Joo Seok Lee Vanessa Merino Massiel Reyes Christopher Herlihy Jonathan Savadogo

Seoul, Korea

DRAM = dynamic random access memory

Definition- DRAM is the most common kind of random access memory (RAM) for personal computers and workstations

R&D = Research and Development OEM = Original Equipment Manufacturer

Fab a manufacturing plant that makes semiconductor devices

Definition- OEM, manufactures products or components that are purchased by a company and retailed under the purchasing companys brand name

Samsung Electronics Company, henceforth called Samsung in this case, was established in 1969 to manufacture black-and-white TV sets. Samsung Electronics is the chief subsidiary of South Koreas giant Samsung Group
The company was Founded by Byung-Chul Lee

As stated in its new motto, Samsung Electronics vision for the new decade is, Inspire the World, Create the future. As part of this vision, Samsung has mapped out a specific plan of reaching $400 billion in revenue and becoming one of the worlds top five brands by 2020 Samsung also established three strategic approaches in its management: Creativity, Partnership, and Talent.

To devote our talent and technology to creating superior products and services that contribute to a better global society.

Samsung Electronic itself was a producer of low end consumer electronics, just like China is currently. The company used to rely on labor intensive assembly lines, importing semiconductors and other advanced products from abroad. Originally, Samsung believed that market growth would vindicate its investment strategies, and so losing money the first several years didnt discourage the group from making further investments.

In the past, Korean companies hired employees because they came from the right region and the right schools Samsung tried to eliminate this practice by giving prospective employees an ability test covering language skills, mathematical knowledge, reasoning, and space perception. Samsung also tried to break the mold of traditional seniority-based employment, which was still a widespread in Asia.

Samsung offers over 1,200 different variations of DRAM product. Given that DRAM products were conventionally thought of commodities, the ability to produced 1,200 different varieties was exceptional in the memory industry. Samsung also sought to create the same advantage in flash memory that it enjoyed in DRAM.
The flash memory market was expected to grow at a double-digit rate for at least another five years.

The first semiconductor developed by the young company was the watch chip, used in wristwatches Samsungs 4-megabit chip had made it the leading global producer of DRAM chips by 1995 Samsung plans to be the first to create the 20TB (terabyte) memory card by 2015 The companys excellent method of quality control is what makes it successful in providing only the best products to the whole world

Samsungs core values lay in its ability to push the boundaries in new thinking and innovation Samsungs innovative spirit is driven by 17 R&D centers and 6 design centers worldwide.

Chairman Kun Hee Lee Vice Chairman & CEO Jong Yong Yun

CTO Yoon Woo Lee

CFO Doh Seok Choi

SemiConductor Business -memory -system LSI -hard disk drive -optical storage President Chang Gyu Hwang

Digital Media Business TV AV monitors DVD players President Gee Sung Choi

Telecom Business mobile handset PDA network equipment President Ki Tae Lee

LCD Business -LCD panels for notebook computers & HDTV President Sang Wan Lee

-refrigerators -air conditioners -washing machines

Digital Appliance Business

President Hyun Bong Lee

Samsung became the first Korean manufacturer of low-cost, relatively low tech, 64-kilobit (DRAM chips) Samsung paralayed knowledge from the venture to become a significant supplier of the low-cost, commodity-like DRAM chips to computer and electronics manufacturers throughout the world

Lee introduced various initiatives designed to improve employee motivation and product quality Lee efforts, put Samsung at the forefront of the semiconductor Industry Under the leadership of Lee, Samsung drew from potential profit gains to endorse their R&D facilities. (innovative products)

Samsungs main R&D facility and all of its fab lines were located at a single site just south of Seoul, South Korea At Samsungs primary campus, the R&D engineers and production engineers lived together in the same company-provided housing On a daily basis, they shared meals and their worksites were placed near one anothers, so that the engineers could quickly solve design and process engineering problems together

Samsung proudly claimed that it invested more in its employees than almost any other competitor in its industry In Lees inauguration speech he stated, "What do our salaried workers worry about as soon as they open the door from their house to work? Probably over 90% will think about their family and their own health, their childrens education, and their retirement.

People:
We value our people with a strong belief in A company is its people philosophy & provide opportunities to perform their full potential

Excellence:
We give our best efforts with endless passion & challenge spirit to become world best in every ways

Change:
We rapidly take the initiative in executing change & innovation with a sense of crisis: we can not survive if we do not constantly strive to innovate

1971: The company exports its first blackand-white television to Panama 1978: Samsung Group enters the semiconductor market by forming Samsung Semiconductor and Telecommunications Co. 1983: The company enters the personal computer market

1984: The firm officially adopts the name Samsung Electronics 1988: Samsung Electronics & Samsung Semiconductor 1992: The company develops the worlds first 64M DRAM 1994: Sales increase after the 4-megabit DRAM chip is developed

1995: Exports reach $10 billion 1997: The company battles the Asian economic crisis 1999: The firm undergoes a major restructuring, and profits reach $2.4 billion 2000: Sales reach $26 billion and net profits climb to $4.7 billion

