9/28/2015
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Matrix Semiconductor Inc,Tracking Challenges of Strategic Dimensions
Presented by: Roba & Abid
Outline
Overview
Answer Questions
1. At the time of the case was set, what was Matrix Semiconductor’s strategy?
2. (a) What was Matrix’s core competency? (b) What did the company need to do (or not do) to stay focuses on its core competency?
3. (a) What was Matrix’s competitive advantage? (b) Was its competitive advantage sustainable?
4. (a) If you were Dan Steere in 1999, what should you recommend to the team? (b) Should Matrix develop OPT or a read/write memory product? (c) How should Matrix position itself in the market? Which specific market(s) should the company pursue? (d) Which business model should the company adopt?
5. Based on the market position you recommended (above), calculate the approximate size of Matrix’s market opportunity.
6. (a) Once Matrix proves the technical viability of its product, what should the company do next? (b) please prepare an action plan
7. Give an update of Matrix Semiconductor Inc, as of this date (2015).
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Matrix Overview:
Matrix Semiconductors Inc. founded in 1999
Four key members
Tom Lee (Professor)
Mike Farmwald (scientist entrepreneur)
Mark Johnson (circuit designer) and
Vivek Subramanian (expert in polysilicon physics)
The company main focus was on the invention of its technology3-D semiconductor memory chips that would offer acceptableperformance at selling prices significantly lower thancompetitive and substitute products available on the market.
Matrix team was not sure which business model to pursue forthe production of the 3D chips i.e. Licensing, Acquiring a fab &last pursuing fabless manufacturing
1. At the time of the case was set, what was Matrix
Semiconductor’s strategy?
- Use two enabling technologies to prove
smaller, faster, and cheapest 3-D Chips
technology.
- Fill current price/performance gap in
memory market.
- Develop process to produce chips in high
volume.
- Complete prototype then build interest in
Matrix with potential customers, partners,
and investors.
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Three tests to identify Core competency of Matrix
3D chip
Core Competence Tests Matrix Technology
1. Potential access to wide
variety of markets
-Digital Camera
- Digital Audio
- Gaming & Other Pre-
recorded Content
2. Significant benefit to
perceived customer benefits to
end product
- Low cost
- High memory capacity
3. Difficult to imitate
- Complex design for 3D chip
- Requires unique & Non-
standard process for
production
2. (a) What was Matrix’s core competency? (Reading I-
3 p 70 )
2. (a) What was Matrix’s core competency?
- Knowledge to place functional transistors
on multiple layers of a single chip.
- Matrix was able to produce ultra-dense,
small, fast and cheap memory chips.
- Focused on producing non-volatile memory
chips
- Build nonvolatile memory chips for 1/10th
of the cost per bit of competing technologies
and at better performance
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(b) What did the company need to do to stay focuses
on its core competency?
The company had two main focus:
1. Designing and building a prototype of the 3-D chips
find an state-of-the-art fab where they could create the first
prototype in less than two weeks vs. 8 weeks.
2. Develop the process to produce the chips in high volume.
"no new atoms" process consumed a lot of their time.
design their own production process since the beginning.
- lower cost and higher performance memory
chip.
- Memory was field as a programmable
memory.
- Focused on non-volatile memory for large
market.
- Memory was compatible with existing
memory card formats.
- Over 100 years of memory storage .
3. (a) What was Matrix’s competitive advantage?
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(b) Was its competitive advantage sustainable?
On the other hand, if we looked at the company lacked of
resources (capital, materials and a building), we can say that
the company was not sustainable.
• It was not able to make enough profit to keep business up.
If we looked at the company intellectual property, we
definitely can say that the company was sustainable.
• Matrix managed to stay under the radar and they were
confident that there was little competition in the market.
• Also, Matrix protected multiple generations of its products
so, in the future Matrix could license its patents to other
companies.
4. (a) If you were Dan Steere in 1999, what should you
recommend to the team?
