Abstract
An ecosystem can grow only when symbiont firms make the necessary investments. To ensure the smooth expansion of the ecosystem, platform firms willingly collaborate, and sometimes intentionally compete, with symbiont firms. Entry into peripheral markets is the strategic tool that they use for this purpose. This chapter examines Intel Corporation’s entry into peripheral markets to promote the adoption of Pentium CPUs in the 1990s. An ecosystem can grow only when symbiont firms make the necessary investments. To ensure the smooth expansion of the ecosystem, platform firms willingly collaborate, and sometimes intentionally compete, with symbiont firms. Entry into peripheral markets is the strategic tool that they use for this purpose. This chapter examines Intel Corporation’s entry into peripheral markets to promote the adoption of Pentium CPUs in the 1990s.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
As of 2007, it was not plausible that the car navigation system would be a platform component of the automobile. More recently, however, with the introduction of autonomous driving, digital maps have become an important platform of the ecosystem.
- 2.
The CPU, which stands for Central Processing Unit, is the primary semiconductor component that provides the computation capability of a personal computer.
- 3.
An x86 CPU is a CPU whose instruction set is compatible with the 8086. CPUs having instruction sets compatible with each other can run the same software and hardware.
- 4.
ODM stands for Original Design Manufacturing. Within the scope of their contracts, PC ODM firms not only perform manufacturing but also procure components and sometimes even design the PCs themselves. These Taiwanese ODM firms are described in Chap. 6.
- 5.
IBM and Compaq initially announced that they would not employ the Pentium. Compaq announced that it would adopt compatible CPUs provided by AMD for its strategically important Presario series.
- 6.
The ACE Consortium consisted of Microsoft, MIPS Computer Systems, Digital Equipment Corporation, the Santa Cruz Operation, Acer, Control Data Corporation, Kubota, NEC Corporation, NKK, Olivetti, Prime Computer, Pyramid Technology, Siemens, Silicon Graphics, Sony, Sumitomo, Tandem, Wang Laboratories and Zenith Data Systems.
- 7.
Traditionally, bus standards were formulated by PC suppliers as de facto standards. The AT bus standard, which was a major standard before the establishment of the PCI, is a good example. It first appeared in the IBM PC/AT personal computer released in 1984 (hence its name) and was defined solely by IBM, making it a de facto standard. For extension devices to be developed, IBM made the AT bus circuit diagram open but kept the signal access timing and other pieces of information confidential, which actually hindered compatibility among extension devices. In 1987, the Institute of Electrical and Electronics Engineers (IEEE) specified the mechanical and electrical properties and released the standard under the new name of ISA (Industry Standard Architecture) bus. However, the name did not catch on and the industry continued to use the expression AT bus.
- 8.
In many cases, the data rate of the local bus is the bottleneck of the processing capability of the CPU.
- 9.
In June 1995, PCI Rev 2.1, based on the clock frequency of 66Â MHz, was published, marking an increase in the signal pin numbers. PCI Rev 2.1 became the most widespread version of the Pentium CPU. PCI Rev 2.2 was released in December 1998, which coincided with the period of transition from Pentium II to Pentium III and the time when PCI-based devices were shifting to the 3.3Â V bus system. Hence, this revision took low electricity consumption into consideration.
- 10.
Another reason for the delayed diffusion of the Pentium CPU was the inferior performance of the preceding 486 CPU in terms of integer operations. Compatible CPU suppliers were launching improved 486-based CPUs and users could achieve higher performance by just upgrading their CPU rather than buying a new Pentium-based PC (http://ascii.jp/elem/000/000/915/915669/index-2.html, accessed 07 Feb 2017).
- 11.
