Samsung Electronics’ Semiconductor Division

1. Samsung Electronics’ Semiconductor Division 30 March 2004 Session B, Group 7: Chen, I ChunChoi, Seung Hyun Fernandez Zabelguelsky, LuisHalbach, Frank Mastrostefano, Adrian; De Meyer, Frederik

2. Company Structure Strategic Analysis Industry overview Summary Agenda Recommendations Agenda Introduction Industry Overview company structure Strategic Analysis Summary Recommendations

3. Company Structure Strategic Analysis Industry overview Summary Agenda Recommendations Semiconductors • Neither conductor nor insulator • E.g. Silicon, Zinc, Germanium • To dope = add impurities DRAM • CPU: read / write data very fast • every cell is randomly accessible • Dynamical = content needs to be refreshed

4. Company Structure Strategic Analysis Industry overview Summary Agenda Recommendations Manufacturing • Blank wafer production • Silicon ingot • Slicing + polishing • Semiconductor fabrication • Oxidation + photo resist coating • UV exposure + Development • Etching + Resist removal • Doping + Layering • Assembly & packaging • Back grinding • Testing + cutting • Wire-bonding + packing

5. Company Structure Strategic Analysis Industry overview Summary Agenda Recommendations Semiconductor Industry 2002 + Forecast Semiconductor Industry 2002 Marketsize 2002: US$ 75 billion Samsung: US$ 9.2 billion = 13%

6. Company Structure Strategic Analysis Industry overview Summary Agenda Recommendations DRAM Industry 2Q 2003 DRAM Industry 2Q 2003 Marketsize 2Q: US$ 3.7 billion Samsung: US$ 1.2 billion = 32% Characteristics of Industry • CAPEX: Capital Spending • short Product Life Cycle • R&D intensive

7. Company Structure Strategic Analysis Industryoverview Summary Agenda Recommendations Samsung Group Electronics Machinery & Heavy Chemical Finance Others Samsung Electronics Semiconductor Division Telecommunication Industries Digital Media Division Home Appliances Division

8. CompanyStructure Strategic Analysis Industryoverview Summary Agenda Recommendations Five Forces Analysis Bargaining Power of Buyers -PC manufacturers consume most of production (75-80%); price dictated by supply -Commodity-like product Threat of Substitutes -Samsung invests in substitutes -Other alternatives not competitive in price Threat of New Entrants -Capital and R&D intensity are a considerable entry barrier Rivalry Among Competitors -High exit barriers (large investments) -High concentration; high competition -Cyclical volatile demand -Only first movers make profits -Large volume required -Low cost + high utilization Bargaining Power of Suppliers: -Low power by raw material suppliers - Power by wafer equipment manufacturers

9. CompanyStructure Strategic Analysis Industryoverview Summary Agenda Recommendations SWOT Analysis

10. CompanyAnalysis Strategic Analysis Industryoverview Summary Agenda Recommendations • Clearly Stated Focused Strategy • Division mid and long term goal: Provide the world best device solution • Achieve u$s 30 billion sales in 2005 • Provide total solution for digital appliances • Memory, TFT LCD and LSI market leader Memory LSI LCD Vision *Solution provider *Memory leader *Market penetration *Product enhancement *Highest quality *Technology leadership Strategy *Differentiation *Diversification *“Sinthesysation” *Strategic partnership development *Wiseview Brand 4+2 Analysis Four Strategic management categories to excel

11. CompanyStructure Strategic Analysis Industryoverview Summary Agenda Recommendations • Performance Oriented Culture • Culture description creates consciousness about industry • Manufacturing Orientation and permanent performance evaluation • Fast, Flexible, flat company structure • Fast decision making in spite of hierarchical structure • Improvements in organizational structure may strengthen the firm. • Flawless operation execution • Process automation and design improvements • Strong Quality Control implementation 4+2 Analysis Four Strategic management categories to excel

12. CompanyStructure Strategic Analysis Industryoverview Summary Agenda Recommendations • Develop Innovation that transform industry • Largest and most innovative memory manufacturer ( in 1999 -2001 among top 10 firms in U.S. patents) • Keep Leadership committed to the business • Commitment shown in decision making about investments, HR hiring and motivation • Make growth happen with mergers and acquisitions • Joint R&D developments • Joint investments and technology transfer • Partnerships with start-ups 4+2 Analysis Additional categories to excel

13. CompanyStructure Strategic Analysis Industryoverview Summary Agenda Recommendations CUSTOMER VALUE/ SPEED VALUE/ SPEED CUSTOMER COST/ SPEED COMPE- TITORS SAMSUNG VALUE/ SPEED VALUE/ SPEED COST/ SPEED COMPE- TITORS SAMSUNG Value, Cost and Speed • SPEED: critical in DRAM industry • Leadership due to • organizationstructure • Chaebol start • Decentralization then • Future? • importance of people • VALUE: • Chip speed / capacity • focus on real customer needs ! • long-term relations with customer • price premium in spite of commodity product • COST: declining cost per megabite in Industry • Cost Advantage due to • economies of scale • process innovation • new demand sources

14. CompanyStructure StrategicAnalysis Industryoverview Summary Agenda Recommendations Summary • Technological Understanding • Industry and company overview • Strategic analysis • Five Forces: Rivalry • SWOT: R&D • 4+2 : Strategy • Value-Cost-Speed: Speed

15. CompanyStructure StrategicAnalysis Industryoverview Summary Agenda Recommendations How to keep the No. 1 status ? • Keep bold and aggressive management style • Use tech hype cycle to create awareness Recommendations MRAM FRAM

16. CompanyAnalysis StrategicAnalysis Industryoverview Summary Agenda Recommendations Recommendation • Reduce the geographical concentration of the R&D facilities • Diversify to less cyclical value added businesses to offset cyclical effects • Reduce bureaucracy • Change organizational structure to a more flexible one, as a matrix organization based on the product mix

17. Questions