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Semiconductor performance minimum line width over

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Unformatted text preview: . .. Figure 3-6 S-Curve for shrinkage of line width (Source: Jason Davis, 2009) This physical limitation of technology is one of critical issues for the DRAM provider to solve, for, shrinkage of the chip size is the main method used for cost reduction. 3-3-3 Change in customer segment One of big challenges in the DRAM industry is the change in customer segment. Historically, corporate customers focusing on performance and quality of products have grown the DRAM market in terms of market size and technology innovation. But, the consumers segment has grown with the passage of time. This change in the customer segment of the DRAM market puts pressure on the market to lower prices and it leads to reduction in profit. The consumer segment in the semiconductor industry was 25% in 1984 but it grew to 55%. With its focusing on the computer market, the consumer segment has increased in the DRAM market from 24% in 1996 to 32% in 2001 mainly due to wide usage of internet. M Average selling price 0 Consumer market share 35% - - - - - - - --................-------------------------------------------------------------................................................---1 ~0 .-----------------------........................ . ------------------------------------- -- --............................ 30% .......-------0 25% ............................................ 0 0- ........ m ............ m 20% ................................................................................................... 15% -----------------------------------------------------------------------------------------------------------------------------------------------. 5% - - - - - - - - --................-------------------------------------------------------------................................................---0%1996 1997 1998 1999 Figure 3-7 Evolution of PC market, 1996 to 2001. 2000 2001 (Source: Clair Brown and Greg Linden, Chips and Change, 2009, Figure 4-3) The growth of the consumer market not only adds pressure to lower prices but also generates efficiency issues in the production since the consumer segment is divided by diverse applications. It is a big challenge to DRAM providers whose mass production is based on standard products. DRAM providers currently face a big challenge: increasing fabrication costs and uncertain for return on investment. Also, the physical limitation of technology improvement gives rise to an uncertainty of growth in the DRAM industry. Lastly, DRAM providers are 32 finding it difficult to make a profit due to the growth of the consumer market. From these three challenges, potential risks of cost increase, technology growth and profit is growing. 3-4 Current DRAM Market Analysis Through the financial crisis of 2008 and the recession in the DRAM industry from 2007 to 2009, the DRAM market has changed on the supply side due to the dynamics of competitors. Also, the demand side of the DRAM market is changing with the appearance of diverse applications and new operating systems of PCs. At this point, Samsung can tap into the DRAM industry again by adopting a business strategy that reflects the current market status. 3-4-1 Recent key factors of market dynamics There are some major changes in the DRAM industry in terms of the 5 forces analysis as discussed in Chapter3. Decrease of competition among existing firms The number of DRAM providers decreased from 11 to 7 through the 2 1s' century. Also, the DRAM market shows characteristics of an oligopoly as the four leading providers have 87% of the market share of which Samsung's market share about 35%. Therefore, DRAM providers pursue more profitability than market share which is 33 different from the past. Decrease in the power of buyers The power of buyers is typically very high in the DRAM industry because the major customers are big PCs makers and customers have bargaining power. Also, major customers can easily change their suppliers since DRAM is one of the commodities. But, as the number of DRAM providers decrease, and with the providers focusing on profit due to the reduction in profitability, the investment and the supply of DRAM decreases in the market. However, new applications and products such as the new operating system Windows 7 (requiring 4 GB DRAM for the system) and many IT devices such as smart phone and net book have appeared all of which require DRAM. In addition, timing of the shipment is getting critical for device makers, and competition among IT devices is getting tougher. As a result of this, the power of DRAM providers is increasing. 3-4-2 Supply Analysis The supply of DRAM has fluctuated from the beginning of the DRAM market. As mentioned, production capability increase requires a high level of capital and lead time. During the recession between 2007 and 2009, most of the DRAM providers could not invest due to the losses. In 2009 the total capital expenditure in the DRAM industry was 4.9 billion which is the lowest after the start of the 21s' century. Therefore bit growth of the D...
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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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