Samsung Electronics Case Summary

SAMSUNG ELECTRONICS SUMMARY d experiencestairs Kun Hee Lees leadership Samsung has risen to become the worlds leading memory pissr for all types of PCs, plot of ground players, digital television cameras and different electronic equipments. In 1987, Samsung was a bit player, old age undersurface its key Japanese rivals. In 2003 Samsungs memory division is larger than that of Japanese rivals in both size & profits. The memory splintering industriousness was evaluate to face orbitual downturn in 2005 and Samsung survived cardinal previous downturns still some outside believers believed that the Chinese entry would fundamentally throw assiduity conditions in the age ahead. at that situation has been a strong growth in economic importance of semiconducting material perseverance over the previous vanadium decades. Semiconductor crops were classified into two categories Logic chips and memory chips. Logic chips were utilise for processing information/ control processes whereas Memory chips were further classified into fluidram (Dynamic Random Access Memory), SRAM (Static RAM), & radiate to store information. The case is foc utilize on Global memory chip industry. fluid drams captured over half of the memory chip marketplace in 2003. drachmas were previously used in PCs, but their make do declined from 80% to 67% between 1990 and 2003.Telecom & consumer electronics were growing consumers of DRAMs in 2003. Communications products were expected to grow from 3. 5% to 7. 9% in 2008 enchantment TVs, set-top boxes, game devices often(prenominal) as Play station represented 7% of worldwide market in 2003. In 2003, SRAM, a type of buffer memory which facilitated computing device processing & mobile phone functionality, accounted for 10% of the industry sales and Flash memory, used in heavy digital cameras & mobile phones, is a heatable growth area and account for 32% of the industry sales. The memory industry contained powerful suppliers and p rice conscious customers.Over time technology grew more conglomerate and suppliers became more concentrated. Only 2-3 main players dominated the key segments of equipment market. Suppliers of memory vulgar materials provided discounts of up to 5% for high-volume buyers. Customers were more fragmented with no oneness OEM lordly more than 20% of global PC market. Memory represented 4-12% of aggregate PC material cost and 4-7% of mobile phone material cost. There was an intense competition in market but OEM would pay upward of 1% average premium for a reliable supplier.In 2005 industry face fierce rivalry and large-scale entry by Chinese firms. Samsung announced a decline in market prices of its cutting edge technological products in novel 2004 but Chinese firms competing in ripened product lines traded mangle profit margins for market share. Chinese competitors had an easy access to local anaesthetic finance and talented local engineers but it lacked Organizational skills & used older technology. MAJOR COMPETITORS The major competitors of Samsung in 2005 were Elpida Memory Inc (Japan) Established as a joint guess between NEC and Hitachi.It produced memory products for mobile devices & consumer electronics goods. In 2004, it announced that it would start the construction on its 12 inch piss fab payoff. Hynix Semiconductor, Inc. (S. Korea) founded in 1983 as Hyundai Electronics. It changed is name to separate itself from financially disruptive Hyundai Group. During 1996 cyclical downturn the familiarity dramatically gaind its working capital cost but in 1999 when market began to expand Hyundai had no resource to ontogenesis its capital expenditure and it ended up in decreasing its capital expenditure.In 1999 Hyundai acquired LG Semiconductor which resulted in more debt burden which together with the next cyclical doenturn brought the company at the verge of collapse in 2001-02. A multi zillion-dollar bailout allowed the company to survive. It th en entered into a joint venture with ST Electronics. Infineon Technologies AG Germany- ground company which spun off from Siemens. In recent years, it entered into the product purchase & capacity arranging with Taiwan-based DRAM bring to passr, Winbond. It also entered into the joint venture with Nanya Technology to build a clean plant in Taiwan.In 2005, it had more than 25 R&D locations slightly the globe. Micron Technology It is Idaho-USA based company founded in 1978, Acquired Texas Instruments, plants in Texas, Italy, Japan, &Singapore. It purchased normal Semiconductor from Toshiba and is backed by Intel. Nanya Technology Corporation It is the fifth-largest DRAM, Taiwan based manufacturer. In 1998 it purchased DRAM technology from IBM. Nanya and Infineon formed a joint venture named Inotera producing 256Mbit DRAM starting in June 2004. Semiconductor Manufacturing International Corp. SMIC) Established in 2000 and headquartered in Shanghai, China. It took designs from other firms and produced chips based on blueprints. In 2003, SMIC signed agreement with Infineon & and later with Elpida to license technology to SMIC in exchange for purchasing rights to much of the output. It also bought business facility from Motorola. COMPANY OVERVIEW In 2005 it was the largest conglomerate (called Chaebol) in South Korea. The total net sales of the group had r separatelyed $135 cardinal in 2004. In 2004 the goup had 337 overseas operations in 58 countries and employed 212,000 people worldwide.Three marrow business sectors were Electronics, Finance, and Trade & Services. Samsung Electronics was established in 1969 to manufacture black-and-white TV sets. At the end of 2004 the company had $78. 5 one thousand million net sales, $66 billion in assets, 113,000 employees. The company brand set increased from $5. 2 billion in 2000 to $12. 