Matrix Semiconductor Inc. (B) Transitioning from Innovation to Execution

In late 2004, the future looked bright for Matrix Semiconductor Inc. The company had pioneered the design and development of three-dimensional (3D) integrated circuits that enabled a new class of low-cost, high-density, non-volatile memory products intended to meet the unique requirements of the consumer electronic markets. Matrix’s second-generation product moved into high-volume production in July. Since then, Matrix had shipped more than 4 million units at a rate that climbed to 1.5 million units a month. With a growing number of well-known companies in its customer portfolio, an impressive list of strategic partners and investors, and a third-generation product waiting in the wings, the company appeared to be positioned for success. However, fueled in part by the contagious enthusiasm of the high tech/Internet bubble, the company’s opportunities had looked nearly as promising five years earlier (see SM-126A). While Matrix’s investors, potential markets, and prospective customers had fallen in line, unfortunately, the company’s leading-edge technology did not follow suit. Originally, the team targeted late 2001 to begin shipping its first generation product. However, a series of unforeseen design and process technology challenges caused the launch date to slip. Just as 2001 came and went without a product that was ready for high-volume production, so did 2002, 2003, and the better part of 2004. Matrix senior management acknowledged that the road between innovation and execution had been complicated, difficult, and more time-consuming than any of them had anticipated. This case explores the importance of the company’s early strategic decisions, the challenges (and changes) it uncovered along the way, and its eventual breakthrough to high-volume production.