ACC 3511 Case #3
Case 3: INSEL INC
The controller of Insel's newly formed Motorised Integrated Circuit (MIC) Division, Mustapha Bakri, sensed that he and his staff could play a significant part in determining the success of what promised to be an important new business. Not only was his division competing in a new and dynamic market with unique requirements but it also was radically changing the way in which it delivered its product. These circumstances led Mustapha to reassess the most basic issues involved in designing a management control system: What should be measured? How should it be measured? Who should measure it? and, For whom should it be measured?
Founded in 1968, Insel soon became widely known for its radios and other consumer electrical and electronic products. By the 1980’s, it sold semiconductor products, communications equipment, and components to consumers, industrial companies, and the military throughout the South East Asian region.
Headquartered in the Butterworth Industrial Zone, Penang, in 2007, Insel achieved over RM 5.5 billion in sales, employed over 99,000 people, and spent RM 411 million in research and development. It was one of the few Malaysian companies that marketed a wide range of electronic products, from highly sophisticated integrated circuits to consumer electronic products.
The company was organized along product and technology lines. Each business unit was structured as a sector, group, or division, depending on size. The Semiconductor Products Sector (SPS) was headquartered in Kulim, Kedah; sales in 2004 were over RM 2.2 billion, which was 39 percent of Insel’s net sales. The sector sold its products worldwide to original equipment manufacturers through its own sales force. Semiconductor products were subject to rapid changes in technology. Accordingly, SPS maintained an extensive research and development program in advanced semiconductor technology.
Formation of the MIC Division
In the early 2000s, the Semiconductor Products Sector produced a large line of both discrete semiconductor components and integrated circuits. Integrated circuits (ICs) can be thought of (at least functionally) as miniature circuit boards. For example, the designer of a video cassette recorder could replace a 12" * 12" circuit board and all its individual components with 1
ACC 3511 Case #3
a single 1" * 1" integrated circuit on a silicon chip, saving space and reducing power consumption. By 2007, worldwide sales of integrated circuits reached RM 20.2 billion. Among integrated circuit manufacturers, Insel was widely known for design and process expertise, and it became a leader in the increasingly popular semicustom integrated circuits. Semicustom integrated circuits are designed using predetermined functional blocks. In the early 2000s, Insel produced a version of semicustom ICs called "gate arrays." Each "gate" on a gate array was a transistor that performed a single operation. These were interconnected to produce the desired set of functions. One chip could contain a thousand or more gates. Each was designed to meet the requirements of a specific customer. Gate array customizations were relatively cheap and quick to manufacture, and they were designed by computer-aided design systems. By 2007, the market for gate arrays had grown to RM 455 million. Sales in 2008 were expected to be RM 740 million, and the market was estimated to reach RM 1.4 billion in sales annually by 2010. The high-performance gate array market totaled RM 90 million in 2007. Forecasts stated that the market should grow to RM 600 million by 2010. Insel manufactured high-performance gate arrays using two different semiconductor technologies: (1) bipolar and (2) metal-oxide semiconductor (MOS). Bipolar technology provided increased speeds at which the circuit could perform but at the cost of increased power consumption (and increased difficulty in meeting cooling requirements) when...
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