Case 3-5 Digital Equipment Corporation

Essay by tuip1024University, Bachelor'sA-, June 2005

download word file, 3 pages 4.5

Case Summary

Digital Semiconductor was a business unit of Digital Equipment Corporation. John Gavin, the DS group controller, wanted the finance department to find ways to add value and better support the division because the DS business strategy had many changes over the past five years and the division was still operating at a loss.


The semiconductor division which was a part of Digital Equipment Corporation expanded rapidly in the 1970s. Digital was financially very successful in 1988. However, Digital faced huge losses in 1990 through 1994. In 1997 Digital returned to profitability because of the reorganization of Digital into business units and product lines.

Digital Semiconductor:

Chip designers start to consider cost along with pushing the envelope of science. In the new product line organization, Digital units needed from Both DS and outside suppliers.

Semiconductor Manufacturing:

Silicon Wafers Probe Assembly Test

It is important to note that the cost structure went from a cost per wafer to a cost per die during the probe process.

Yield was very critical to the cost of the process.

Product lines:

A product line was defined as the integration of the activities of marketing, product development, and product engineering to manage a set of common products to achieve ROI. DS was divided into six product lines representing their major microprocessor.



I think the new system is better than old one. First of all, each product line would be measured with specific goals for profit contribution. Furthermore, all the financial performance would be measured individually (i.e. revenues, sales, spending, etc...). Therefore, each product line would be more responsible and active for making profit. And the product line would be charged a competitive manufacturing product cost for each of its products. So each product line would control the cost. As a...