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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/