Samsung Electronics

Harvard Business School Case #705-508

Case Software #XLS-318

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Exhibit 1 Financial Results (USD, millions)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Samsung*
Net Revenues 1903 2271 3006 4427 5896 6298 6871 7741 10091 14604 20898 18804 13048 16629 22802 27216 24418 33167 36385
Cost of Goods Sold 1652 1954 2586 3735 4550 4836 4997 5634 6874 9150 12112 14123 8975 11571 15419 17459 18486 21910 24644
R&D 11 14 22 38 136 231 371 443 678 1392 1454 1512 896 1378 1390 1603 1824 2451 2947
Net Income 24 37 44 149 233 102 90 92 191 1198 3234 194 87 259 2768 4775 2222 5875 4975
Cashflow from Operation 75 116 143 371 1115 1074 947 1177 2050 3925 6069 1978 1967 4426 6179 7506 4744 9325 8222
Cash & Equivalents(a) 49 45 103 199 80 149 222 355 539 1149 1509 1141 966 983 1026 1534 2129 4734 6667
Long&Short-term Debt(b) 435 467 598 1786 2019 3086 4034 4758 4040 4658 6054 9276 9171 8461 5016 3224 2040 1355 968
Net Debt (b-a) 386 422 495 1587 1940 2938 3812 4402 3501 3509 4546 8135 8205 7477 3990 1690 -89 -3379 -5699
Interest Expense/Debt 48 51 61 89 194 302 414 445 433 394 482 480 536 924 630 273 155 84 80
Total Assets 748 991 1383 3370 4334 5731 7568 8102 8296 11314 17589 19680 24251 14852 20774 23788 21629 27437 32892
Micron
Net Revenues 76 49 91 301 446 333 425 506 828 1629 2953 3654 3516 3012 3764 7336 3936 2589 3091
Cost of Goods Sold 46 43 69 100 192 178 242 285 378 608 1130 1835 2078 2125 2107 2963 1984 1146 1895
R&D 7 3 5 9 21 36 36 48 57 83 129 192 209 272 322 428 490 561 656
Net Income 0 -34 -23 98 106 5 5 7 104 401 844 594 332 -234 -69 1548 -521 -907 -1280
Cashflow from Operation 18 -13 -1 142 165 84 98 121 231 611 1092 1055 990 242 827 2629 1578 698 447
Cash & Equialents(a) 1 5 9 164 161 77 68 73 186 433 556 287 988 649 1614 2466 1678 986 922
Long&Short-term Debt(b) 36 44 45 24 51 99 93 89 80 155 156 480 889 865 1639 982 531 454 1086
Net Debt (b-a) 34 39 35 -141 -110 22 26 16 -106 -279 -400 193 -99 215 26 -1485 -1147 -532 164
Interest Expense/Debt 2 0 5 1 -15 11 11 9 8 8 7 9 31 65 132 111 27 27 40
Total Assets 133 132 129 388 625 697 706 724 966 1530 2775 3752 4851 4688 6965 9632 8363 7431 7075
Infineon
Net Revenues 0 0 0 0 0 0 0 0 0 0 0 0 2885 3175 4208 7757 6371 4966 4884
Cost of Goods Sold 0 0 0 0 0 0 0 0 0 0 0 0 1623 2149 2421 3492 4245 3085 2522
R&D 0 0 0 0 0 0 0 0 0 0 0 0 457 637 733 1092 1336 1011 864
Net Income 0 0 0 0 0 0 0 0 0 0 0 0 -95 -775 60 1199 -663 -974 -345
Cashflow from Operation 0 0 0 0 0 0 0 0 0 0 0 0 615 -232 613 2077 287 73 757
Cash & Equivalents(a) 0 0 0 0 0 0 0 0 0 0 0 0 340 906 878 1074 955 1847 2185
Long&Short-term Debt(b) 0 0 0 0 0 0 0 0 0 0 0 0 1139 1253 996 284 414 1745 1978
Net Debt (b-a) 0 0 0 0 0 0 0 0 0 0 0 0 799 347 118 -791 -541 -102 -207
Interest Expense/Debt 0 0 0 0 0 0 0 0 0 0 0 0 22 94 22 0 1 24 41
Total Equity 0 0 0 0 0 0 0 0 0 0 0 0 3205 3078 3861 6368 8093 7735 6539
Total Assets 0 0 0 0 0 0 0 0 0 0 0 0 4402 4471 6088 9254 10483 9662 8018
Hynix
Net Revenues 0 0 0 0 0 0 0 0 0 0 0 4537 6201 6288 8035 9489 4097 3739 4030
Cost of Goods Sold 0 0 0 0 0 0 0 0 0 0 0 2721 3959 4739 6584 4648 3011 2015 2272
R&D 0 0 0 0 0 0 0 0 0 0 0 0 21 29 68 254 264 338 296
Net Income 0 0 0 0 0 0 0 0 0 0 0 -474 -599 -129 167 -2280 -3844 -1560 -1770
Cashflow from Operation 0 0 0 0 0 0 0 0 0 0 0 966 1192 338 1607 2788 -69 933 1171
Cash & Equivalents(a) 0 0 0 0 0 0 0 0 0 0 0 346 611 578 811 280 452 255 529
Long&Short-term Debt(b) 0 0 0 0 0 0 0 0 0 0 0 6045 13775 8966 10379 10545 4910 3414 3231
Net Debt (b-a) 0 0 0 0 0 0 0 0 0 0 0 5699 13165 8388 9568 10265 4458 3159 2702
Interest Expense/Debt 0 0 0 0 0 0 0 0 0 0 0 411 651 941 1055 1222 846 434 253
Total Equity 0 0 0 0 0 0 0 0 0 0 0 1449 -1662 1096 9204 7097 7892 24813 4267
Total Assets 0 0 0 0 0 0 0 0 0 0 0 9910 14768 11742 20911 18217 11165 8891 7218

