Samsung is the world leader in memory chip manufacturing, producing hundreds of variants of DRAM. It faces competition from Chinese manufacturers like SMIC that are challenging its position in Asian markets. The author argues Samsung should not collaborate with Chinese competitors. Samsung achieves cost leadership through economies of scale and a large R&D department. It has the lowest DRAM manufacturing costs and highest profits margins in the industry. Samsung also has a strong financial position and effective human resources practices that help it compete successfully.

1. Irtaza Ishtiaq
MBA 30 (B) International Islamic University, Islamabad.
SAMSUNG ELECTRONICS CASE BRIEF
Samsung is the world leader in the memory chip industries. It presented hundreds of variants in Dynamic
Random Access Memory (DRAM). Samsung is working on the highly competitive basis and providing
customized memory chips to their customers according to the respective demands. Samsung is facing heavy
competition from Chinese memory chip manufacturers such as SMIC, which is challenging their position
in Asian countries.
According to my opinion, Samsung should not collaborate with Chinese competitors because Samsung is
already providing better quality memory chips at low cost to the world such as DRAM. Chinese competitors
are increasing their rivalry by forming alliances with other companies in memory chip industry, but
Samsung can compete with the help of its research and development department and their long experience
in this field. Working with Chinese companies can cause a risk of losing intellectual assets privileges of
designs and proficiency shared with them in these circumstances. Following are the reasons in support of
my opinion:
1. Cost Leadership
2. Research and Development Department
3. Profit Margins
4. Financial Position
5. Human Resource Department
Should Samsung collaborate with Chinese competitors or compete with them?
Samsung is the cost leader in memory chip industry. Samsung uses economies of scale and R&D
department to achieve this leadership. The cost of DRAM after manufacture is $4.31, which is lowest in
the chip manufacturing industry. It shows that SMIC is not a cost leader in this industry.
Research and Development department of Samsung is located in a single site, which is providing them cost
benefits as well as with almost 19000 researchers working in that facility to provide better innovations and
inventions in memory chip industry. Samsung is using 8-inch wafer technology in almost 88% memory
chip manufacturing. They are also continuously increasing the budget of R&D department to compete with
rivals; in 2003, it was 2947 million dollars.
Samsung is enjoying high profits with the help of high prices of its memory chips in the industry. In 2003,
Samsung has highest average selling price shown in exhibit 3 is $15.25 of DRAM, and the average
operating margin is also high in comparison with Chinese competitors; it was 44%.
The financial position of Samsung is strong as matched to its Chinese competitors, in exhibit 1 it is shown
that total assets of Samsung was 32892 million dollars and there cash and equivalent are 6667 million
dollars in 2003. With this strong financial position, Samsung can acquire small firms such as Micron and
Hynix to expand its business geographically.
Human resource department of Samsung is very effective and providing right employees for the right job.
Samsung is using evaluation scale for the promotion of their employees; it means that they are promoting
them based on merit. Samsung is also supporting their employee’s higher education such as MBA or Ph.D.
in foreign countries. HR is taking care of 90% personal burden of their employees, which allow them to
work more effectively and efficiently for Samsung. Monetary incentives also drive their employees from
working hard. Senior management also considers the point of view of all the staff from junior level to top
level while taking a final decision on any critical point.