REVENUE STRATEGY - SAMSUNG ELECTRONICS

The semiconductor industry is seeing intensifying competition and capacity addition, driving prices and profitability downwards.

1. Samsung Electronics' semiconductor unit has even sold chips below manufacturing costs.
2. It has been placing more emphasis on developing NAND flash chips, which can store information even when the power is switched off, and are widely used in handheld products such as music players, digital cameras, and portable media players, and provide an alternative profit driver when DRAM chip prices are falling. (More costly than conventional hard drives, flash drives are faster, more reliable, and consume less power).
3. On June 14 it opened a $3.5 billion state-of-the-art NAND plant in Austin, Tex., where it already has a memory chip factory.
4. It hopes that one eventual driver of demand will be notebook PCs, which will be equipped with NAND-based drives, called solid-state drives or SSDs. Although more costly than conventional hard drives, flash drives are faster, more reliable, and consume less power
5. It has built up a superior product mix - its memory chip business is the biggest in the world.
6. It has developed the capability of delivering custom-made memory devices for game consoles; handsets doubling as music players; and high-end servers—that all allow fatter profits.

Revenue below manufacturing costs is a cancer for any business outside of “Catch-22”. A business needs to focus on profitable sources of revenue to survive.

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