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Also what assumptions of perfect competition for

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Unformatted text preview: f design and fabrication 52 process for the next generation product. Investment for capability, especially in wafer size, could increase the competitive advantage in the DRAM industry. But, bold investment for fabrication is highly risky due to uncertainty of technology and a cyclical market situation. Samsung took a strategic decision to invest in building 8 inch wafer fabrication and it established a major presence in the DRAM market with efficient production capability based on 8 inch wafer fabrication. Investment for new fabrication includes investment for new equipment, a huge portion of fabrication. Although there is a huge risk in investing in new equipment, investment for new equipment has an advantage in procurement and technology leadership. When equipment suppliers launch new equipment, they also have a quality risk. Therefore, equipment suppliers usually give a price advantage and provide technology support to the first comer. Leveraging these facts, Samsung could secure technology leadership in processing and increase production level to twice that of before 1992. This first mover's strategy was applied to development of 12 inch wafer fabrication in 2001. The reason why Samsung can afford the risk of precedent investment is that Samsung has a diversified portfolio. This is a different competitive advantage of Samsung's compared to other competitors. 5-1-2 Technology Leadership Technologies of design and process are the core competitive factor in the DRAM industry. At this point, Samsung has kept number one position after 1992. Vertical integration helped Samsung beat the competitors in technology competition. Samsung has a close internal collaboration from design to mass production. Although this collaboration is the normal phenomenon in the DRAM industry, Samsung uniquely has one site where design, production and sales activity are performed unlike its competitors. This one site strategy can make collaboration among internal processes tighter. (Unit: nm) Samsung 2007 IQ 2Q 3Q 4Q 2008 IQ 2Q 2009 3Q 4Q IQ 2Q 3Q 4Q El Hynix 66 Elpida 70 Micron Nanya 68 : 75 " Figure 5-1 DRAM Supplier's Line width generation roadmap (Source: Samsung) In addition to this, Samsung has a pre-verifying system which can prove the yield of mass production from the pilot production stages. This pre-verifying system has developed in 2000 and became available due to the vertical integration model. In 2001 Samsung had almost 80% in yield of mass-production at the initial stage of production for the sake of pre-verifying system. Referring to a typical semiconductor life cycle (figure 2-1), a company with technology leadership can earn a high premium at the initial stages of a new product and it can maintain a good position to recover its initial investment and enjoy additional profit due to a short product life cycle. Considering this industry feature, technology leadership from internal collaboration and pre-verifying system for accelerating mass production is one of the competitive advantages of Samsung. 5-1-3 Cost reduction through process As Samsung has enlarged the leadership in capability and technology, it continuously tried to reduce the cost of production by innovation of process. One-to-one correspondence relationship between circuit density and circuit line width had been maintained in the semiconductor industry by early 1990s. For example, 1.1 micro meter of design rule for line width was only used for 256 kilobit DRAM. Samsung succeeded in applying new line width technology to previous density circuit and dramatically decrease chip size. This process innovation increased productivity of each wafer. In other words, cost of production decreased by increase in productivity. Also, Samsung utilized old fabrication for developing new product and produce different generations at the same line. This process innovation enhanced the efficiency in usage of product lines. This innovation is getting powerful as the portfolio of products such as flash memory increases. Table 5-2 Mixed Line usage of Samsung after 1992 Line Initial Production Wafer Size Starting Year 1 64 kilobit DRAM 4 inch 1984 2 256 kilobit DRAM 6 inch 1985 3 1 Megabit DRAM 6 inch 1988 4 4 megabit DRAM 6 inch 1989 5 8 inch wafer processing 8 inch 1992 6 16 megabit DRAM 64 megabit DRAM 64 megabit DRAM Graphic memory 8 inch 1994 8 inch 1995 8 inch 1996 Flash Memory 7 64 megabit DRAM 128 megabit DRAM Graphic 8 memory 64 megabit DRAM 128 megabit DRAM 256 megabit DRAM Rambus DRAM 9 64 megabit DRAM 8 inch 1999 10 128 megabit DRAM 8 inch 2000 11 128 megabit DRAM 256 megabit DRAM 1, 12 inch 2001 12 256 megabit DRAM 512 megabit DRAM 512 megabit DRAM 12 2003 12 2004 13 (Source: Samsung) 5-1-4 Product Differentiation Samsung has continuously made an effort to diversify its products for overcoming the limitation of DRAM product as a commodity as it has maintained the cost leadership by investment in technology and capability and by innovation of process. The value added features of DRAM are created by improvement in speed, density and power consumption. The issue of power consumption is critical to notebook and mobile product because these are usually wireless products and are used without a plug for the long time. To reflect the needs of these customers', Samsung has developed a low power function for every generation of products. This low power function can create value for the customers and Samsung can enjoy a premium by this product diff...
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This note was uploaded on 01/22/2014 for the course BUAD 497 taught by Professor Degravel during the Fall '07 term at USC.

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