Source: Thomson Datastream.

Note: Hyundai Semiconductor went public in December 1996. It acquired LG Semiconductor in 1999 and changed its name to Hynix. Micron was incorporated in 1978. Infineon was founded in April 1999, when the semiconductor operations of parent company Siemens AG were spun off to form a separate
legal entity. In March 2000, the company went public and is now listed on the Stock Exchanges of Frankfurt and New York. For 1985 to 1998, Siemens AG data were used.
*Parent only
Exhibit 3 DRAM Average Selling Price (ASP), Operating Cost, and Operating Margin (256Mbit equivalent)

1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 Average

Samsung
Average Selling Price($) 39.08 38.44 43.79 33.42 20.82 13.24 4.86 5.16 9.31 7.75 6.86 7.58 5.76 5.27 5.79 5.90 6.15 15.25
Operating Cost($) 16.95 13.64 14.41 15.70 12.36 12.02 9.53 7.46 5.72 5.33 4.92 5.33 4.77 4.60 4.00 3.82 3.92 8.50
Operating Margin 57% 65% 67% 53% 41% 9% -96% -45% 39% 31% 28% 30% 17% 13% 31% 35% 36% 44%
Micron
Average Selling Price($) 32.49 25.13 30.83 25.65 12.59 8.30 3.76 2.85 5.01 7.48 5.25 4.99 5.10 4.33 4.97 5.32 4.51 11.09
Operating Cost($) 34.75 24.00 20.31 19.65 15.81 15.96 12.01 6.67 8.28 8.98 7.97 7.25 7.96 6.65 6.06 5.57 4.75 12.51
Operating Margin -7% 4% 34% 23% -26% -92% -219% -134% -65% -20% -52% -45% -56% -53% -22% -5% -5% -13%
Infineon
Average Selling Price($) 26.62 26.5 30.93 16.01 10.58 7.98 4.20 4.38 8.90 7.20 5.50 5.90 4.89 4.69 5.41 5.21 4.95 10.58
Operating Cost($) 18.11 16.69 10.88 14.14 13.46 13.76 12.00 11.00 9.80 8.20 7.50 7.96 5.62 5.10 4.69 4.69 4.75 9.90
Operating Margin 32% 37% 65% 12% -27% -73% -186% -151% -10% -14% -36% -35% -15% -9% 13% 10% 4% 6%
Hynix
Average Selling Price($) 28.72 29.83 37.76 20.95 12.42 7.35 3.86 3.73 8.56 6.30 4.71 4.92 4.57 4.50 5.46 5.36 5.16 11.42
Operating Cost($) 22.21 24.68 23.94 17.40 11.82 8.73 9.33 9.38 6.08 9.15 7.47 6.56 6.16 5.61 4.82 4.37 3.89 10.68
Operating Margin 23% 17% 37% 17% 5% -19% -142% -152% 29% -45% -59% -33% -35% -24% 12% 18% 25% 6%
Worldwide
Average Selling Price($) 36 33.8 36.5 22.9 14.30 9.02 4.8 3.49 8.58 7.36 6.21 6.14 5.12 4.62 5.47 5.37 5.06 12.63
ASP Quarterly Change -6% 8% -37% -37% -37% -47% -27% 146% -14% -16% -1% -17% -10% 19% -2% -6% -5%

