INFRASTRUCTURE
A. NECESSARY FOR MANUFACTURING
B. FUTURE ENERGY SUPPLY IS ENSURED
2. INCREASE IN EXPORT OF GOODS
3. GOVERNMENT SUBSIDIES FOR PRIVATE AND PUBLIC COMPANIES IS ON THE RISE
BULGARIA – ECONOMIC
1. GROWTH IN GDP
2. INTELLECTUAL PROPERTY RIGHTS ARE ENFORCED
3. GLOBAL BUSINESS STRATEGIES ARE SUPPORTED BY HIGH PRODUCTIVITY
A. SKILLED WORKFORCE
4. COMPETITIVE TAX STRUCTURE AND EFFECTIVE LEGAL STRUCTURE
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POLITICAL, LEGAL, ECONOMIC, AND SOCIAL ANALYSIS IN EACH COUNTRY
BRAZIL – POLITICAL, LEGAL, AND SOCIAL14
1. Brazil has become an established country that possesses a low political, legal and social risk. a. Open trading nation that gives the same protection for foreign investments as it does to its citizens.15
2. Brazil’s government continues to stabilize, and bureaucracy will not hinder the operation of a business. 3. Brazil has a Large Population of 197 million.
a. Primes country for manufacturing – with a large segment of unemployed, as well as lower wages.
BULGARIA – POLITICAL, LEGAL, AND SOCIAL16
1. Bulgaria is a well-‐established country that possesses a low political, legal and social risk. 2. Bulgaria has a stable government with strong relations with the UN and NATO 3. Bulgaria has a smaller Population of 7.4 million.
a. High investments towards technology – government subsidies are on the rise for technological projects. b. Strength in power engineering.
14 IMD – Brazil 15 Brazil – Strengthen its Economic Backbone 16 IMD – Bulgaria
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CURRENT INTERNATIONAL CORPORATE STRATEGY
BRAZIL
1. NO CURRENT OPERATIONS IN BRAZIL
2. FIRST LOCATION WITHIN SOUTH AMERICA
3. BRAZIL IS A GROWING MANUFACTURING COUNTRY
4. IDEAL LOCATION/POSITION FOR BEACH HEAD
BULGARIA
1. DOES NOT CURRENTLY OPERATE IN BULGARIA
2. VENDORS OF FAIRCHILD ARE EXPANDING INTO BULGARIA
3. IDEAL FOR DESIGN AND ENGINEERING LOCATION
4. OPERATING COSTS WOULD BE LOWER THAN MOST EU NATIONS.
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ASSESSMENT OF GLOBAL CAPABILITIES
BRAZILIAN VS BULGARIAN MARKET ASSESSMENT
1. EMERGING MARKETS
2. LOW POLITICAL BARRIERS TO ENTRY
3. TECHNOLOGY SECTORS ARE GROWING
4. PAYOFF FROM GLOBALIZATION HIGH: LOCAL ADAPTATION LOW
MANAGING PEOPLE AND BUSINESS UNITS ACROSS BOUNDARIES
1. ENTRY MODE
2. GROWTH MARKET
3. EXPORTS TO CHINA
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ASSESSMENT OF GLOBAL CAPABILITIES
BRAZILIAN VS BULGARIAN MARKET ASSESSMENT
1. Low Political Barriers for Entry Into Bulgaria and Brazil
2. Large Electronic Manufacturing Facilities Moving Into Brazil
3. Large Utility Infrastructure Projects Underway in Brazil
4. Brazils Industry Growth More focused on Technology Manufacturing
MANAGING PEOPLE AND BUSINESS UNITS ACROSS BOUNDARIES
1. ENTRY MODE
a. Greenfield Approach into Brazil Allows Full Control of Assets and Direction
b. Upfront Initial Investment into Facility Enhances Long-‐Term Outcome
c. Rapid Entry into Market to Establish Distribution/Vendor Relationships
d. Become Largest Semiconductor Supplier in South America
2. GROWTH MARKET
a. Need for Semiconductors Rises Alongside Demand for Electronics
b. Need from Innovations Derived From Industry Globalization
3. EXPORTS TO CHINA
a. Need for China to Outsource Labor from Brazil and geographic Location makes Brazil prime target
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ASSESSMENT OF PRODUCTS USED IN GLOBAL STRATEGY
1. No or low local adaptation necessary 2. High payoffs in Brazil, moderate in Bulgaria
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FIT WITH THE COMPANY’S STRATEGY
GLOBAL PRODUCT STRATEGIES
1. MOST SEMICONDUCTORS ARE SOLD TO MANUFACTURERS 2. LOW COST OF LABOR 3. INCREASED DEMAND FOR ELECTRONICS
GLOBAL PRODUCTS
1. Brazil is increasingly becoming a manufacturing country, which will cause demand for semiconductors to increase. Semiconductors are a global product, needed by everyone, and are created the same for every market.1 (Fig 1) 2. Brazil has the 6th largest workforce that consists of a balance between low-‐cost labor as well as skilled workers.2 3. Semiconductors are predicted to grow at an average of 5.7% through 2017. (Fig 2) Rapid growth is expected in developing countries for automobiles, solar equipment, household appliances, healthcare, computers and mobile devices, all requiring semiconductors.3
