Sai Risk Analysis
"Silicon Arts, Inc is a four year old company that manufactures digital imaging integrated Circuits (ICs) that are manufactured in digital cameras, DVD players, computers, and medical scientific instrumentation. It has presence in North America (70%), Europe 20%), and South East Asia (10%). SAI grew by 78% in 2000 following the semiconductor industry boom. In early 2001, however its revenues fell by 40% de to industry slowdown. SAI responded to the fall in revenue by reducing its costs and freezing capital expenses." (UOP Resource, 2007)
SAI continued its R&D efforts to develop the IC1032, a specialized chip used in the data embedded mobile phones. The chip was pilot tested by B&U, the world's leading manufacturer of mobile handsets, and the results were optimistic. Towards the end of 2001, the consumer electronics industry gained momentum towards the end of 2001. As a result, SAI's revenue grew in the last two quarters. SAI entered 2002 with a healthy financial position and was poised to plan for growth. Hal Eichner, SAI's chairman, had two goals for SAI; increase market share and keep pace with technology. To meet these goals, SAI has two options. SAI can expand the existing Digital Imaging market share or enter the wireless communications market.
As the new Financial Analyst of SAI, I will analyze two capital investment proposals prepared by a task force set up by Hal Eichner. The proposals were from Dig-Image and W-Comm. Below is a table to illustrate and compare their market research report and other related information.
Market Research Report Comparison Table
Dig-Imaging W-Comm
Market Forecast
1) Global Digital Imaging semiconductor to grow 20% in Year 1.
2) Worldwide demand to grow 7% annually until Year 4.
3) By end of Year 5, new technologies will take over the market. 1) Mobile handsets market is growing and about 25 million handsets are expected to...
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