Intel Announces New Restructuring Initiative
Silicon Valley has been so successful in cultivating a mystique around technology that it’s easy to forget that most vendors are in the manufacturing business. That is, they make stuff, mostly by assembling commercial off the shelf (COTS) components, such as microprocessors, memory, motherboards and displays made by yet other manufacturers.
As a result, the hardware portion of the IT industry is sensitive to the same yield/volume/margin pressures that impact other manufacturers. If acceptable quality (yield) products can’t be made in workable numbers (volume) and sold profitably (margin), the larger structure wobbles. If that situation persists or worsens, the vendor risks injury or even collapse.
Though this dynamic is common across the IT industry, its effects are anything but equal. Consumer-centric products tend to be less stable since sales depend on often unpredictable customer preferences. But that’s balanced out by such products being generally cheaper and easier to build.
In contrast, making business-focused products is typically more complex and demanding but is also considerably more profitable. So it’s quite common for large scale component manufacturers to develop product lines that span a range of consumer and business applications.
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NOTE: This column was originally published in the Pund-IT Review.