Case Study for Samsung Electronics Essay

1448 Words Apr 15th, 2013 6 Pages
Case Analysis for Samsung Electronics 1. What is SMIC’s strategy? Should Samsung be concerned about SMIC? SMIC seems to execute the same kind of strategy Samsung used before to succeed. The strategy is selling their products at low prices and growing their market share at the expense of profitability. SMIC may threaten Samsung’s business in the future, but not too much. Although SMIC can get many resources, such as cheap funds and lands from Chinese government and foreign investors, SMIC only focuses on producing chips, not designing chips. The cost of the application of a new tap today is 3 billion and it is difficult for SMIC with sales revenue of 365.8 million in 2003. Samsung’s success depends on its constant technology …show more content…
With high processing technology (0.11μm) to control yield rate (Samsung 80% vs Industry weighted average 59%), Samsung can produce more efficiently. So the depreciation per unit is lower. The production efficiency advantage (25%) is higher than the cost depreciation advantages (17%). That may because Samsung uses more advanced and expensive machine. e. Samsung’s advantage in unit R&D cost may come from three ways. First, the competitive corporation culture drive employees to devote themselves in innovation. And the technical person works together with the manufacturing one, making the innovation process more efficient. Second, the innovation method is effective. The can use same core technology to develop different products types, such as the DDR and Rambus. Third, centralization of the R&D facilities saves an average 12% fab construction costs. f. Samsung’s unit SG&A cost advantage comes from the efficient management structure of the country reducing the general administration cost and good reputation of products reducing the sales expenses. 3.2 Analysis Samsung VS SMIC a. Compared to the industry composite, Samsung’s profit advantage over SMIC mainly from the price realization (70%), and the cost advantage only stands for 30%. The huge price gap results from several aspects. First, the quality and reputation for SMIC is lower. Second, the technology SMIC used was one or two generation older than Samsung.

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