| Intel Example SupportiveArgument1 #87405
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A case study from Andy Grove: "Another example from Intel: The investment to build a silicon manufacturing plant in the '70s was a few million dollars. By the early '90s the cost of the factories that would be able to produce the new Pentium chips in volume rose to several billion dollars. The decision to build these plants needed to be made years before we knew whether the Pentium chip would work or whether the market would be interested in it.
Lessons we learned from previous missteps helped us. Some years earlier, when Intel's business consisted of making memory chips, we hesitated to add manufacturing capacity, not being all that sure about the market demand in years to come. Our Japanese competitors didn't hesitate: They built the plants. When the demand for memory chips exploded, the Japanese roared into the U.S. market and Intel began its descent as a memory chip supplier. Despite being steeled by that experience, I still remember how afraid I was as I asked the Intel directors for authorization to spend billions of dollars for factories to produce a product that did not exist at the time for a market we could not size. Fortunately, they gave their O.K. even as they gulped. The bet paid off."
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