rises of more than 100 companies that design, manufacture, and market semiconductors to original equipment manufacturers and personal computer end users. The following information is a profile of the dominant economic characteristics of the microprocessor industry.Market Size: $300-$350 billion worldwide consumption.Scope of Competitive Rivalry: Global. Market Growth Rate: 15-20 percent annually.Stage in Life Cycle: Rapid growth and takeoff.Number of Companies in Industry: About 174 companies.Customers: 80 million microprocessors for use in PCs and network servers.Degree of Vertical Integration: Mixed; forward and backward integration.Ease of Entry/Exit: High entry barriers in the form of capital requirements.Technology/Innovation: Rapid technological changes microprocessor production.Product Characteristics: Highly standardized.Scale Economies: Companies can realize economies of scale.Learning and Experience Effects: Strong.Capacity Utilization: Manufacturing efficiency is higher when capacity is increased.Industry Profitability: Above par.1995 Industry Usage 1997 Industry UsageError! Not a valid embedded object.The two pie charts above display the industry usage in 1995 and 1997. As shown, the computer sector is the main user of the microprocessor. Within two years, the computer sector increased its usage by 11% and is expected to continue increasing over the next several years. Computers are the main focus in the microprocessor industry, which is why many rivals are competing for market share in that sector. THE FIVE FORCES MODEL OF COMPETITION Rivalry among competing manufacturers in this industry is a strong force of competition. It is focused on such factors as performance features, new product innovation, quality, and brand image. New product innovation plays a major role in the microprocessor industry because it determines the intensity of rivalry among competing firms. Companies are trying to gain better mar...
