report introduction to micro economics topic monopoly in united states

Expanding around the world In the 1970s, Intel products such as random access memory DRAM, SRAM and read-only memory ROM dominated the world market.. The first microprocessor that Intel

INTERNATIONAL UNIVERSITY-HCMUNIVERSITY BUSINESS ADMINISTRATION DEPARTMENT

REPORT INTRODUCTION TO MICRO ECONOMICS

SEM I (2020-2021)

Topic: MONOPOLY IN UNITED STATES

I History begin

Intel Corporation was founded on July 18, 1968, at that time an integrated corporation in electronics, manufactured in Santa Clara, California, USA by chemist and physicist Gordon

E Moore and Robert Noyce, after they left the company Fairchild Semiconductor

Gordon Moore (1929) and Robert Noyce (1927-1990) are the two founders of Intel

Corporation Noyce is the general manager and Moore is the director of the research and development department of the semiconductor component maker Fairchild Semiconductor But Fairchild Semiconductor is under the control of Fairchild Camera & Instrument Corporation

The two men, along with his assistant, Andrew Grove, disagreed with the group's management, so decided to leave Fairchild Semiconductor to set up their own company in

1968 Both of them before coming to contribute to the establishment of the company founding Fairchild Semiconductor also co-founded the semiconductor company Shockley Semiconductor

Therefore, the two men are very confident that they can continue to build another company

Each contributed $ 250,000 and called for an additional $ 2.5 million in investment to form

a company called NM Electronics At first, the two men planned to name their company

"Moore Noyce” (their names)

However, this name sounds the same as "more noise" For an electronics company, this name is actually not good Then, the two decided to take the initials of 2 from Integrated

Electronics (integrated electronics) to become from Intel But the name is owned - it's the

name of a hotel group Therefore, the two men had to buy back the copyright of the name at the end of 1968 Since then, the name Intel began to appear

Instead of making transistor-shaped bulbs to compete with the old company, Intel worked

on making electronic chips for computers In 1971, Intel was successful in selling chips That same year, Intel scientists developed a new chip called the microprocessor (microprocessor) with programmable capabilities for computation Since then, the microprocessor has become the "brain" of the computer Intel microprocessors have become smaller, faster, and cheaper over the past three decades and dominate the world market

Officially launched in 1971, the 4004 microprocessor chip became a premise, allowing equipment manufacturers to produce smarter PCs, elevators, digital cameras, dialers, and cell phones It also helped bring Intel, then a three-year-old microprocessor maker, into major corporations around the world

Il Expanding around the world

In the 1970s, Intel products such as random access memory (DRAM, SRAM) and read-only memory (ROM) dominated the world market The first microprocessor that Intel hit the world market on November 15, 1971 was the Intel 4004 microprocessor, although at that time Intel's main activity was not to manufacture microprocessors It wasn’t until the mid- 1980s that Intel started to focus on microprocessors In 1972, Intel began expanding production outside the US with a factory built in Penang, Malaysia

In 1974, Intel launched the Intel 8080 microprocessor, according to many people this is actually a multi-purpose processor, it can replace 4,500 transistors and the speed is 10 times faster than the "elder" of the IT After that, Intel 8080 appeared in many electronic products such as traffic lights, cash registers

In 1975, the Intel 8080 microprocessor was first used in a personal computer called the Altair 8800, attracting thousands of buyers

HI Recent development

In 2004, Intel invested over $ 4.8 billion in research and development Intel's recent activities have focused on promoting and developing the use of wireless networking technology Recently, the company released a series of new computer processors based on Intel XScale® technology designed to connect to broadband communications networks in high-end PDAs and mobile phones

These processors are designed to meet the requirements of portable portable devices: multimedia, multimedia, security, low power consumption while still pushing enough computing power to provide Take pictures, record movies, play back video with image quality like a real DVD player

Intel recently announced the arrival of the first WiMAX product to provide carriers and carriers with devices capable of distributing next-generation wireless broadband networks worldwide gender

WiMAX (which stands for Worldwide Interoperability for Microwave Access) is a standard wireless technology that provides high-speed, end-to-end broadband connectivity for home, corporate and wireless mobile networks This is a high speed and low cost technology The first application of WiMAX technology allows to bring broadband Internet technology

to remote places where there is no cable or ADSL at present As a standard technology, WiMAX is expected to bring convenience and economic efficiency to wireless Internet users