Price Premium of Samsung

33% 42% 32% 60% 75% 68% 23% 41% 24% 11% 33% 44% 19% 17% 10% 11% 26% 34%
ASP over Competitors' ASP
Operating Margin of (Samsung
- Competitors' Average) 41% 45% 22% 36% 57% 70% 86% 101% 54% 57% 77% 68% 53% 42% 30% 27% 28% 53%

Source: Merrill Lynch.

Exhibit 4 DRAM Production Volume by Density in 2003

Production Volume (million unit, 256Mbit equiv.)

Samsung Micron Infineon Hynix SMIC

4Mbit -- -- -- -- -- -- -- -- - -
16Mbit 1.3 0.1% 1.0 0.2% 0.0 0.0% 10.0 1.9% - -
64Mbit 16.4 1.8% 29.7 4.4% 0.0 0.0% 33.6 6.4% - -
128Mbit 151.6 16.9% 88.1 13.1% 43.7 8.2% 96.8 18.6% - -
256Mbit 695.8 77.6% 540.1 80.3% 479.5 89.6% 374.2 71.8% 68.2 100.0%
512Mbit 30.4 3.4% 13.7 2.0% 11.5 2.1% 6.8 1.3% - -
1Gbit 1.0 0.1% 0.1 0.0% 0.6 0.1% 0.0 0.0% - -
Total 896.4 100.0% 672.8 100.0% 535.3 100.0% 521.5 100.0% 68.2 100.0%

Source: "DRAM Supply and Demand Quarterly Statistics: Worldwide, 2003-2005," Gartner, Inc. As the research is over 12 months old,
Gartner deems it to be a historical perspective.
Exhibit 5 DRAM Production Volume by Product Line in 2003 (million, 256 Mbit equivalent)

Production Volume (million unit, 256Mbit equiv.)

Samsung Micron Infineon Hynix Worldwide

SDRAM 206.1 23.0% 191.8 28.5% 79.1 14.8% 117.5 22.5% 0.0
DDR SDRAM 585.3 65.3% 475.6 70.7% 437.8 81.8% 401.4 77.0% 68.2
DDR2 SDRAM 40.4 4.5% 0.0 0.0% 1.7 0.3% 0.0 0.0% 0.0
RDRAM 37.9 4.2% 0.0 0.0% 2.4 0.4% 0.0 0.0% 0.0
Other DRAM 25.9 2.9% 5.4 0.8% 14.3 2.7% 1.3 0.2% 0.0
Total 896.4 100% 672.8 100% 535.3 100% 521.5 100% 68.2

Source: "DRAM Supply and Demand Quarterly Statistics: Worldwide, 2003-2005," Gartner, Inc. As the research is over 12 months old,
Gartner deems it to be a historical perspective.
ent)

v.)
Worldwide

0.0%
100.0%
0.0%
0.0%
0.0%
100%

ch is over 12 months old,

Exhibit 6 Worldwide DRAM Average Selling Price History and Forecast, 2000-2010 (Dollars)