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BETTER-‐OFF TEST APPLICATION OF THE BETTER-‐OFF TEST
1. REPLICATE EXISTING INTERNATIONAL STRATEGY
a. SUPPLY-‐SIDE SCOPE ECONOMY
2. VERTICAL INTEGRATION STRATEGY
3. COMPETITIVE ADVANTAGE LINKED TO INTERNAL DEVELOPMENT
OWNERSHIP TEST APPLICATION OF THE OWNERSHIP TEST
1. GREENFIELD ENTRY
2. ACQUISITION STRATEGY
3. CONTROL DISSEMINTATION OF R&D COMPETITIVE ADVANTAGE
4. SYNERGY TYPE
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BETTER-‐OFF TEST APPLICATION OF THE BETTER-‐OFF TEST
1. Fairchild should replicate its experience expanding into production in China when looking into expanding into Brazil.
2. Brazil’s emerging technology market will allow for significant cost savings when utilizing the existing technologically trained population.
3. Fairchild can continue R&D in “green” focused power management which represents one of their strongest current competitive advantages.
OWNERSHIP TEST APPLICATION OF THE OWNERSHIP TEST
1. Should Fairchild decide to enter into Brazil or Bulgaria it would be ideal to establish their own facilities (Greenfield) or acquire outright existing firms.
2. Possibility to mimic Chinese expansion through acquisition of firms with local experience such as FreeScale’s manufacturing facility.
3. “Green” power management represents Fairchild’s competitive advantage, this hard resource is would be difficult to control if Fairchild entered into a joint venture or alliance situation with an existing firm.
4. Some JV opportunity exists in working with CEITEC and establishing a reciprocal synergy relationship.
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RECOMMENDATIONS FOR CHANGE
BRAZIL
• Brazil Becoming Ideal Manufacturing Destination o Central geographic location between the US and Asia o Cheap labor and land costs o Increase in FDI by Multinational firms o Increase in government’s human capital investing
1. Appealing for Multinational Manufactures looking to expand 2. Incentive to innovative is greater in emerging economies 3. Cultural diversity and global competiveness 4. Makes Brazil an ideal candidate for Fairchild
BULGARIA
• Multinationals are influencing economy by increasing FDI o Higher education degrees in engineering o Labor force is highly skilled with low wages o Membership in EU reduces economic risks o Government still taking bribes
1. Lower wages then most EU partners 2. Local and national Governments still trying to unite
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APPENDIX 2
Catalogue of Activities
Manufacturing compliance with RoHS industry environmental requirements
Primary Activities
Support Activities
Inbound Logistics
Operations Outbound Logistics
Marketing & Sales
Service
Firm Infrastructure
HR Mgmt.
Technology Development
Procurement
Highly directed sales teams
Just-in-time delivery
Design enhancements and product differentiation Significant R&D expenses
Product Design & Manufacturing: Acquisition of Intersil / R&D costs represent 9.7% of Sales in 2011 /
Raw materials & supplies obtained from wide range of sources using vendor-managed inventory and just-in-time
delivery
small, highly focused, direct sales force for all of our businesses
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APPENDIX 3
GENERAL COUNTRY ATTRIBUTES
17 CIA World Factbook 18 XE.com retrieved on 8/5/2012 19 Corruptions Perception Index
Brazil Bulgaria United States
Population17 205,716,890
7,037,935
313,847,465
US$1 (As of 8/5/2012)18 2.03 1.58 1.00 Local Currency1 Real Leva Dollar GDP (in trillions)1 2.324 .1023 15.29 % Real GDP Growth1 2.7% 1.7% 1.7% GDP per capita1 11,900 13,800 49,000 % GDP in Industry Sectors1 27.5% 30.6% 19.2% Unemployment Rates1 6% 9.6% 9% % Industrial Prod. Growth Rate1 0.3% 5.9% 4.1% Exports ($ in billions)1 250.8 26.08 1511 Imports ($ in billions)1 219.6 28.39 2314 Corruption Perception Index19 (Higher is better)
3.8 3.3 7.1
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Fig 1. Major Market Segments
Market Segment Share
Manufacturers and assemblers 85.0% Distributors 15.0%
IBIS World
Fig 2. Revenue Growth of Semiconductors
Year Revenue $ Million Growth %
2012 676,020.1 2013 713,121.3 5.5 2014 755,192.1 5.9 2015 796,005.7 5.4 2016 841,158.2 5.7 2017 891,174.5 5.9 2018 946,648.6 6.2