More recently, Intel tried again on the UK market by introducing WiMAX technology into science museums in Wroughton It is a large 545 acres dedicated to the collection of large objects in 11 old aircraft WiMAX allows museum curators in different places to communicate with each other quickly so that information and data about the museum antiques can be updated

Today, 90% of computers worldwide use Intel chips Currently, Intel has a total of more than 90,000 employees worldwide with 15 production facilities globally, including 7

facilities in the US and 8 overseas facilities Gn China, Costa Rica, Ireland, Israel, Malaysia

and the Philippines) Revenue of Intel in 2005 is estimated at over 38 billion USD Intel's manufacturing facilities fall into two categories: the fabrication facility (fab) and the assembly and test facility Manufacturing facilities for making silicon, chips, and memory components

After the products are manufactured in the manufacturing facilities it will be sent to the assembly facilities for microprocessor integration and commissioning Due to the high requirements of making chips (using a variety of chemicals, state-of-the-art equipment, high level of expertise) fab fab have much higher construction investment than assembly facilities On average, one fab has an investment of about $ 2 billion

IV Achievements

Intel was founded in 1968, with only 12 employees and operates in a rental building on a quiet corner of California with revenues of $ 2,672 / year Today, the company has 80,000 employees with assets of nearly 175 billion USD In the first quarter of 2005, Intel reported profits of $ 2.2 billion - a 25% increase over the same period in 2003 Intel's leading position can be attributed to a series of scientific breakthroughs and continuous development over time The first opportunity came in 1971 with the 4004 microprocessor when it was approached by Japanese computer manufacturers Ten years later, IBM chose the company's 8088 computer processor for use in its first line of PCs In 1993, Intel introduced the first Pentium® computer processor to the market Since then, almost every year the company has continued to launch its own new products - a strategy not seen in any other company Intel founder Gordon Moore once said, 'If automobile technology were to evolve as fast as semiconductor technology, a Rolls-Royce could run 500 thousand miles with only a gallon of fuel and it was so cheap that it could cost a lot of money Buying a new Rolls-Royce is less than depositing it in the yard ' Intel® Centrino ™ mobile technology is a big new achievement for Intel in bringing wireless networking technology

to the public Today, Intel is one of the pioneers in the Wi-Fi revolution

- Organization structure

—¬ằ.-=

Director

John Donahoe

Director

Frank Yeary

Chairman of the Board

Jane Shaw +

- Intel Architecture Group —i-

David Perimutter

Director

Merard T

cEO

Intel Architecture Group

Director

Douglas Melamed Director

hariene Barshefsky

Director

James Plummer

——

Director

- Business strategy

At the beginning, only operating in the US, Intel implemented an international business strategy, standardized production and export Then expanding globally, a global strategy to the present day (because of product specificity)

In 2009, Intel formed a strategic alliance with Nokia According to Intel, the deal 1s part

of its strategy of growing beyond the traditional PC and server markets and towards mobile devices and other systems

Alcatel and America’s largest chip maker have just announced an alliance to promote the WiMAX (or 802.16) standard - a broadband standard designed to compete with GSM and future UMTS mobile protocols It is assumed that the technology will

compete with ADSL, cable, and UMTS (Universal Mobile Telecommunications

Systems) or third-generation telephony standards (2004)

Marketing

1 Product strategy

+ Product

Intel is a special, unique and most important business that is holding and always at the forefront of the most valuable product in the world of the digital age, a product that is considered the "brain" side in a computer, is the power behind every popular digital device and service today Intel products are highly standardized to satisfy the needs of customers around the world Intel has invested billions of dollars to make more processors in a day than competitors can make in a year

As aresult, Intel products are in more than half of the products on the list of the world's fastest supercomputers (According to the list of the 500 fastest supercomputer systems

in the world)

Intel's supercomputing platforms are pivotal in a number of research areas, from improving space exploration safety to forecasting climate conditions across the world

"More mainstream" industries such as financial services and healthcare are also using systems that use Intel products to achieve faster and more accurate results

