Intel is deciding whether to outsource the production of its Skylake series of processors to Samsung.Intel plans to produce these processors only for the next year, as they are due to be replaced by a newseries. Samsung requires a $580 million payment upfront to defray the cost of setting up production andwill then sell the chips to Intel for $190 apiece. Intel has a specially-designed facility in Hillsboro, ORwhich is currently producing the Skylake chip at a cost of $220 each. On top of this cost, the facility inHillsboro has overhead expenses of $170 million per year, $40 million of which could be saved ifproduction is outsourced. What is the minimum number of Skylake chips Intel should expect to sell overthe next year if outsourcing is the best decision? Explain briefly.
Intel is deciding whether to outsource the production of its Skylake series of processors to Samsung.
Intel plans to produce these processors only for the next year, as they are due to be replaced by a new
series. Samsung requires a $580 million payment upfront to defray the cost of setting up production and
will then sell the chips to Intel for $190 apiece. Intel has a specially-designed facility in Hillsboro, OR
which is currently producing the Skylake chip at a cost of $220 each. On top of this cost, the facility in
Hillsboro has overhead expenses of $170 million per year, $40 million of which could be saved if
production is outsourced. What is the minimum number of Skylake chips Intel should expect to sell over
the next year if outsourcing is the best decision? Explain briefly.
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