The past couple of years have been brutal for memory-chip makers: The electronics industry has not been recovering fast enough to push up chip prices. But Hwang Chang Gyu, president of Samsung Electronics Co.'s memory-chip unit, has been laughing all the way to the bank. That's because Hwang believes Samsung has finally beaten all major rivals in a high-risk game of spending high and winning big. "We are the dominant player, and then there are a group of second-tier players," Hwang declares.
Hwang has reason to boast. Samsung's memory business posted 2002 sales of $7 billion, roughly equal to the sales of the next three producers combined. The unit made a profit of nearly $2 billion -- in a year when most other memory specialists were in the red. The big difference is that Hwang has focused on specialty products that command fat margins, such as graphic chips for game consoles, high-density memory modules for powerful servers, and flash-memory chips for portable gadgets. His rivals have been largely selling commodity-type chips for the mass PC market.
Although Samsung was once criticized for betting on too many segments, its diversity is now paying off. The strategy makes it easier to ride out chip cycles. When the market for the dynamic random access memory (DRAM) chips that provide horsepower for PCs is down, Samsung makes money with flash memory and static random access memory chips (SRAM) used in mobile phones and handhelds, which are on different cycles.
By comparison, rivals Micron Technology Inc. and Hynix Semiconductor Inc. each derives more than 90% of their revenues from DRAMs. Even Samsung still gets two-thirds of its memory business from DRAMs. But by 2006, Hwang wants half of its chips to go into cell phones, personal digital assistants, and other handhelds.
Much of Hwang's high-tech knowhow was gained during his years of study and work in the U.S. He earned a PhD in electrical and computer engineering from the University of Massachusetts, Amherst, and worked as a research associate at Stanford University's Dept. of Electrical Engineering for four years, before joining Samsung Electronics' Semiconductor R&D Center in 1989. He then quickly climbed the ranks.
These days, Hwang is as bullish as ever. After investing $2.5 billion in new capacity last year, he budgeted another $3 billion this year to widen the gap with other players. He is particularly keen on prospects for flash-memory chips, which can hold data even when electric power is turned off. Samsung's flash memory sales jumped to $1.1 billion last year, from $350 million in 2001. Hwang's target is to boost flash-memory sales to $4.2 billion annually by 2005, which would make Samsung No. 1 in the segment, overtaking Intel. It may be a tough time for others, but Hwang and Samsung are moving up.
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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