Professional Documents
Culture Documents
• Non-volatile
– Flash
• High growth market (mobile, digital music and imaging)
• Slow to write, degrades over time
– PCM (PRAM) - Most promising new technology
• Fast, long lasting
• Prototypes by Samsung (512Mb), Intel/STM, Sep 2006
• Segmentation
– DRAM ( over 50% of this market)
– SRAM (10%)
– Flash (32%)
1. http://www.infoworld.com/article/06/05/31/78779_HNchipforecast_1.html
2. http://www.informationweek.com/showArticle.jhtml?articleID=201201654
Cyclic Structure of Semiconductor
Industry
Factors :
– Rapid Technical Progress
• Brand value rank grew from 43rd in the world ($ 5.2 billion) in 2000 to
21st in the world ( $12.6 billion) in 2004 and 20th in 2006 (16.1 billion)
• Total net revenue in 2004 was $78.5 billion, and $78.7 billion in 2006
Samsung Structure
• Spans 58 countries
• Samsung Electronics has 5 business
divisions :
– Semiconductor
– Digital Media
– Telecommunications
– LCD
– Digital Appliances
Samsung DRAM Facts
• 2nd Largest chipmaker worldwide (2006) 1
1. www.dailytech.com
2. Samsung 2006 Annual Report
DRAM Operating Profits
5
SG&A
R&D
4
Depreciation
Labor
3
Raw Materials
Price
2
0
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Samsung Performance
• Cost Advantages
– Lowest raw materials cost (volume)
– Lowest depreciation
– Labor and SG&A not high
– Shared core designs
– Lower cost fabs (12%)
– Flexible production lines
– Higher yields (because of process quality)
• Highest Price
– Highest reliability in industry: >$1 premium
Cost of Materials
DRAM Cost of Materials vs Volume
(2003)
2.5
Cost of Raw Materials ($)
Infineon
1.5
Samsung
0.5
0
0 200 400 600 800 1000
SAMSUNG STRATEGY
Generic Competitive
Strategies
• Two dimensions of competitive strategy
– Competitive advantage - low cost vs.
differentiated play
– Target Market - broad vs. niche play
Best-Cost Provider
Strategy
(Samsung’s Strategy)
Narrow Focused Focused
Buyer Low-Cost Differentiation
Segment Strategy Strategy
or Niche (Low cost flash memory) (Rambus DRAM)
Combined low-
cost/differentiated strategy is
difficult to achieve
• Difficult to implement
• Firms aiming to do this are often
stuck in the middle
• Firm’s products are too costly to
compete with low costs provider’s
product, and too undifferentiated to
command the price premium gained
by the differentiated
A variety of internal andfirm
external factors
have helped Samsung achieve this
desirable position
Samsung’s Combined Low-
cost/Differentiated Strategy
Samsung’s success has been due to a
variety of factors:
– Successfully customize products around a
core design
– Large product portfolio (occupy the entire
spectrum for a broad market play)
– Collocation of fab and R&D facilities
(internal conversation among engineers to
decrease time to market)
Samsung’s Combined Low-
cost/Differentiated Strategy
(cont’d)
– Easy access to Asian market
– Combination of educated guessing and pure
luck (e.g. stack design vs trench design)
– Talent pool strategy: Access to local talents,
sponsoring employees for PhD and MBA
education)
– Availability of capital: E.g. from 1983 to 1985
during recession of semiconductor industry,
Samsung allocated significant capital to build
capacity
CHINESE THREAT
Emerging Competitors
Elpida Japan’s only remaining DRAM producer