2000 2001 2002 2003 2004 2005(E) 2006(E) 2007(E) 2008(E) 2009(E) 2010(E)
1Mbit 1.51 1.06 1.10 - - - - - - - -
4Mbit 1.90 1.34 1.28 0.97 0.79 0.51 0.40 - - - -
16Mbit 3.42 1.88 1.61 1.19 0.90 0.62 0.50 0.50 - - -
64Mbit 7.18 1.88 1.55 1.88 2.13 1.39 0.74 0.70 0.62 - -
128Mbit 14.41 2.99 3.30 2.75 3.48 2.41 1.28 1.01 0.90 0.66 -
256Mbit 48.59 6.73 6.22 4.68 4.88 3.67 1.64 1.21 1.10 0.84 0.68
512Mbit - 150.00 42.11 21.70 12.76 6.75 3.12 2.79 2.53 1.78 1.25
1Gbit - - - 83.57 40.76 18.04 7.29 5.54 4.81 2.22 1.55
2Gbit - - - - - 82.93 21.29 11.70 9.68 3.99 3.08
4Gbit - - - - - - - 125.15 47.00 13.02 7.50
8Gbit - - - - - - - - - - 93.18
ASP per Megabyte 0.99 0.22 0.21 0.16 0.17 0.11 0.05 0.04 0.04 0.02 0.01
ASP per 256Mbit Equiv. 31.63 7.08 6.76 5.19 5.49 3.66 1.65 1.42 1.28 0.58 0.42
Annual ASP growth -17.3% -77.6% -4.5% -23.3% 5.8% -33.3% -55.1% -13.7% -9.9% -54.4% -28.3%

Source: "Forecast: DRAM Market Statistics, Worldwide, 2000-2010 (1Q05 Update)," Gartner, Inc.
Exhibit 7a Comparison of Operating Profit of DRAM in 2003 (256Mbit equivalent a)

Competitors' Samsung -Competitors' Competitors' Weighted

Samsung Micron Infineon Hynix SMIC Weighted Average Weighted Average Average/Samsung
Average Selling Price $5.68 $4.93 $5.05 $4.97 $4.43 $4.96 $0.72 87.3%
Fully loaded costs $4.31 $6.61 $5.02 $5.33 $4.84 $5.70 -$1.39 132.2%
Raw materials 1.18 1.93 1.58 1.93 1.84 1.83 -0.65 155.1%
Labor 0.54 0.94 0.76 0.51 0.23 0.74 -0.19 137.0%
Depreciation 1.35 1.88 1.50 1.48 1.63 1.64 -0.29 121.5%
R&D 0.60 0.57 0.71 0.58 0.80 0.62 -0.02 103.3%
SG&A 0.65 1.28 0.46 0.83 0.34 0.87 -0.22 133.8%
Operating Profit (a) $1.37 -$1.68 $0.02 -$0.36 -$0.41 -$0.74
Operating Margin 24.1% -34.1% 0.5% -7.3% -9.3% -15.0%
Production Volume in 256Mbit equiv. (b)
(millions) 896.4 672.8 535.3 521.5 68.2
Operating Profit in $Million (a × b) $1,224.3 -$1,129.5 $12.9 -$188.1 -$28.1

a
Explanation of "256Mbit equivalent" term used above: Each company in the industry uses a slightly different design rule and process technology for each product, along with producing a different mixture of architectures and memory sizes. So that
makes it very difficult to do an apples-to-apples comparison for even the same exact product. Therefore the industry analysts have settled on a common approach for comparing the overall cost competitiveness of a company. The company's total
sales and production costs are weighted by memory generation, with the 256Mbit generation given a weight of 1.00, the generations above 256Mbit given a weighting above 1.00 that is proportional to 256Mbit, and the generations below 256Mbit
given a weighting below 1.00 that is proportional to 256Mbit.

b
Total production volume is the sum of DRAM production volumes across all density levels (including 16Mb, 64Mb, 128Mb, 256Mb, 512Mb, and 1Gb).
Exhibit 7b Cost Breakdown of 64Mbit DRAM in 2003 (256Mbit equivalent)