- Be cautions and not let the market know
about the new 3-D until it’s almost done
release.
- Not to hire more employees.
- Do a research for a state-of-the-art
manufacturing facility.
- Would have suggested some marketing
ideas that the group could use to market
their product once they release it to the
market.
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(b) Should Matrix develop OTP or a read/write
memory product?
OTP (One Time Programmable)
Advantage
Quick way to the market
Shorter time-to-market so the
company didn’t miss any
opportunity.
Disadvantage
Technical limitation.
Read/Write
Advantage
Lower market risk.
Disadvantage
No plan to produce.
Didn't have the capital
needed to start the
production process.
Need of new funding
• We would recommend Matrix to start with OTP memory
It was a quick way to the market - quick way to get some profits
• Start a research on read / write chips and further develop the 3D chip
(c) How should Matrix position itself in the market?
Which specific market(s) should the company pursue?
(Reading I-2 p 65)
Higher Lower
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(c) How should Matrix position itself in the market?
Which specific market(s) should the company pursue?
Matrix wanted to offer the technology to digital electronics consumer market
(performance, size and quality in high demand). (Exhibit 7 p115)
Digital cameras occupied a big chunk of the worldwide market
Digital cameras market was expected to reach 3 million by 2000.
Available cameras had poor quality lenses, Limited storage capacity of 16-
64MB, and slow in processing photos.
Matrix could provide 32MB and
64MB at $10 and $15 dollars.
Matrix 3-D memory cards would be
Flash format compatible
Matrix 3-D memory would provide high
quality at a very low price
Comparison of Business Models for Matrix
Licensing Acquiring Fab Fabless Manufacturing
Advantages • Can focus on R&D
• Small investment
needed
• Multi-million dollar
business like IP
(intellectual property)
• Easy productized
• Highest profit
• Control over the
product
• No production
partner to pay
• Company focused on
design and marketing
• No much investment
needed
• Higher quality
• State-of-the-art
facility
Disadvantages • Need high volume of
design-ins for
profitability
• Little control in getting
the product to market
• Too expensive
• Takes attention
away from R&D
• Product process was
not standardized
• Hard to find the right
partner
• High gross margin
required
• High cost production
option (p 121)
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(d) Which business model should the company adopt?
Tending to be low-cost & high-volume product
supplier we would suggest to pursue through
LICENSING model.
5. Approx size of Matrix market opportunity
Digital Camera Digital Audio Gaming & related
products
Size
• $1.4 billion by
2000
• $2.8 billion
film sales
• 2.4 billion pre
recorded CDs
& 1.3 billion
pre recorded
cassestes
Exp. to be $ 7 billion in
1999
Opportunity betwenn
$120 - $300 million
Growth
Relatively new
market with big
potential
Exp. to be 150%
annual growth
rate
Although decrease
forecasted but huge
gowth expected in
gaming software
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5. Approx size of Matrix market opportunity
Sales =$ 1.4 billion
• Huge market potential in Digital camera
• Market size of Digital camera expected to reach 3 million units with $1.4
billion sales.
6. Action plan
Digital Audio
150% growth rate expected
Gaming
Industry
• Exceed $7 billion sales
• Opportunity between $120 -
$300 million
Own
Brand/Partner
with OEM
Market Matrix memory cards
• OTP chips could be used for
pre-recorded CDs
• 3D read/write memory chips
for portable audio players
• Inexpensive, higher density than
Masked ROM
• Field Programming
• Brand directly to consumers
• Using established sales channels
& brand awarenss
• Fabless Manufacturing model
Mark
et
Tech
nolo
gy A
pplic
ation
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7. Matrix Semiconductors Current Update
SanDisk acquires Matrix Semiconductor for $238
million in 2005
Pursued OTP chip making
Was used in SanDisk Gruvi cards for secure
distribution of premium music titles and other
preloaded content in handsets
Ref: http://www.eetimes.com/
http://www.sandisck.com/