Political-Legal Dimension -U.S. Department of Justice regulating market prices -Environmental Regulations

Economic Dimension - Fluctuating Market. - High unemployment rate

Samsung Electronic
International Dimension -Nine regional headquarters in major countries - Increase in the Chinese and Indian market. Sociocultural Dimension -Consumer expectations are subject to change.(smaller, faster, cheaper, technology -Customers expect companies to care for the global community by putting an emphasize on (CSR)

Technological Dimension -Converting to nanotechnology. - Samsung president proposed a new Hwang Law was set to passed Moore's law

By converting to nanotechnology, Samsung will be applying a version of differentiation Nanotechnology can make production more efficient & effective The new technology will help Samsung sustain their overall cost leadership strategy

By Samsung implementing a defender strategy it can protect its market from new competitors Implementing a defender strategy tends to decrease creativity and innovation and focuses its efforts on lowering costs and improving the performance of current products. Samsung also can find ways to create jobs increasing the unemployment rate

Weaknesses
Fluctuating operating and net profit Slow Start Up (early development) Had lost track of quality (early development) Originally Samsung scarified profits for market share (risk taker) Low brand awareness and loyalty Slow adaption of globalizing its brand R&D facilities and all of its Fab were located at a single site.

Strengths
Robust top line growth Strong market position (competitors have to steal market share) Collection of fab and R&D facilities Easy access to Asian market Fast & efficient product life cycle

Management efficiency Quality Control Incentivized Workers Innovative Products Currently holds #1 global market share in three major memory products, such as DRAM, SRAM and NAND Flash They invested more in its employee than almost any other competitors.

Opportunities
Growing Indian Market Positive outlook for semiconductors Maintaining the minimum capital expenditure needed to maintain smooth business operation during the cycling decline of the DRAM market. In 1997, the Asian financial crisis happened, it affected Samsung but they utilized resources, saving profits

Threats
Intense competition Government regulations Product substitution Chinese competitors willing to sacrifice profits for market share, just like Samsung did Unpredictable market Consumer expectations are likely to change (e.g. smaller, faster, cheaper technology) Chinese government were helping chinese firm create their infrastructure.

Customers are price-conscious. OEM Purchasers PC Producers Many customers, even rivals of one another, named Samsung their supplier of choice For example, Samsung developed Flash memory chips for Sony Ericsson The company also developed Flash memory chips customized for Nokia

The U.S department of Justice (DOJ) Environmental Protection Agency (EPA) Federal Communications Commission (FCC) Department of Commerce (DOC)

Applied Materials Tokyo Electron ASML

IBM Infineon Technologies AG Freescale Semiconductor Chartered Semiconductor Common Platform

Micron was the sole U.S. producer remaining in this industry, and it had expanded its memory business primarily through acquisitions In September 2003, Micron received a $500 million investment from Intel, and Micron agreed to use the money to invest in nextgeneration DRAM technology

SMIC, established in 2000 and headquartered in Shanghai, was Chinas largest foundry, manufacturing logic and memory products including DRAM. Foundries did not design chips as Samsung did, but rather, took designs from other firms and produced chips based off blueprints. While SMIC was the only Chinese DRAM producer, other Chinese producers had already entered other semiconductor markets for logic chips

ElpidaJapans only remaining DRAM producerwas established as a joint venture between NEC and Hitachi in December 1999 Elpida announced that it would start construction on its second 12-inch wafer fab next to its current manufacturing facility in Hiroshima. The cost of the new facility was $4.5 billion, and Elpida partially financed the new facility through a $100 million investment form Intel along with a public equity issue.

South Korea-based Hynix was founded in 1983 as Hyundai Electronics, and it changed its name in 2001 while separating from the financially distressed Hyundai Group In April 2005 Hynix paid $185 million to settle charges by the U.S. Department of justice (DOJ) that it and the other memory manufacturers had conspired to control prices in the U.S.

The Global Strategy Group was a corporate resource that helped to solve business problems at the business-unit level and prepared global managers for important positions Samsungs competitive advantage had come from creating a unique culture at the main R&D production site

Differentiation -Unlike its competitors, Samsung tried to create new uses for DRAMs by putting its manufacturing and R&D in support of design firms such as Rambus -To develop frontier technology for the next generation of DRAM, Samsung created what was, at the time, an unusual internal competition across global R&D sites

Focus -During the 1980s, Kun Hee Lee convinced his father that semiconductors represented the future of Samsung Group, and so the Group made Samsung Electronics its star affiliate and gave it most of the Groups resources. -The Group wanted to get into DRAMs, the high-growth memory segment in the 1980s and 1990s

Samsung Average Selling Price ($) Operating Cost ($) Operating Margain Micron Average Selling Price ($) Operating Cost ($) Operating Margain Infineon Average Selling Price ($) Operating Cost ($) Operating Margain Hynix Average Selling Price ($) Operating Cost ($) Operating Margain Worldwide Average Selling Price ($) ASP Qyarterly Change

