Samsung Electronics' Semiconductor Division (A)
2002 | Case No. IB24A
In 2000, Samsung Electronics was the world’s largest manufacturer of semiconductor memory chips. It’s main line of business was the manufacture of DRAM chips, but worldwide demand had plummeted. Moreover, Intel, the world’s largest producer of microprocessors, had formed an alliance with Rambus, a memory design company, to develop a new super high-speed DRAM design that would represent a new industry standard. Senior management at Samsung faced fundamental strategic issues: Should it continue to invest in the high-risk DRAM business alone and could Samsung be a market leader by itself? Should it be steadfast in its opposition to the alternative standard, which represented new opportunities? If it adopted the Rambus design, how many resources should be devoted to the manufacture of Rambus chips? Diversification out of the volatile memory business was a key strategic issue and represented one possible means for reducing Samsung’s vulnerability to industry-wide downturns, but Samsung’s past efforts to expand its non-memory business had met with only limited success. This case provides the background to the issues Samsung faced as it debated how to meet these challenges while remaining a leading player in the semiconductor industry.
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