Samsung's market strategy for memory chips

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Samsung's market strategy for memory chips

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Abstract

Samsung entered the market for memory chips during the years 1980 to 2005 and quickly became the market leader in that particular segment. What were the factors behind this success? How could this position be affected by recent market developments? A memory chip is a standardized product, with perfectly defined qualities and known purchasers.

The competition between producers is based only on the price and therefore on the upstream capacity of each generator to control its production costs. Even the successive waves of innovations fail to sustain prices because with each new technology wave, there is a strong and rapid decrease in selling prices. The price of DRAM 256M was divided by 7 from 2000 to 2001 and all models eventually stagnated at a price of about $1 a few years ago.

Yet in this commodity market, Samsung is able to charge prices that average 15% higher than those of its competitors. What is the basis for this ability to charge high prices?

Samsung has managed to develop a strategy of differentiation through a unique offer among the suppliers of memory chips. Samsung products, in addition to the conventional DRAM chips and 256Mb specialized chips whose application is specific to a given product (PC or video game) or customized to a customer's request. This assures higher prices and customer loyalty.

Tags: memory chips market, definition of memory chips, Samsung's market strategy for memory chips

How has Samsung managed to develop a win-win strategy of differentiation and premium prices while having lower costs than its competitors?
1. Analysis of the differentiation strategy of Samsung
2. Effectiveness of the cost structure of Samsung
3. What are the underlying specifics to Samsung that made this winning strategy?
What is the risk factor Samsung faces with regard to the entry of Chinese players?
1. Chinese players have the means to penetrate the market for semiconductors and change the rules
2. What are the strategic options of Samsung cope to with these new entrants?
Recommendations: Samsung must partner with a Chinese company maintaining its competitive advantages
1. Samsung must, above all, maintain its strategy of differentiation and premium pricing
2. Samsung can benefit from this partnership to strengthen its competitiveness by lowering costs

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[...] What are the strategic options of Samsung cope to with these new entrants? a. Continuing without alliance with a Chinese partner is too great a risk - Governmental barriers, such as a ban by the U.S. government to transfer semiconductor technology to Taiwan, are not sustainable in a context open to globalization and competition. - In addition, traditional competitors of Samsung, already in partnership with Chinese partners, could compensate for the relative inefficiency of their cost structure compared to that of Samsung. [...]

[...] What are the underlying specifics to Samsung that made this winning strategy? a. Samsung's management has always made the right strategic choices - The timing of investments over market cycles was very good: unlike its rival Hynix, Samsung has managed to limit investments during downturns and rise during periods of growth. - Samsung has the ability to quickly follow the right technologies such as the "stacking" in the late 1980s - Samsung also has the ability to develop new manufacturing technologies such as 8-inch wafers. [...]

[...] Yet in this commodity market, Samsung is able to charge prices an average 15% higher than those of its competitors: what is the basis for this ability to charge high prices? b. Samsung has managed to develop a strategy of differentiation through a unique offering among the suppliers of memory chips - Samsung product in addition to conventional DRAM 256Mb chips has specialized chips for which the application is specific to a given product (PC or video game) or customized to the client's request. [...]

[...] Recommendations: Samsung must partner with a Chinese company maintaining its competitive advantages A. Samsung must, above all, maintain its strategy of differentiation and premium pricing a. For this, Samsung has to remain master of innovation - Samsung must keep all R&D sites and not use Chinese sites for additional production capacity. The alliance with Chinese smelters, for example, is preferred. - Although the transfer of knowledge is ultimately inevitable, Samsung must continue to develop the chips of the future and effect the transfer of its production to the fastest growing segments (eg. [...]

[...] Samsung's market strategy for memory chips During the years 1980 to 2005, Samsung entered the market for memory chips and quickly became the leader. What were the factors of this success? How is this position affected by recent market developments? How has Samsung managed to develop a win-win strategy of differentiation and premium prices while having lower costs than its competitors? A. Analysis of the differentiation strategy of Samsung a. The memory chip market is a commodity market, where one would expect uniform prices. [...]

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