Sessions: INT 201: Product Liability and Product Recall – Intel Corp.’s China Experience

Locked deep in the electronic vaults of Intel Corp. is a master map of every factory, every research plant and every design center owned by the world’s leading manufacturer of microchips.

What stands out about this map isn’t the familiar position of the seven continents – or five continents depending on how you count them. What makes these particular maps unique are the numbers found on them.

In China, for example, it’s the number 68, or in the lingo of Intel executives, Fab 68, the company’s fabrication plant under construction in Dalian. Intel doesn’t have 68 factories, far fewer. But the reason for No. 68 is that when pronounced in mandarin, the sound means good luck, according to Diane R. Labrador, Intel’s assistant treasurer and director of risk management.

Intel’s plants in Israel, Fab 18 and 28, are so designated because tradition there considers the numbers 18 and 28 special.

“We don’t look at China any differently than any other manufacturing organization,” she said. But there are habits and customs specific to foreign countries that deserve special attention if you’re going to do business there.

Fab 68 is a recognition of that, which Intel has learned after 23 years of doing business in China.

“Embedding a corporate culture is the No. 1 issue,” said Labrador. “If you’re going to embed quality in your products, then you need robust corporate culture so our Pudong facility has the highest quality ratings of any of our test facilities.”

Intel employs more than 6,000 employees in China, and for the past two decades has stuck to assembly and testing there only. But beginning in 2010, Fab 68 in Dalian will be Intel’s first manufacturing facility in China, adding capacity outside of the United States, Israel and Ireland.
The manufacturing specs for the new factors will have to be exact … and Labrador means exact.

Over the past 30 years, Intel has managed shrink the transistor to such an extent that it can now pack 400 million transistors on a chip the size of a fingernail.

Intel measures its products in units of measures called nanometers, which is the size of bacteria, so product recall issues when dealing with technology so advanced is top-of-mind among Intel’s risk managers.

Exacting are the demands of retaining consistent processes from one factory to another that plants are reproduced exactly – down to the position of toilet paper stored in the bathroom.

That’s because the potential changes in chemical properties in factories built to different designs and specs could affect the performance of the chips coming off the production line. “To manufacture at these levels and produce at these levels requires a lot, a lot of discipline,” said Labrador. Just in case, the company carries global product liability coverage.

The Chinese are more than capable of adopting Intel’s corporate culture. Intel’s Pudong facility, for example, has the highest quality ratings of any of Intel’s test facilities around the world, Labrador said.

As the Dalian factory prepares to stamp out more chips two years from now, they still won’t be Intel’s leading-edge chips no matter how rigorous the manufacturing process. That’s because of the U.S. government’s export controls, which prohibit the production of Intel’s latest technologies. “In China we process N-2, which means two generations behind what we make elsewhere,” said Labrador.

N-2 is still valuable technology and Intel does all it can to protect its intellectual property, she said.

“At some facilities we have armed guards, in other places we don’t depend on them,” she said. Choosing how much firepower to give guards depends on the community in which Intel operates, she said, as Intel needs to protect its relationship with host governments as well as its need to protect its economic interests in the marketplace.