6 billion in 2004. In 2005 Samsung consisted of five business divisions 1) digital Media TV, AV, Computers 2) Telecom 3) HDTV 4) D igital Appliances and 5) Semiconductor Business. DEVELOPMENT OF MEMORY BUSINESSKoreas semiconductor industry started its wafer production in 1974. Kun Hee Lee, third son of Samsung Groups founder Byung Chull Lee, bought Korea Semiconductor Company, using his own individualised savings. Samsung Electronics was a producer of low-end consumer electronics goods. Kun Hee Lee integrate the two companies to create global powerhouse. First semiconductor produced was the watch chip, used in wristwatches. From 1983 to 1985, even as global semiconductor market went into a recession & Intel left the DRAM business, Samsung al locate more than $100 million to DRAM development.At that time cost to produce 64K DRAM was $1. 30, market price downstairs $1. 00. in mid eighties Samsung built its first large manufacturing facility. To come across fast-paced construction, a target was set to build 4-kilometer road in 1 day to receive production equipment. Kun Hee Lee was made chair when father ret ired. Since 1992, semiconductors had been South Koreas largest export. In 2004, exports totaled to $25. 1 billion that is 10. 4% of the countrys export volume. Samsung Group exported 22% of Koreas exports.Samsung Group represented 23% of total market value at the Korea Stock Exchange. TECHNOLOGY DEVELOPMENT To design its first 64K DRAMs in 1980s with outside help the company found Micron in the US which accepted cash payment in exchange for teaching Samsung how to produce 64K DRAMs. To develop bourne technology for next generation DRAM, Samsung used inbred competition across global R&D sites. The company engage one team composed primarily of Korean-Americans with experience in semiconductor industry and located that team in California.A similar Korean-Americans team was located in S. Korea it was required to compete & collaborate and come up with its own solution. California team won competition for designing 256K DRAM while Korean team won competition for next generation 1Mbit t echnology. imputable to market situations Hitachi took the lead and Samsung came to second Hitachi in the market. Early 1990s, Samsung decided to increase the size of wafers used to cut the DRAM chips to eight inches to become make out 1 again and they were first to do so.They invested $1 billion towards get the hang the tonic technology and became number 1 again in 1992 and retain leadership for 13 years. PRODUT MIX In 2003, Samsung offered 1,200 different variations of DRAM products. Products ranged from frontier products (512Mbit DRAM) at the cutting edge of technology to legacy products (64Mbit DRAM). Within each product generation there were specialty products as well. Prices for new-generation products were high for a few quarters before plunging rapidly. Legacy products became high-value niche products.In 2004, Samsung also seek to create some advantages in Flash memory for digital cameras & camera phones. Because market expected to grow at double-digit for another five years in Flash memory while DRAMs would experience a single digit growth and Flash price were high relative to that of the DRAM. rule AND PRODUCTION Unlike its competitors, Samsung created new uses for DRAMs. It launched new DRAM products with product-specific applications, for laptops, personal game players etc. Many of them shared a common core design.Even two seemingly different architectures, DDR DRAM & Rambus DRAM shared the same core design. Samsung main R&D facility and fab lines were located at a single site near Seoul whereas, competitors facilities were scattered across the globe. The benefit was of collocation and scale of fab which saved them an average of 12% of construction cost. At Samsungs primary campus, R&D engineers & production engineers lived in the same company-provided housing. Samsung prided itself on the reliability of its products & ability to customize products.But in 1980s & 1990, Samsung was producing poor quality products. Thus in 1994, Lee wrote a boo k that was delivered to all employees and explained how the Group had lost sight of quality & argued that employees mustiness now think of quality first. The result of this effort was that by the late 1990s, Samsung was routinely winning key industry competitions for reliability and performance. Samsung developed new Flash memory chip for Sony Ericsson & chip customized for Nokia. HUMAN RESOURCE POLICIES It was considered out(p) at Samsung to ask a coworker about his or her university or place of origin.Prospective employees were given aptitude test covering language skills, mathematical knowledge, reasoning, & station perception. As a result of more meritocratic evaluation system, younger, high-potential, English-speaking managers were quickly promoted up the hierarchy. Samsung also place programs to invest in employees global business skills. Samsung claimed to have invested more in its employees that any other competitors in this industry. They also hired westerners & other fo reign talents. According to the Chairman of the company, At Samsung, we reward outstanding performance we do not punish failure.This is my personal philosophy and belief. STRATEGIC CHALLENGES In 2005, company faced new challenges from Chinese entrants who were attacking the DRAM market in the way Samsung did 20 years ago. These Companies were using partnerships with Infineon & Elpida with billions of dollars in outside financing to build state-of-art production facilities. Chinese producers have patience to endure years of losses to gain substantive market share. China lacked critical root word for cutting-edge semiconductor industry but the Government s firmly committed to subsidizing all infrastructure needs around Shanghai and Beijing.