The low profitability of chipset products was always a matter of serious concern to Intel. The chipset division, however, persuaded the management that, without high-performance chipsets, Intel’s high-speed CPUs would not be accepted in the market. The argument was convincing, yet the chipset division did not manage to secure the necessary budget and did all that it could to keep the business going, despite extremely low profitability. For example, the manufacturing of chipsets was outsourced to third-party fabs. Later, both in-house fabs and third-party fabs contributed to Intel’s chipset production (Burgelman 2002).
- 12.
The Pentium CPU had multiple versions. The first version, called P5, used the bipolar CMOS (BiCMOS) process and was thus a large, die-size product. The CMOS process was used in P54C and its follow-ons.
- 13.
The Taiwanese PC industry was established in 1983, when imitations of the newly launched IBM PC/XT started to be manufactured by Taiwanese makers. Since they had been producing imitations of the Apple II, it was only natural for these manufacturers to enter the market for IBM-compatible PCs. In 1984, however, IBM filed a lawsuit against the Taiwanese manufacturers for breaching the BIOS patent and, in 1985, it hunted down the guilty parties together with the Taiwanese government. The following year, IBM and the Taiwanese manufacturers reached a settlement. As time went by, some Taiwanese suppliers started manufacturing original-brand PCs and exporting them to Europe, while others became OEM firms for leading US brands, producing PCs and motherboards.
- 14.
In 1994, the export of motherboards from Taiwan amounted to about 30 million units, excluding those for Desktop PCs and Note PCs produced in Taiwan.
- 15.
The name of the product line was Zappa.
- 16.
Intel regularly entered peripheral markets and provided products at low prices. It did so in order to revitalize them thanks to its presence and enable the entire ecosystem to expand. This is why Intel’s market entries typically lasted only for a short while. Gawer and Henderson (2007) examined the 27 cases in which Intel planned to enter peripheral markets and found that the firm shared and licensed its patents when joining these markets. Sharing patents means allowing competitors to use one’s technology, which should have worked against Intel. However, if the purpose is to activate peripheral markets, then this is a reasonable strategy.
- 17.
For the Pentium II CPU generation, the north bridge was renamed the Media Control Hub (MCH) and the south bridge the IO Control Hub (ICH). The PCI bus was placed beneath the ICH chipset and the MCH and ICH were connected via a dedicated interface with proprietary specifications. This realignment made the area between the CPU and the chipset a complete black box.
- 18.
The specification document, Pentium Processor User’s Manual, Volume 3: Architecture and Programming Manual, Intel Corp., stipulated that developers had to enter into an NDA with and obtain the manual from Intel in order to access the information needed to achieve the full performance of the Pentium (such as the impact on CPU performance when multiple instruction sets were simultaneously executed). For compatible CPU manufacturers, designing a Pentium-compatible CPU became significantly more difficult than in the case of the 486, for which the necessary information was readily available.
- 19.
The data transfer capability of the USB standard was implemented at the semiconductor level and not at the OS level; in other words, the standard setters could have chosen a distributed-processing approach. In that case, the reliance of USB functionality on CPU performance would have been minimized, avoiding the need for users to acquire the latest high-performance CPU.
- 20.
The sales amounts of major DRAM manufacturers were aggregated by year. In some years, fewer than 20 firms were active in the market.
- 21.
The development of the Taiwanese DRAM industry took off when Infineon separated its semiconductor business from its main business in 2006 and founded Qimonda. The name of this spin-out contained the element Qi, coming from the Chinese language, which shows how seriously the firm took its collaboration with Chinese and Taiwanese semiconductor suppliers (PC Watch 2007). Qimonda ranked third in the market in 2007, but it went bankrupt in 2009 as a result of severe competition. Currently, the business operates as Qimonda Licensing and specializes is the licensing of semiconductor-related patents. Elpida ranked third in the market in 2008, but it had to file a bankruptcy-reorganization plan under the Corporation Reorganization Law in 2012, which was approved. The firm later became a subsidiary of Micron, a US firm. At present, the main players in the DRAM industry are Samsung Electronics and Hynix, based in South Korea, and the US DRAM provider Micron.