Competitors'
Samsung Micron Infineon Hynix SMIC Weighted Average

Average Selling Price $8.63 $7.88 - $8.10 $8.00

Fully loaded costs $2.99 $4.19 - $3.98 - $4.07
Raw materials 0.99 0.98 - 1.67 - 1.35
Labor 0.54 0.76 - 0.51 - 0.63
Depreciation 0.35 0.42 - 0.43 - 0.42
R&D 0.15 0.13 - 0.17 - 0.15
SG&A 0.96 1.90 - 1.20 - 1.53
Operating Profit $5.64 $3.69 - $4.13 - $3.92
Operating Margin 65.4% 46.9% - 50.9% - 49.0%
Production Volume Units
16.4 29.7 0.0 33.6 0.0 63.3
(million)
Production Volume/Total
1.8% 4.4% 0.0% 6.4% 0.0% 3.5%
Production Volume
Exhibit 7c Cost Breakdown of 128Mbit DRAM in 2003 (256Mbit equivalent)

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $6.45 $5.56 $6.34 $5.45 - $5.66

Fully loaded costs $3.89 $6.22 $4.49 $5.08 - $5.40
Raw materials 1.09 1.81 1.43 1.83 - 1.75
Labor 0.54 0.94 0.75 0.51 - 0.72
Depreciation 1.09 1.60 1.21 1.33 - 1.41
R&D 0.48 0.48 0.57 0.52 - 0.52
SG&A 0.70 1.39 0.52 0.88 - 1.01
Operating Profit $2.56 -$0.66 $1.85 $0.37 - $0.25
Operating Margin 39.6% -11.9% 29.2% 6.8% - 3.9%
Production Volume Units
151.6 88.1 43.7 96.8 0.0 228.6
(million)
Production Volume/Total
16.9% 13.1% 8.2% 18.6% 0.0% 12.7%
Production Volume

a
128Mbit DRAM production volume includes production volumes of various 128Mbit DRAM product lines (such as SDRAM, DDR, DDR2,
and Rambus DRAM).
Exhibit 7d Cost Breakdown of 256Mbit DRAM in 2003 (256Mbit equivalent)

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $5.08 $4.48 $4.73 $4.58 $4.43 $4.57

Fully loaded costs $4.15 $6.52 $4.84 $5.42 $4.84 $5.61
Raw materials 1.19 1.98 1.57 2.01 1.84 1.84
Labor 0.54 0.94 0.75 0.51 0.23 0.74
Depreciation 1.27 1.86 1.41 1.56 1.63 1.63
R&D 0.56 0.56 0.67 0.61 0.80 0.62
SG&A 0.59 1.18 0.44 0.74 0.34 0.79
Operating Profit $0.94 -$2.04 -$0.11 -$0.85 -$0.41 -$1.04
Operating Margin 18.4% -45.5% -2.2% -18.5% -9.3% -22.8%
Production Volume Units
695.8 540.1 479.5 374.2 68.2 1462.1
(million)
Production Volume/Total
Production Volume 77.6% 80.3% 89.6% 71.8% 100.0% 81.3%

256Mbit DRAM production volume includes production volumes of various 256Mbit DRAM product lines (such as SDRAM, DDR,
a

DDR2, and Rambus DRAM).

Exhibit 7e Cost Breakdown of 512Mbit DRAM in 2003 (256Mbit equivalent)

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $14.21 $12.11 $13.60 $11.99 - $12.62

Fully loaded costs $10.52 $17.58 $13.26 $13.81 - $15.22
Raw materials 1.29 3.17 2.47 2.97 - 2.87
Labor 0.80 1.52 1.20 0.77 - 1.25
Depreciation 4.89 7.78 5.82 6.00 - 6.70
R&D 2.16 2.36 2.74 2.34 - 2.49
SG&A 1.38 2.75 1.02 1.73 - 1.91
Operating Profit $3.69 -$5.47 $0.34 -$1.82 - -$2.60
Operating Margin 26.0% -45.1% 2.5% -15.2% - -21.6%
Production Volume Units
30.4 13.7 11.5 6.8 0.0 32.0
(million)
Production Volume/Total
3.4% 2.0% 2.1% 1.3% 0.0% 1.8%
Production Volume
Exhibit 7f Cost Breakdown of 256Mbit SDRAM in 2003

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $4.95 $4.56 $5.00 $4.58 - $4.67

