a. Provide an overview of the main strengths and weaknesses of each possible pla

Question

a. Provide an overview of the main strengths and weaknesses of each possible plant location options. According to Microsom characteristics and long-term strategy, which location will you choose? Why?

Case Microsom Brian Krzanich, Microsom general manager of Assembly Test (AT), looked through his deck of slides one more time. It was March 2015, and in a few days, he would present the AT team's proposal for the siting of its next AT factory to Microsom's board. The new facility would be Microsom's largest AT plant to date, doubling the size of any existing AT plant and providing the company with more efficient capacity. In 2015, industry average costs to build a new AT factory ran about $80 million with annual operating costs of between $150 and $300 million. He thought back to the fall of 2011 when Microsom's global site selection team had first started gathering data on possible sites for a new AT plant. There were a host of considerations implicated in this proposal, with operational and strategic dynamics as well as national and international relationships at stake In their preliminary study of possible sites, Krzanich and his team had focused primarily on Asian and South East Asian locations, given that between 2012 and 2015, the total cost of operations in these countries were still the lowest in the world, and these markets represented important and growing opportunities for Microsom. While U.S. regulations had prohibited the construction of a semiconductor fab in China, given Microsomlectual property (IP) concerns, Microsom had operated an AT plant in Shanghai for almost a decade with a second AT plant opened in Chengdu in 2013; the firm also had several university research and innovation labs in China. Would China be the best place for a third AT plant? India had also surfaced to the top of the short list. Microsom's chairman was knowledgeable about the country and its leadership, and some felt the time might be right to build a plant in India. Several other Asian countries also presented viable sites, and locations in Latin America and the Middle East were also being considered Several years of data collection, analysis, site visits, and on-the-ground negotiations lay behind the short list. In just a few days, Krzanich was scheduled to travel to Chennai, India, one of the potential sites, with members from Microsom's Finance and Enterprise group to pursue additional negotiations with local officials. Krzanich wanted to be sure he had the board's approval before investing time in the next stage of negotiations. What would the board decide? The Semiconductor and Microprocessor Industry at glance In 2015, the semiconductor industry generated approximately $226 billion inr about $17.5 billion of which was generated in the U.S. The industry was expected to hit over $300 billion by 2008, driven primarily by demand in consumer products such as personal computers, digital cameras, televisions and cell phones. The semiconductor industry was fragmented, with the worldwide companie (Microsom, Renesas Technology, Samsung and Texas Instruments or TI) controlling about 30% of production. The industry produced silicon-based electronic circuits for use in computers and othe microproc accounted for over 90% of global sales of microprocessor production lectronic devices. One of the major uses of these semiconductors wa ors. In 2015, the top two companies, Microsom and Advanced De (AMD) The microprocessor market had been historically dominated by Microsom, which held a market share in excess of 80%. The firm's continuously high-paced innovation and regular introduction of new (faster, better, etc.) microchips quickly rendered competitors' offerings obsolete. Microsom's

Explanation / Answer

China-Dalian:

Strengths:

Cost of operations being lowest and opportunities in the form of growing market

Tax breaks from the govt.

Already 2 plants in china thereby we already have some country dynamics knowledge and higher management in China

Several university research and innovation labs in china

Weaknesses:

IP Issues is a major weakness or even a threat to the firm

Lot of competition due to multiple clients like Microsom

India-Chennai:

Strengths:

Strong political and committed leadership

Growing middle class market as end consumers

English speaking talent, Low cost talent, skilled engineering talent

Weaknesses:

Complex regulations, tax structures

Multiple layers of government

Quality and reliable power issues are so threating that Microsom has to ensure their captive plants

Thialand- Amata Industrial park:

Strengths:

Educated workforce

Tax incentives

Weaknesses:

Poor Road, Rail infrastructure

Unstable government

Prone to natural disasters

Vietnam – Ho Chi Minh City

Strengths:

High growth rate in the South-east Asian region

Young and underdeveloped but cheap workforce

Higher work dedication to offset their underdeveloped skills

Weaknesses:

Lacking infrastructure

Middle East:

Weaknesses:

Political instability

Migrant labor

Higher costs than Asia

We would go for China because of its’ proven expertise in manufacturing. Also since we have done great by already having a team in China and the management expertise. In terms of cost all the south Asian regions would largely fare the same. Also in terms of political stability China has a good track record. It has also not faced many natural calamity as compared to other regions.

We can tackle the IP issues by creating strict policies and obtaining government assurances (if possible in the form of huge penalties) so that IP infringement risk is minimal.

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