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2 figure 43 figure 51 figure 52 typical semiconductor

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Unformatted text preview: igure 5.2 Typical Semiconductor Life Cycle Semiconductor Value Chain Porter's Five Forces analysis, applied to the DRAM industry Change in the number of DRAM providers Alliances and Partnership in the DRAM industry in 2008 Chip Making R&D Versus Revenues S-Curve for shrinkage of line width Evolution of PC market, 1996 to 2001 Operating Profit Margin Of DRAM Chips Based On Contract Price in 2009 DRAM industry-relation between average quarterly revenues (US $m) and operating margin (%), Q102-Q209 PC sales and megabyte per set Rate of supply to demand Elasticity in different time frame and industry Market EXIT and Investing by costs and prices Framework from perfect competition of microeconomics DRAM Supplier's Line width generation roadmap framework of departure from perfect competition from Samsung's perspective Chapter1 Introduction In 2009, Dynamic Random Access Memory (DRAM) market size is around $21 billion dollars accounting for 10% of semiconductors after this industry evolved from Intel's mass production of 1-kilobit DRAM based on MOS process technology. DRAM is used for various IT applications but the core application is for the computer. During the 1970s, Intel led the DRAM market with technology leadership. After the 1980s, Japanese conglomerates such as Hitachi and Mitsubishi took a chance to lead the market with manufacturing efficiency. Lastly, Korean and Taiwan companies are leading the market from mid-1990s to now. With this historical change, severe market fluctuation decreased the DRAM providers from forty to ten. Especially, the world economic depression from recent financial crisis severely affected industry dynamics. At this point, the DRAM providers including Samsung Electronics should consider a new strategy approach to capture market value. From this view, I analyze the current challenges the DRAM industry is facing and propose a way for DRAM providers to keep capturing value from the DRAM market. History of the DRAM industry and the main industry features are described in chapter 2. In chapter 3, the overall industry will be analyzed using some frameworks. The value chain of the DRAM industry will be shown and I will check the industry dynamics using Michael Porter's 5 forces. Additionally, I will show current DRAM market analysis and major challenges for the DRAM industry. Chapter 4 introduces Framework from Microeconomics, departure from perfect competition. Chapter 5 will deal with Samsung case. Chapter2 Overview of the DRAM Industry DRAM is one of the random access memories which can store the data. It needs continuously to be refreshed to store data. Its data storage capacity called density is measured by kilobit, megabit, or gigabit. The major applications of DRAM are PC and server. As many IT devices are getting diversified, target markets are getting diversified as well. Table 2-1 DRAM demand by application Applications 2006 201 1E Desktop Notebook 27% 15% 18% 29% Server Upgrade Module Graphics DSC Game Console HDTV Handset Other 8% 25% 5% 2% 3% 2% 3% 10% 8% 18% 4% 1% 1% 5% 6% 10% Source: UBS 2-1 History of DRAM Industry In terms of technology evolution and business strategy, the history of the DRAM industry should be described with the history of semiconductors because the evolution of technology and competitive dynamics in the semiconductor industry has had a huge effect on the DRAM industry. The history of the DRAM industry can be divided by three stages into dominant market 7 leaders: US, Japan and Korea. As table 2-2 shows in 1975, US companies dominated with almost 90% market share with 4K DRAM, but no US company was ranked in the top 5 after 1990. After 1992, Samsung started to lead the market with 4M DRAM. Table 2-2 Market Leadership of 4K DRAM, 1M DRAM and 4M DRAM logo 195 4K DRAM share 46 (Wu Mustek (UW 1M DRAM Th a fatpan) NEC gJapa) 4 Natial (US) 3 Uhrket shaure AM DRAM share 13 22 14 25 14 L2 NEC (apan) Mitsubishi Hkiachig(apan) NEC (gapan) 12 10 Hitchi (Japan) 11 11 10 g Fujilsa (Japan) 9 Source: D. Mal, J. Yu2, Strategy Evolution and Market Leaderships: New Evidences from Semiconductor Memory Industry This chapter will describe each stage of history and the main factors of change in leadership. Also, it will discuss how technology has changed through its history. 2-1-1 US Era (1970s) From the invention of transistors by Bell Laboratories in 1947, government subsidies provided for national defense helped the semiconductor industry develop. In the 1970s, Intel and Advanced Memory Systems developed the 1K DRAM product with the mainframe market growing. But, Intel's 1K DRAM became the industry standard due to its cost effectiveness, small size and performance. Following Intel's success, many other US companies such as Advanced Micro Devices (AMD), Motorola, and Texas Instruments (TI) joined the DRAM industry. US companies dominated with almost 90% of market share of 4K DRAM. At this stage, US companies had a deep relation with the defense industry in terms of R&D expenditure and demand. Therefore, technology leadership and relationship with the go...
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