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

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

3. 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 RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary

4. 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 RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary

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

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

7. Samsung Group ElectronicsMachinery & HeavyChemicalFinanceOthers Samsung Electronics Semiconductor Division Home Appliances Division Digital Media Division Telecommunication Industries RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary

8. Five Forces Analysis RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary Bargaining Power of Suppliers: - Low power by raw material suppliers - Power by wafer equipment manufacturers Threat of New Entrants -Capital and R&D intensity are a considerable entry barrier Threat of Substitutes - Samsung invests in substitutes - Other alternatives not competitive in price Bargaining Power of Buyers - PC manufacturers consume most of production (75-80%); price dictated by supply - Commodity-like product 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

9. SWOT Analysis Strengths R&D & Manufacturing Chaebol Management style Alliances Threats New Technologies Rambus Competitors’ Alliance Weakness Relaying on DRAM Size Opportunities Technology Innovation Branding RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary

10. Four Strategic management categories to excel 1.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 *Wiseview Brand*Strategic partnership development *Differentiation *Diversification *“Sinthesysation” Strategy *Highest quality *Technology leadership *Market penetration *Product enhancement *Solution provider *Memory leader Vision LCDLSIMemory RecommendationsAgenda Industry overview Company Analysis Strategic Analysis Summary 4+2 Analysis

11. RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary 2.Performance Oriented Culture Culture description creates consciousness about industry Manufacturing Orientation and permanent performance evaluation 3.Fast, Flexible, flat company structure Fast decision making in spite of hierarchical structure Improvements in organizational structure may strengthen the firm. 4.Flawless operation execution Process automation and design improvements Strong Quality Control implementation 4+2 Analysis Four Strategic management categories to excel

12. 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 RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary 4+2 Analysis Additional categories to excel

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

14. Summary Technological Understanding Industry and company overview Strategic analysis Five Forces: Rivalry SWOT: R&D 4+2 : Strategy Value-Cost-Speed: Speed RecommendationsAgenda Industry overview Company Structure Strategic Analysis Summary

15. How to keep the No. 1 status ? Keep bold and aggressive management style Use tech hype cycle to create awareness Recommendations Agenda Industry overview Company Structure Strategic Analysis Summary FRAM MRAM

16. RecommendationsAgenda Industry overview Company Analysis Strategic Analysis Summary 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