Fully loaded costs $4.16 $6.62 $4.97 $5.54 - $5.95
Raw materials 1.20 2.01 1.61 2.05 - 1.92
Labor 0.54 0.95 0.77 0.52 - 0.80
Depreciation 1.28 1.89 1.45 1.59 - 1.71
R&D 0.57 0.57 0.68 0.62 - 0.61
SG&A 0.58 1.21 0.46 0.74 - 0.91
Operating Profit $0.79 -$2.06 $0.03 -$0.95 - -$1.28
Operating Margin 15.9% -45.2% 0.5% -20.8% - -28.0%
Production Volume Units
160.0 162.0 76.7 84.2 0.0 323.0
(million)
Production Volume/Total
17.9% 24.1% 14.3% 16.1% 0.0% 18.0%
Production Volume
Exhibit 7g Cost Breakdown of 256Mbit DDR SDRAM in 2003

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $4.72 $4.45 $4.65 $4.57 $4.43 $4.55

Fully loaded costs $4.06 $6.48 $4.81 $5.39 $4.84 $5.51
Raw materials 1.18 1.97 1.56 1.99 1.84 1.82
Labor 0.53 0.93 0.75 0.51 0.23 0.72
Depreciation 1.25 1.85 1.41 1.55 1.63 1.60
R&D 0.55 0.56 0.66 0.60 0.80 0.62
SG&A 0.55 1.17 0.43 0.74 0.34 0.75
Operating Profit $0.66 -$2.03 -$0.16 -$0.82 -$0.41 -$0.96
Operating Margin 13.9% -45.6% -3.4% -18.0% -9.3% -21.2%
Production Volume Units
485.0 378.1 399.7 290.0 68.2 1136.0
(million)
Production Volume/Total
54.1% 56.2% 74.7% 55.6% 100.0% 63.2%
Production Volume
Exhibit 7h Cost Breakdown of 256Mbit DDR2 SDRAM in 2003

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $8.83 - $8.67 - - $8.67

Fully loaded costs $4.93 - $5.72 - - $5.72
Raw materials 1.31 - 1.75 - - 1.75
Labor 0.59 - 0.84 - - 0.84
Depreciation 1.39 - 1.58 - - 1.58
R&D 0.62 - 0.74 - - 0.74
SG&A 1.03 - 0.80 - - 0.80
Operating Profit $3.90 - $2.95 - - $2.95
Operating Margin 44.1% - 34.0% - - 34.0%
Production Volume Units
25.7 0.0 1.2 0.0 0.0 1.2
(million)
Production Volume/Total
2.9% 0.0% 0.2% 0.0% 0.0% 0.1%
Production Volume
Exhibit 7i Cost Breakdown of 256Mbit Rambus DRAM in 2003

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $9.21 $8.45 $8.45

Fully loaded costs $4.89 - $5.59 - - $5.59
Raw materials 1.28 - 1.71 - - 1.71
Labor 0.57 - 0.82 - - 0.82
Depreciation 1.36 - 1.55 - - 1.55
R&D 0.60 - 0.73 - - 0.73
SG&A 1.07 - 0.78 - - 0.78
Operating Profit $4.32 - $2.86 - - $2.86
Operating Margin 46.9% - 33.8% - - 33.8%
Production Volume Units
25.0 0.0 1.7 0.0 0.0 1.7
(million)
Production Volume/Total
2.8% 0.0% 0.3% 0.0% 0.0% 0.3%
Production Volume
Exhibit 7j Cost Breakdown of 128Mbit DDR2 SDRAM in 2003 (256Mbit equivalent)

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $11.30 $9.74 $9.74

Fully loaded costs $4.49 - $5.27 - - $5.27
Raw materials 1.13 - 1.58 - - 1.58
Labor 0.55 - 0.83 - - 0.83
Depreciation 1.12 - 1.34 - - 1.34
R&D 0.50 - 0.63 - - 0.63
SG&A 1.19 - 0.89 - - 0.89
Operating Profit $6.81 - $4.47 - - $4.47
Operating Margin 60.3% - 45.9% - - 45.9%
Production Volume Units
7.1 0.0 0.4 0.0 0.0 0.4
(million)
Production Volume/Total
0.79% 0.00% 0.08% 0.00% 0.00% 0.08%
Production Volume
Exhibit 7k Cost Breakdown of 128Mbit Rambus DRAM in 2003 (256Mbit equivalent)