In addition, Intel also has a build to order program for notebooks in many countries to meet the growing demand for notebooks When the customer requests to change the processing speed, memory capacity, storage capacity, wireless network card of the machine, it will be met in any country in the world thanks to standardized machine components Therefore, Intel is committed to supporting the worldwide warranty system

+ Trademarks

Intel's branding approach shows how close a B2B (Business to business) product manufacturer can reach an end customer Intel has demonstrated that through a process

of awakening customer recognition, an electronic component still has a very important voice Combined with new branding approaches such as: collaborative marketing,

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VI

fostering tied relationships, developing global initiatives for the common good, Intel can build a new dimension beyond what a microprocessor can bring to human life According to a 2005 report by Interbrand / BusinessWeek, a B2B brand valuation research program, Intel is one of the top 3 most economically valuable brands among B2B businesses The value of the Intel brand is 35.6 billion USD, accounting for a very large proportion of the total assets of this corporation Intel's own brands are estimated

to contribute about $ 2 billion annually to Intel's market value It is the brand, not the product, that sets the economic value and differentiates Intel from its competitors Intel multinational corporation has demonstrated its value in front of customers, giving customers exactly what they want A strong brand name and a well-positioned strategy have effectively influenced customers’ buying decisions now and in the future

2 Distribution

Currently, Intel products are supplied to 2 main customers, nearly 80% for original material manufacturers and over 20% for distribution channels Intel resellers are currently present in 165 countries with 225,000 members, including 255 wholesale distributors, 1,100 warehouses Intel dealer systems currently account for between 20% and 30% of Intel's total processor sales It is the distribution channel system that helps

to spread Intel products to every corner of the global market Therefore, the development of indigenous distribution systems, especially in the Asian market, has been focused on over the past 10 years by Intel

What is a monopoly

A firm is a monopoly if it is the sole seller of its product and if its product does not have close substitutes A monopoly arises when:

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+

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A single firm owns a key resource;

The government gives a firm the exclusive right to produce a good;

A single firm can supply the entire market at a lower cost than many firms could The fundamental cause of monopoly is barriers to entry A monopoly remains the only seller in its market because other firms cannot enter the market and compete with it

Barriers to entry, in turn, have various sources, include:

+

+

+

Let’

Monopoly resources

Government regulation: The government gives a single firm the exclusive right to produce some good or service

The production process: A single firm can produce output at a lower cost than can a larger number of producers

s briefly analyze Intel business; then, find out how it gained monopoly power

VHI Intel Business Analysis

According to Bloomberg, Intel’s microprocessors are used in over 80% of global PCs sold each year, and the company has nearly 100% of the market for servers that are built on PC chips How has Intel amassed such a dominant share in these huge markets? Simply put, Intel has consistently invested to maintain the most advanced manufacturing process in the world, enabling it to deliver the best performance and value proposition to customers Developing and manufacturing microprocessors is extremely complex and capital intensive The manufacturing process requires hundreds of steps in “cleanrooms,” which, according to Intel, contain air which is 1,000 times cleaner than a hospital’s operation theater

Building a single plant costs roughly $5 billion today and will only increase in cost going forward Research and development costs are also astronomical in the semiconductor manufacturing industry Intel spent more than $12 billion on R&D in 2015, representing about 22% of its total sales To maintain its technological lead, Intel must constantly invest

in cutting-edge processes to improve the performance and value of its chips Intel expects capital spending to total $10 billion in 2016, and Intel has spent more than $160 billion on R&D and capital expenditures since 2005

Not surprisingly, there are very high barriers to entry in this industry The cost of developing valuable intellectual property and building out competitive production facilities

is enormous, especially when the bulk of customers are already dependent on Intel’s chips Intel’s investments have allowed it to consistently introduce the next generation of process technology every two to three years, improving the performance of its chips at a breakneck pace that competitors cannot afford to keep up with

Intel is also one of the few semiconductor companies that manufacture products using their own facilities (most semiconductor businesses design their chips and outsource manufacturing to save costs and generate more predictable cash flow)

