Mitel Semiconductor
Mitel Semiconductor is a division of the Mitel Corporation that produces semiconductors, which are used in the fabrication of integrated circuits for consumers in the aerospace, automobile, and any electronics industries. Semiconductor sales accounted for approximately 15 percent of Mitel corporate revenue and the firm held a seven percent market share of the one billion dollar business communications semiconductor market in 1995. Kirk J. Mandy, vice president and general manager of the Mitel Semiconductor division is faced with the challenging task of choosing investment options for the division, ensuring sustainability and increased market share for the company over the next five years. Kirk is faced with several alternatives, which include:
1. Maintain the status quo, and having the Bromont plant continue to use 100mm wafers. 2. Convert Bromont to larger wafers, 150mm, 200mm, or 300mm. 3. Contract out fabrication to other facilities. 4. Increase capacity through the acquisition of other semiconductor facilities.
Considerations
There are several factors which need to be taken into consideration, outside of the alternatives themselves. One such factor is that, due to Mitel past financial failures, the corporation has a policy that over the long term, business must be able to finance their own growth. Therefore the company is in opposition to further debt and only available cash and cash equivalents can be used for investments. A 15 percent cost of capital is utilized in comparing alternatives. Another factor is its current supplier of 100mm wafers has stated that it is increasing to larger sizes and will no longer be able to meet the demands at Mitel for 100mm wafers. This is coupled with an issue of ageing equipment at the Bromont facility, which is becoming increasingly more expensive to maintain and difficult to procure replacement parts. One of Mitel’s sub-contracted facilities has also recently stated that it will be
1. Maintain the status quo, and having the Bromont plant continue to use 100mm wafers. 2. Convert Bromont to larger wafers, 150mm, 200mm, or 300mm. 3. Contract out fabrication to other facilities. 4. Increase capacity through the acquisition of other semiconductor facilities.
Considerations
There are several factors which need to be taken into consideration, outside of the alternatives themselves. One such factor is that, due to Mitel past financial failures, the corporation has a policy that over the long term, business must be able to finance their own growth. Therefore the company is in opposition to further debt and only available cash and cash equivalents can be used for investments. A 15 percent cost of capital is utilized in comparing alternatives. Another factor is its current supplier of 100mm wafers has stated that it is increasing to larger sizes and will no longer be able to meet the demands at Mitel for 100mm wafers. This is coupled with an issue of ageing equipment at the Bromont facility, which is becoming increasingly more expensive to maintain and difficult to procure replacement parts. One of Mitel’s sub-contracted facilities has also recently stated that it will be