1. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 1 Integrative Project in Modern Production Methods (IE285e) Lecture #3 12 September, 2005

2. Integrative Project in Modern Production Methods, IE285e 2 Topic: World Industrial development trends, how Armenia could benefit from them: the rapid development of high tech in the world; need for outsourcing of mature technologies from the developed countries; etc.

3. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 3 World Industrial development trends Increased competitiveness Narrow specialization of specialists and companies, both in technology and business, e.g. emerging of high tech insurance companies, etc. Separation and outsourcing of the production and businesses

4. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 4 World Industrial development trends While in developing countries: businesses are taking advantage of inexpensive workforce; In developed countries: businesses are taking advantage of established infrastructure and business environment, – advanced technologies

5. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 5 World Industrial development trends The Technologies develop very fast in the world. Moore's law: In computer business the performance (number of transistors on a processor chip) is doubled each 18 months!

6. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 6 World Industrial development trends

7. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 7 World Technological Hierarchy “High End” technologies are the most advanced and scientifically intensive technologies. “Low End” technologies or “Mature” technologies are still needed.

8. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 8 Hierarchy in Chip Manufacturing In semiconductor industry technologies are described by the width of the narrowest element, e.g. of a transistor, that is possible to achive on a semiconductor substrate. In parallel to the decrease in the smallest element size, the size of a semiconductor substrate, e.g. a silicon wafer is increasing.

9. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 9 Hierarchy in Chip Manufacturing 5 micron technology, up to 2 inch – until 1980 1 micron technology, up to 3 inch – 1990 0.65 micron technology, up to 5 inch – 1994 0.35 micron technology, up to 6 inch – 1996 0.27 micron technology, up to 8 inch – 1998 0.17 micron technology, start design of 12 inch – 2000 0.1 micron technology, working on 12 inch – 2002 Sub 0.1 micron technology is on its way now.

10. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 10 Hierarchy in Chip Manufacturing

11. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 11 Hierarchy in Chip Manufacturing

12. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 12 Hierarchy in Chip Manufacturing However, Moore predicts that transistor miniaturization will reach physical limits around the year 2017.

13. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 13 Hierarchy in Chip Manufacturing Year of introduction# of transistors in the processor 400419712,250 800819722,500 808019745,000 8086197829,000 2861982120,000 386™ processor1985275,000 486™ DX processor19891,180,000 Pentium® processor19933,100,000 Pentium II processor19977,500,000 Pentium III processor199924,000,000 Pentium 4 processor200042,000,000

14. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 14 World Technological Hierarchy, an example E.g. Toyota Camry Solara contains:E.g. Toyota Camry Solara contains: 2 Pentium processors2 Pentium processors 3 processors 486 series level3 processors 486 series level 12 processors 386 series level12 processors 386 series level More than 40 lower end processorsMore than 40 lower end processors

15. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 15 Volumes of Hi-Tech production Hi End Low End

16. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 16 Outsourcing! The same hierarchy applies in all technology related markets. However different areas have different rates of increase. The market for mature manufacturing is huge! In many cases this market is still increasing! Example of Digital vs. Film cameras.

17. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 17 Product Life Cycle Two aspect of “product life cycle” notion: 1. Birth and Death 2. Life Cycle that starts from the raw material acquisition and ends with the disposal - from energy and materials consumption to the long-run effect on health, environment and society.

18. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 18 Product Life Cycle 1.

19. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 19 Product Life Cycle After a period of development product is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilizes and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn.

20. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 20 PLC stages Introduction: - The need for immediate profit is not a pressure. The product is promoted to create awareness. - If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution.

21. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 21 PLC stages Growth: Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilize.

22. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 22 PLC stages Maturity: Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilize. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media.

23. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 23 PLC stages Decline: - At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting. - In some cases here there might be a considerable value adding capability in niche markets. Example - high end audio.

24. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 24 PLC stages Withdrawal: Only rare exotic users could be clients here.

25. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 25 Problems with Product Life Cycle In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously The decisions of marketers can change the stage, for example from maturity to decline by price- cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Why?

26. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 26 Hierarchy in Chip Manufacturing

27. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 27 Hierarchy in Chip Manufacturing

28. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 28 Outsourcing! All advanced brand name companies try to concentrate on introduction and growth - high end manufacturing. They want to delegate the lower end mature manufacturing to other companies. The best countries for outsourcing are the developing countries, such as: Malaysia, Taiwan, Singapore, Indonesia, Hong Kong, Korea. Recently also: China, Puerto Rico, Mexico.

29. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 29 Important Industry Areas Which industries are attractive to get in, I.e. to start a manufacturing operation? ANY, however the following two are special: Introduction (Nokia example) Maturity

30. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 30 Renewables: SOLAR Solar Energy deliveres around 1700 kWh annually to any square meter of Armenia’s surface. A square with a base equal to 6 km will provide all needed power for the country. Is ecologically clean, but needs technological advances for decreasing the costs. Currently around $6000/kW installed for photovoltaics (PV).

31. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 31 Renewables: SOLAR Solar hot water costs are around $600/kW! Solar hot water may give a solution to more than 50% of the energy needs. In summer it will give up to 80% of consumed energy, in winter … All solar options have strong seasonal pattern

32. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 32 Renewables: SOLAR Monthly Solar Energy Flow

33. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 33 Yearly dynamics of solar energy flow

34. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 34 Growth in World PV Capacities

35. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 35 Growth in Companies in Different Countries

36. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 36 Growth rate in Japan

37. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 37 PV Industry Growth rates World: 43% in 2003 57% in 2005 Japan: 45% in 2003 66% in 2005 World: 736 MW 1195 MW Japan: 363 MW 602 MW

38. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 38 Business Outsourcing Diagram Brand Name Company, e.g. Philips (Advanced Technologies) Company in Developing country (mature technologies)  Outsourced business  Creation of a subsidiary Technology Transfer (mature technologies) Insurance  Insurance Company, e.g. Comdisco USED EQUIPMENT MARKET  Materials supplier, e.g. Applied Materials

39. 12 September, 2005Integrative Project in Modern Production Methods, IE285e 39 Fast Growing Areas Nokia Example. Internet Renewable Energy Sources Fuel Cells Nanotechnologies Biotechnologies … Find from the web 3 fast growing industries. Explain. Show volumes if possible. Write a one page essay about one of them.