As a result of its scale and vertical integration, Intel exerts more control over its performance optimization and can introduce new products to the market at a faster pace With costs to build leading-edge manufacturing facilities rising (it becomes increasingly difficult to build smaller chips), fewer companies are able to compete with Intel’s advancements in performance, energy efficiency, and cost

In addition to spending on manufacturing plants and R&D, competitors and new entrants must contend with the strong reputation of Intel’s brand, which recently ranked as the world’s 14th most valuable brand

Altogether, Intel’s economies of scale, leading technology portfolio, and cutting-edge manufacturing processes have created a powerful ecosystem with high switching costs for customers Intel’s architecture has been refined for decades, and the company has funneled well over $100 billion dollars to continue improving it

As the incumbent technology in PCs and data centers, Intel’s processors have effectively locked up customers For example, when Dell develops a new computer, there is no compelling incentive to switch to a different processor family as long as the previous version worked and the next one offered by Intel is even better Many legacy applications run on Intel’s technology, and switching would be costly

Intel’s leading PC technologies have also provided the foundation for the company’s expansion into the data center and “Internet of Things” markets

Intel’s PC business provides incredible scale with about $35 billion of revenue and possesses substantial intellectual property that translates over into other electronics such as servers This gives Intel an advantage once again over smaller players with inferior manufacturing processes

However, it doesn’t guarantee Intel’s success in dominating these markets either One move Intel recently made to continue strengthening its position in data centers and Internet of Things devices was its acquisition of Altera (ALTR) for $16.7 billion in 2015

This deal helped Intel gain exposure to field-programmable gate arrays (FGPAs), a more flexible type of semiconductor chip that could account for as much as a third of the processors in all data centers by 2020 By purchasing Altera, Intel can stay in front of this potential development and deliver customizable, integrated products (Intel Corporation: A Technology Monopoly Paying Safe, Growing Dividends (INTC), 2021)

VHHI How Intel gained monopoly power in the market for PC chips

1 Legal Barriers

As Intel entered the semiconductor chip manufacturing industry; the founders and executive board were filled with ideas as to how they could become the best in their market With their innovative ideas, Intel decided to receive patents on their products to make their technology and ideas untouchable to other competing companies This allowed Intel to have an exclusive right over their memory chips and semiconductors making it difficult for other companies to compete as well as giving Intel significant monopoly profit

There are not many companies that have patents that interfere with the ideas put forth

by Intel in an attempt to be patented for their own brand Although Intel had many

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patents, they were faced with many lawsuits from their main competitor AMD - Advanced Micro Devices, as it was to believe that their patents had infringed on some

of their ideas This led to Intel and AMD coming to a cross-licensing agreement in

1976 allowing both companies to use the others technological innovations without charge

2 Economies of scale

Intel started off as a very small company with patents on its new technological ideas for semiconductors and processors In 1971, Intel created its first microprocessor chip which later became its primary business idea as a result of PC’s success During the 1990’s Intel was aggressive in their innovation towards the chips and became the dominant supplier of all PC computers Intel and PC had a ten-year deal in place to ensure the brand name of Intel would grow being PC’s number one supplier As a result

of this partnership (which is still going on), Apple decided that they would need the new x86 processor from Intel to power all their Macintosh computers

This relationship between Apple and PC with Intel made it very difficult for other companies with new ideas to enter the industry as Intel supplied the 2 largest computer manufacturers with semiconductor chips As well, the production of these chips are a very expensive task and new companies with low budgets have a tough time competing

in the market with Intel and other mid to large sized companies

3 Pricing and strategic barriers

Intel has very unique price and strategic barriers when it comes to the way they are able

to “create” barriers to ensure they stay a monopolistic company Intel has been in constant lawsuits with many companies about their patent infringement on their computer architecture and other technologies In an attempt to save the business, Intel sued the companies back for using their patented ideas Both companies would drop the lawsuits and Intel was given the right to use the current and future patented idea As well, they would arrange agreements with competing companies to allow a cross- licensing to ensure both companies would profit from the innovative idea

Intel has been able to keep their relationship with PC and Apple to maintain their monopoly power Even though they have been sued by many rival companies; Intel has branded their name into being a household company for computer chips (Power, Power and profile, 2021)

IX Policies implemented by United States to control monopoly — THE ANTITRUST LAWS