The Samsung Electronics Company was the largest conglomerate in South Korea. The total net sales of the Samsung Group were $135 billion in 2004. It has 337 overseas operations in 58 countries. Electronic, finance, and trade and services were the three core sectors within the Samsung Group. Semiconductor products were classified into two different categories of chips, which are memory and logic.
To focus on the global memory chip industry, the primary threat facing the firm contained suppliers and price-conscious buyer. Based on the Porter’s Five Forces Model, the powerful suppliers can squeeze the focal firm, the powerful buyers can lower profit the focal firm by demanding lower price and higher levels of quality and service. From the case, with different semiconductor equipment, the technology become more complex and the number of suppliers became more intensive. Suppliers of raw materials would give discount of up to 5% for high-volume buyers. OEMs were the largest buyers. In the global PC market in 2005, because rivalry between PC producers was intense, there was no one controlling more than 20%. Also the memory industry had high entry barriers. Companies needed large amounts of capital investment and technology support. At the beginning of Korea’s semiconductor industry in 1974, without strong financing and proprietary technology, the start-up ran into financial difficulties.
The secondary threat facing the firm was rivalry in the industry. In 2005, with increasing number of large-scale entries by Chinese firms, the industry experienced fierce rivalry. Samsung had a sharply decreasing market price during late 2004. The price drop was due partly to an increase in industry capacity. However, the Chinese competitors lacked the necessary organizational experience and tacit knowledge required to master the design and production process. From the point of view of Samsung, this lack would be the