Will Samsung Electronics’ New Challenge Succeed?

Samsung Electronics is planning a new strategy to break through the decline in their DRAM semiconductor sales. On August 7, Samsung announced that it will mass produce a third generation 256 megabytes Rambus DRAM semiconductors. The new product is an upgrade from the former 128 megabytes to 256 megabytes. Moreover, Samsung will join with Sony in the Flash Memory area while it will join with Dell on Rambus DRAM and LCD development. It plans to increase profit through active technical cooperation and internal reduction of production costs.

Yet, beneath this new life lies the DRAM semiconductor’s poor performance. Opinions indicate that the future of Samsung depends on the improvement of the DRAM situation and whether it can manufacture a product in the digital technology realm that would match world class standards.

Ñ A New Challenge: The production of Samsung’s newly announced 256 MB DRAM utilizes cutting edge micro-production, increasing the rate of chip production by 30 percent and the speed of data transmission by 20 percent. Rambus DRAM is used in high power PCs, workstations, game machines, and will be used in digital TVs in the near future.

Moreover, Samsung announced a technological partnership with Sony in Flash Memory development. Also, the major U.S. computer corporation Dell will export Rambus DRAM and LCD for four years, costing up to 160 million dollars, and will join hands in developing a new generation of computers. This is to overcome the sluggish performance of SDRAM used in most PCs.

Samsung also plans to change its strategy in the TFT-LCD area to generate more profits, reducing part-production from an average of 150 to 100 and lowering the rate of progress two levels from competing companies. Additionally, B-Memory system LSI also entered the production improvement fray and the mobile phone sales rank in the top 5 of the world.

A Samsung representative said, ``On the whole, the profit margin falls within 170 million dollars and ranks within the world top 10, whereas the ration of cost-reduction amounts only up to 47 percent. Last July, we ranked 70 in Forbes top 500 corporations.``

Ñ Remaining Problems ~ The most important questions is when will DRAM return to the top seat. When looking at number of sales, semiconductors comes to 35 percent and memory comes to only 23 percent. The reason why memory becomes so important is because it is the key factor in increasing profit.

Dae Woo Funds financial analyst says, ``Although things like B-Memory may provide an `insurance` in other areas of the business, unless the market for these things matures, the semiconductor remains the most important product.`` He predicts, ``After Microsoft releases Windows XP and a new generation of PCs comes on the scene, PC sales will climb up again after the first quarter of next year.``

artemes@donga.com