How Did Samsung Become the DRAM Champion? [Tech Talk by Im Ju-hyung]

DRAM That Elevated Samsung to the World's No. 2 Semiconductor Position
Foreseeing the PC Era, Focused on Yield and Price
Q2 Market Share at 43.5%, Overwhelming No. 1
Challenges from Chinese Companies May Trigger Another Chicken Game

Samsung Electronics Headquarters. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] There is a saying that the more DRAM (Dynamic Random-Access Memory) a computer has, the better. This is because, compared to other components, it is relatively inexpensive, easy to obtain, and simply plugging it into the slot inside the main body immediately improves performance.

Currently, the company that produces the most DRAM and also produces it best is Samsung Electronics. As of 2019, Samsung recorded the world's second-highest sales after Intel, with most of its profits coming from DRAM.

Although DRAM is now treated as a simple component, it was actually a high-end part in the past.

Until the 1980s, the word "computer" referred to mainframes. Mainframes are computers characterized by their huge main bodies and are mainly used by companies or research institutes to process massive amounts of data. Compared to PCs, which have become the mainstream of computers today, they were very expensive.

At that time, DRAM was a key component that determined the performance of mainframes. It was traded at a very high price. The price of DRAM back then was said to be more expensive than gold of the same weight. Because of this, companies purchasing DRAM at that time emphasized the performance and lifespan of the components.

Mainframe developed by the American company IBM. A mainframe refers to a large computer used by corporations, government offices, and other organizations. / Photo by Wikipedia capture

Because of this, Japanese semiconductor companies with high technology and reliability dominated the memory industry. In the mid-1980s, Japanese companies such as Elpida, Toshiba, and NEC controlled 80% of the DRAM market.

However, in the 1990s, as computers became smaller and cheaper, the familiar PC was developed. As PCs began to be distributed to each household, the requirements for computer components also began to change. It was at this time that Samsung Electronics entered the semiconductor industry as a new player.

◆Stack or Trench?

Japanese companies, which had already achieved the world’s number one position in the DRAM industry in the 1980s, still insisted on high performance and extreme technology. On the other hand, Korean companies like Samsung focused on yield and price competitiveness.

The biggest issue in DRAM design at the time was whether to use a "stack" or a "trench." As computers became smaller, DRAM faced the challenge of reducing size while increasing circuits. To address this, there were two approaches: stacking circuits upward (stack) or digging downward (trench). Samsung adopted the stack method, while Japanese companies led by Toshiba used the trench method.

Although the trench process was complex, it excelled in performance, whereas the stack was easier to produce and made defect detection easier. At that time, Samsung Chairman Lee Kun-hee, after hearing the pros and cons of stack and trench from semiconductor researchers, chose the stack method because it was "simpler." This decision determined the fate of Samsung and Japanese semiconductor companies.

The world's first 64M DRAM (left) and Korea's first 64K DRAM. / Photo by Yonhap News

By adopting the stack method, Samsung was able to produce DRAM more cheaply and quickly, achieving economies of scale and launching a low-price offensive. Subsequently, Japanese companies, caught in a "bloody competition" due to Samsung's production capacity, began to collapse one by one.

◆The Arrival of the Semiconductor Chicken Game

Because of Samsung, the rules of the DRAM market completely changed. Yield and price, not performance and lifespan, became the factors deciding the market winner.

Surviving DRAM companies increased production to drive out rival companies’ market shares by launching low-price offensives, leading to what is called the "semiconductor chicken game."

The chicken game is a competition between two opposing groups where one side either completely fails or gives up.

DRAM developed by Samsung. / Photo by Korea Academy of Engineering Sciences [Image source=Yonhap News]

DRAM manufacturers lowered the price of DRAM to the extreme, engaging in price competition where companies actually lose money every time they sell one DRAM chip. Companies that cannot bear the losses eventually withdraw from the DRAM market, and the winner takes all the remaining market share in this ruthless game.

Due to the semiconductor chicken game, the German DRAM semiconductor company "Qimonda" went bankrupt in 2009, and in 2012, Elpida, once Japan's largest DRAM company, collapsed after five consecutive quarters of losses.

After a long chicken game, the current DRAM market is dominated by the so-called "Big 3": Samsung Electronics, SK Hynix, and the American company Micron. Among them, Samsung Electronics holds a dominant first place with a 43.5% market share as of the second quarter of this year.

◆Will History Repeat Itself?

Currently, the DRAM market is divided among the Big 3 companies, but there is a possibility that new challengers may appear. Recently, Chinese IT companies, supported by massive subsidies from the Chinese government, have started producing semiconductors directly. Some companies are preparing for full-scale DRAM mass production.

It is known that Korea still maintains a technology gap of more than five years compared to Chinese companies in the memory field. However, if Chinese companies, supported directly by the government, engage in a bloody competition like the past chicken game, the landscape of the memory semiconductor industry could change again.