Competitors'
Weighted
Samsung Micron Infineon Hynix SMIC Average

Average Selling Price $11.06 $9.64 $9.64

Fully loaded costs $4.65 - $5.26 - - $5.26
Raw materials 1.19 - 1.58 - - 1.58
Labor 0.58 - 0.83 - - 0.83
Depreciation 1.18 - 1.34 - - 1.34
R&D 0.52 - 0.63 - - 0.63
SG&A 1.17 - 0.88 - - 0.88
Operating Profit $6.41 - $4.38 - - $4.38
Operating Margin 58.0% - 45.5% - - 45.5%
Production Volume Units
5.5 0.0 0.5 0.0 0.0 0.5
(million)
Production Volume/Total
0.61% 0.00% 0.10% 0.00% 0.00% 0.10%
Production Volume

Source: Casewriters' estimates based on Merrill Lynch report.

Exhibit 8 Samsung's Manufacturing Line Sharing (Line A)

1998 1999 2000 2001 2002

DRAM 78% 45% 28% 40% 27%

Graphic 19% 13% 3% 2% 0%
SRAM 3% 41% 52% 46% 44%
Flash 0% 2% 15% 8% 24%
MROM 0% 0% 2% 5% 5%
Total 100% 100% 100% 100% 100%

Source: Company data.

Exhibit 9 Cost Breakdown of NAND Flash (512Mbit equivalent, 1Q 2004)

Toshiba (a) Samsung (b) (a)/(b) Toshiba Samsung

Average Selling Price ($) 9.51 9.48 100.3%

Fully loaded cost 4.55 3.28 138.5% 100.0% 100.0%
Raw materials 1.15 0.79 144.8% 25.2% 24.1%
Labour 0.74 0.45 165.3% 16.3% 13.6%
Utilities 0.13 0.10 138.5% 2.9% 2.9%
SG&A 0.28 0.24 119.3% 6.2% 7.2%
Depreciation 1.10 1.19 92.8% 24.2% 36.1%
R&D 0.51 0.30 170.9% 11.3% 9.1%
Others 0.63 0.22 281.4% 13.9% 6.9%
Operating Profit 4.97 6.20 80.1%

Source: Merrill Lynch.

Exhibit 10a Comparison of 8-inch Wafer vs. 12-inch Wafer

12-inch Wafer/
8-inch Wafer 12-inch Wafer 8-inch Wafer

Net Die per Wafera 257 616 240%

Assumed Yield Rate 87% 87% 100%
Good Die per Wafer 224 536 240%
Production Cost per Wafer 210%
Depreciation per Wafer n/a n/a 200%
Material Cost per Wafer n/a n/a 270%
Cost per Chip n/a n/a 90%

Source: Company data and casewriters' estimates.

a
Net Dice per Wafer is based on 0.13μm process technology.
Exhibit 10b Process Technology, Wafer Size, and Net Dice Output

Process Technology (Design Rule) 0.25μm 0.18μm 0.15μm 0.13μm 0.11μm

Chip Size 208.9 mm2 159.4 mm2 120.9 mm2 91.3 mm2 68.6 mm2
Number of Net Die out of 8-inch Wafer 100 137 188 257 352
Number of Net Die out of 12-inch Wafer 240 329 451 616 845

Source: Casewriters' estimates.

a
Design rule is the minimum feature width of the chip, which indicates the level of process technology.
Exhibit 10c Comparison of Production by Wafer Size, Design Rule, and Yield Rate

Production Volume by Wafer Size Process Technology Yield Ratea

8-inch 12-inch Main Design % of
Wafer Wafer Total Rule (μm) Usage

Samsung 88% 12% 100% 0.11 67% 80%

Micron 97% 3% 100% 0.13 80% 60%
Infineon 67% 33% 100% 0.14 80% 67%
Hynix 100% 0% 100% 0.13 72% 50%

Source: Casewriters' estimates based on Gartner, Inc. report (February 2004)

a
Yield rate is based on 0.11μm process technology for 256Mbit.