Powerchip Semiconductor Essay

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Powerchip Semiconductor Powerchip Semiconductors – Case Analysis MGMT 503 Shyam Sunder Pariavakkam Feb 7, 2012 Executive Summary Powerchip Semiconductors, under the guidance of Stephen Chen has seen extreme growth over the last decade or so. Stephen Chen had created a Virtual IDM (VIDM) business model with Elpida memory Inc., where in the two companies would act as a virtually integrated organization that did everything from design to manufacturing. But in 2009, at the peak of global recession, Powerchip was feeling the pressure of its declining sales numbers and increasing losses which basically caused Stephen Chen to re-think about the VIDM business model that he had set up for Powerchip. The challenges that Powerchip faces are Multi-pronged as listed below, * Cyclical nature of the semiconductor industry * Vertically integrated with one company (Elpida Memory Inc.) * Lack of Intellectual Property Stephen Chen has the following options in front of him to get the company back to profitability. * Get into long-term contracts with Elpida and pricing should include production costs * Stop being in a VIDM model with Elpida alone and start supplying DRAM’s to other semiconductor manufacturers also * Start investing in R&D and get own IP’s to compete in the “Premier DRAM” markets I recommend, Powerchip to go with a combination of the latter two options where they can set up a five year road map that would enable them to utilize their existing resources effectively so as to start supplying other semiconductor manufacturers and at the same time start investing in R&D labs so as to get innovative and competitive by owning Intellectual Property designs. Powerchip Semiconductors Problem Statement / Key Issues As can be seen from Exhibit 3, in 2008, when the global economy was heading south, the sales numbers of Powerchip

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