A Strategic Analysis in Dynamic Random Access Memory Industry in Taiwan

The credit crisis and global economic recession have severely impacted on Integrated Circuit (IC) industry particularly in Dynamic Random Access Memory (DRAM) industry. The average selling price declined below the cost of chip and almost all memory producers are lack of cash flow. One of the global three 3 producers has been driven out of this industry and all Taiwanese DRAM vendors are facing to a dilemma on how they can survive through the economic recession and oversupply circumstance. This paper used Porter’s five forces analysis framework to examine the power of suppliers and buyers, threat of substitutes, potential entrant, and market penetration and strategies from each competitor and then applied the Resource-Based View to analyse the current Taiwanese resources with competitive advantages. The recommendatory strategies for Taiwanese DRAM vendors which include strategic alliance, diversification strategy, and branding strategy were made on the basis of the analysis results. It was suggested to form an alliance among producers in Taiwan to increase the bargaining power to suppliers, to reduce the cost of technology transfer, and to leverage all resources to co-develop the own technologies. In view of the diversification strategy, Taiwanese vendors may enter to flash memory industry in order to obtain the market agility as well as to gain the maximum profits due to the prominent demand for smart phone segment and stable growth in consumer appliances. Branding strategy is to present the strength of Taiwan’s value of production in order to compete with other global competitors and obtain the market awareness, loyalty from customers. This may create price premium and product differentiation in DRAM industry. Hopefully, Taiwan’s DRAM makers can change their mindsets and myopia, then alliance and sharing resources each other with alliances so that they may survive at next price competition and global recession