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Unformatted text preview: vernment were the competitive advantages for US companies. But, DRAM needs high
investment for product development and process, and high capital expenditure needed to be a
market leader. This means that investment capability and yield from learning of previous
technology is important. Therefore the DRAM industry is significantly related to the national
strategy. In this sense, as the memory market was getting large with the growth of digital device,
many potential foreign companies entered the market with national support. Also, US companies,
especially Intel, needed to efficiently allocate their resources to DRAM or Microprocessors and
needed to make strategic corporate decisions. 2-1-2 Japanese Era (Late 1970s ~ 1980s)
Japanese companies such as Hitachi, Matsushita, NEC, Toshiba, Mitsubishi and Fujitsu
9 challenged the DRAM market dominated by US companies. As shown in table 2-2, Japanese
companies took the market leadership from the US companies. There was a semiconductor price
war between Japan and the US and the leading US semiconductor makers were forced out of the
DRAM Business.' As a result of this war, only two US companies - Micron Technology and
Texas Instruments - stayed in the DRAM market.
There are several factors behind why the Japanese companies took leadership in the
DRAM industry. The first factor was government support. The Japanese government asked
foreign companies which wanted to enter the big Japanese market to transfer technology. Also,
the government gave a subsidy for research cooperation among Japanese companies. Secondly,
Japanese companies had access to easy capital accessibility. The DRAM business is capital
intensive and leadership in technology provided a more chances to profit to recover initial
investment. Japanese DRAM providers were a vertically integrated division in the large
electronics companies. This structure gave Japanese DRAM providers the opportunity to easily
get funds from banks and pursue a long-run strategy.
Also, domestic demand for DRAM is one of the sources for business stability. With the
above advantages, Japanese providers focused on the process technology for mass production.
The best Japanese producers achieved 70 to 80 percent in yield, while yields of the US producers
were between 50 to 60 percent 2 . As a result of this, in 1987 seven of the companies among the
top ten DRAM providers were Japanese companies as in 1987 shown in table 2-3. Daw Ma and John Mark, The DRAM Market Structure: The rise and fall in concentration
2 Clair Brown and Greg Linden, Chips and Change, The MIT Press, 2009, page 17
10 Table 2-3 DRAM Market Share in 1987 Rank
Toshiba Revenue (000)
$452,755 Market Share
Texas Instruments $368,800
1.9% Source: Dataquest 2-1-3 Korea and Asia pacific Era (Middle of 1990s - present) While Japan was hit by recession around the early 1990s, Korean Chaebol companies
duplicated Japan's strategy to enter the DRAM industry. Three Korean companies - Samsung,
Hyundai and Goldstar - invested a lot with government subsidy and a unique Chaebol corporate
structure. These three Korean companies invested $1.2 billion to enter the DRAM industry in
1984 - 1985. In 1995, these three companies earned more than $ 5 billion dollars with a dramatic
growth in demand from the emergence of window 95 at the expense of Japanese company
earnings. One of the Korean companies, Samsung, ranked 1St in the DRAM market in 1992 and these three Korean companies took the 32% of market share in 19953. Many Taiwanese D. Mal, J. Yu2, Striategy Evolution and Market Leaderships: New Evidences from Semiconductor
Memory Industry & In-Stat, Inc.)
3 companies such as Nan Ya, Promos, Powerchip and Winbond entered the market following the
Korean companies' success.
Although Korean companies tried to duplicate Japanese companies' strategy, there were
several differences. Firstly, the Korean companies' domestic market for DRAM was small so
they needed to focus on the global market. Meanwhile, a significant share of demand in Japanese
companies depended on domestic sales and Japanese companies struggled with domestic
economic recession. Secondly, Japanese companies had such a high quality standard that they
lost their mass production leadership. This is very ironical because Japanese companies had the
leadership in the DRAM industry because of production leadership and quality.
After 1992, Samsung kept its number one position in the DRAM market and Korean
DRAM providers had 56% of the market share at QI 2009.Only one Japanese company - Elpida
- was ranked in the Top 10 among the DRAM providers. Table 2-4 iSuppli's Preliminary Q1 2009 DRAM Market Shares Rank Company (0u0) Market Share 1
5.2% 6 Qimonda $160 4.8% 7
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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.
- Fall '07