4Q02 7.58 5.33 30% 4.99 7.25 -45% 5.9 7.96 -35% 4.92 6.56 -33% 6.14 -1%

1Q03 5.76 4.77 17% 5.1 7.96 -56% 4.89 5.62 -15% 4.57 6.16 35% 5.12 -17%

2Q03 5.27 4.6 13% 4.33 6.65 -53% 4.69 5.1 -9% 4.5 5.61 -24% 4.62 -10%

3Q03 5.79 4.00 31% 4.97 6.06 -22% 5.41 4.69 13% 5.46 4.82 12% 5.47 19%

4Q03 5.90 3.82 35% 5.32 5.57 -5% 5.21 4.69 10% 5.36 4.37 18% 5.37 -2%

1Q04 6.15 3.92 36% 4.51 4.75 -5% 4.95 4.75 4% 5.16 3.89 25% 5.06 -6%

Average 15.25 8.5 44% 11.09 12.51 -13% 10.58 9.90% 6% 11.42 10.68 6% 12.63 -5%

Improve operating efficiency Improve enterprise financial health Samsung seeks to increase the return on equity by 12% Enhance market share by 5%

Service excellence Trusted business partners Empathy Learn what the customers want and deliver based on that request Increase sales kiosks by 8%

Develop new products Understand consumer segments Reduce cycle time Provide rapid response Cross the product line Reduce defects from workmanship by 10%

Hire key technical talent Implement cross-training Provide access to transaction information Align business objectives Increase employee productivity and motivation Instill leadership aptitudes at all levels Become a customer centric culture

Recruit regardless of their schools or regions of origins Evaluations given to employees Meritocratic-based promotions instead of seniority-based promotions Employees betterment special programs Employees incentives Foreign talents recruitment

Addressing climate change Realizing green convergence Maintain a clean organizational culture To care for the environment, health and citizens safety To be respectful towards, customers, shareholders, and employees To comply with laws and ethical standards

International affairs
Large market share

Government subsidize
Lower cost structure High productivity

Chinese's firm were attracting billions of dollar in outside financing. Using that revenue to build state of the art production facilities. Like Samsung in the mid 80s, Chinese firm had patience to endure years of loses to gain a significant market share. Chinese government was able to provide Chinese firm's with cheap credit, abundant land, cheap utilities, engineering talent, and tax incentives.

Samsung is able to charge lower prices and are able to achieve superior profitable As for China, competitors may lower their cost structures, they may imitate the cost leadership methods but they cant duplicate Samsungs low-cost advantage Can Samsung's low cost advantage withstand the Chinese threat in low cost?

Referring to the overall cost leadership chart Samsung has the lowest operating cost, and the highest operating margin percentage.
Samsung Average Selling Price ($) Operating Cost ($) Operating Margain Micron Average Selling Price ($) Operating Cost ($) Operating Margain Infineon Average Selling Price ($) Operating Cost ($) Operating Margain Hynix Average Selling Price ($) Operating Cost ($) Operating Margain Worldwide Average Selling Price ($) ASP Qyarterly Change 4Q02 7.58 5.33 30% 4.99 7.25 -45% 5.9 7.96 -35% 4.92 6.56 -33% 6.14 -1% 1Q03 5.76 4.77 17% 5.1 7.96 -56% 4.89 5.62 -15% 4.57 6.16 35% 5.12 -17% 2Q03 5.27 4.6 13% 4.33 6.65 -53% 4.69 5.1 -9% 4.5 5.61 -24% 4.62 -10% 3Q03 5.79 4.00 31% 4.97 6.06 -22% 5.41 4.69 13% 5.46 4.82 12% 5.47 19% 4Q03 5.90 3.82 35% 5.32 5.57 -5% 5.21 4.69 10% 5.36 4.37 18% 5.37 -2% 1Q04 6.15 3.92 36% 4.51 4.75 -5% 4.95 4.75 4% 5.16 3.89 25% 5.06 -6% Average 15.25 8.5 44% 11.09 12.51 -13% 10.58 9.90% 6% 11.42 10.68 6% 12.63 -5%

Samsung integrated R&D facilities to make their products more innovative. Thus, emphasizing differentiation. Samsung invested millions of dollars a year to their R&D facilities. Quality, Customizability, and Legacy products 2000: 1603$ 2001: 1824$ 2002: 2451$ 2003: 2947$

Samsung R&D facilities actively sought to customize its products around a core design, allowing them to sustain growth. Is That Differentiation Easier To Grow or Sustain?

Samsung prided itself on the reliability of its products and its ability to customize products to customer demands. Samsung can be lowcost while making their products differentiated

If Samsung was the market leader in terms of low cost and productivity, then Samsung should not be teaching Chinese competitors how to become more low-cost and productive. Instead, Samsung should potentially yield but not give away the lower end of the market to the Chinese while trying to develop more high-value niche products.

Samsungs mission statement relates to the nation of South Korea by creating superior products and services that contribute to a better global society. Samsung is basically implying that they will care for the community and contribute assets to help South Korea grow as a country