- 22.
Pin compatibility meant that the compatible CPU had exactly the same interface as the Intel CPU. If the Intel CPU was replaced with the compatible CPU, the motherboard performed just as originally designed.
- 23.
The average ratio of general administrative expenses to total sales between 1987 and 1990 was 7% for Compaq and 5% for Dell. In relation to marketing expenditure, the ratio was 12% for Compaq and 14% for Dell. In and after 1991, Compaq reported a combined figure for general administrative expenses and marketing expenditure; a comparison between the two firms has been impractical since.
- 24.
As of 2016, the RISC CPU was available in non-PC markets, especially in areas requiring high energy efficiency. Firms like ARM, SH and MIPS are still active players in this arena.
References
Burgelman RA (2002) Strategy is destiny: How strategy-making shapes a company’s future. Free Press, New York
Gawer A, Cusumano MA (2002) Platform leadership: How Intel, Microsoft, and Cisco drive industry innovation. Harvard Business School Press, Boston MA
Gawer A, Henderson R (2007) Platform owner entry and innovation in complementary markets: Evidence from Intel. J Econ Manag Strategy 16(1):1–34
Itami H (1995) Naze Mittsu no Gyakuten ha Okottanoka–Nihon no Handoutai Sangyou (Why the three reversals happened: Japan’s Semiconductor Industry). NTT Press, Tokyo (in Japanese)
Mizuhashi Y (2001) Denshi Rikkoku Taiwan no Jitsuzou (The reality of Taiwan as Electronic Nation). JETRO, Tokyo (in Japanese)
Nakane Y (2002a) Hanyou Buhin Shijou ni Henka DRAM deha Gappei Kyoutei ga Kaishou TFT ni EMS Oote Sannyuu (Changes in the electronic components market: Merger agreement dissolved at DRAM, Major EMS supplier entry into TFT). Nikkei Microdevices 58 (in Japanese)
Nakane Y (2002b) Taiwan Nanya to Doitsu Infinion Teikei no Igi to Taiwan DRAM Gyoukai Saihen (Meanings of partnership of Nanya and Infineon and Taiwanese DRAM industry restructuring). Tech-on, 08 May 2002, Nikkei BP. http://techon.nikkeibp.co.jp/members/01db/200205/1000296/. Accessed 26 Aug 2006 (in Japanese)
Nihon Kougyou Shinbun (1997) Chiku Sei Tai Hatsu Taiwan Jouhou Kiki Sangyou Hatten no Shinario 7 (Future growth scenario of Taiwanese information appliance industry 7). Nihon Kougyou Shinbun, Tokyo (in Japanese)
PC Watch (2007) Qumonda no CEO ga Rainichi. Nihon ha Hijouni Juuyouna Shijou (Qimonda’s CEO comes to Japan, saying Japan is a very important market). PC Watch, 22 Feb 2007. http://pc.watch.impress.co.jp/docs/2007/0222/qimonda.htm. Accessed 08 Dec 2016 (in Japanese)
Uchida T (1994) Intel wo Houi shite Totsunyuu shita Micro Processor Shin Sengoku Jidai–Beikoku Computer Shijou Repoto (Microprocessor Warfare Era and Intel–US computer market report). Interface 1994 Apr 232–234 (in Japanese)
Yu A (1998) Creating the digital future: the secrets of consistent innovation at Intel. Free Press, New York
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2021 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Tatsumoto, H. (2021). Ecosystem Management and Entry into Peripheral Markets: The Platform Strategy of Intel. In: Platform Strategy for Global Markets. Springer, Singapore. https://doi.org/10.1007/978-981-33-6789-0_5
Download citation
DOI: https://doi.org/10.1007/978-981-33-6789-0_5
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-33-6788-3
Online ISBN: 978-981-33-6789-0
eBook Packages: Business and ManagementBusiness and Management (R0)