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MASTER IN BUSINESS ADMINISTRATION

MANAGERIAL ECONOMICS CASE STUDY

“GOLDEN WEEK IN 1998”

Submitted By:
Demandante, Kimberly D.
Dinglasan, Catherene U.
Park, Kyoung Nam

Submitted To:
Dr. Neil C. Bermudez
 MANAGERIAL ECONOMICS CASE STUDY
“GOLDEN WEEK IN 1998”

CASE BACKGROUND

In 1998, faced with depressed DRAM prices, Mitsubishi Electric decided to idle its Fukuoka
and Kumamoto plants for the “Golden Week” beginning April 29. Among Japan’s other four major
DRAM manufacturers, Fujitsu and Toshiba also decided to stop operations during Golden Week,
while Hitachi and NEC announced that they would continue in production.
Dynamic random-access memory or DRAM is the main memory component of most
computers and many electronic systems. From 1993-1995, industry observers were stunned and
amazed as the DRAM market displayed relentless growth. Helping the DRAM market grow at its
accelerated pace was the lack of sufficient memory production capacity available to meet the
needs of the vigorous PC market. In 1996, a different scenario panned out for the DRAM market
and its suppliers. In 1Q96, DRAM prices for 4Mbit devices plunged and continued to drop through
the balance of the year. Furthermore, 16Mbit DRAM average selling prices (ASPs) also rapidly
declined. Softer PC sales and a rather sudden glut of worldwide production capacity turned the
DRAM market from one of the most lucrative to one of most difficult in which to participate
Japanese chipmakers have racked up losses because of increasing competition from foreign
rivals such as South Korea's Samsung Electronics SSNGY, , and the industry as a whole is under
pressure to consolidate because of the global decline in memory prices.

I. TIME CONTEXT
From 1996 to 1999.

In 1996-1997 the problem started to occur as the DRAM prices continued to be

plunged and drop.

Beginning April 29, 1998 during the Golden week in Japan. DRAM market started to
fall and faced with depressed DRAM prices, average selling of DRAM market decline.
Mitsubishi Electric decided to idle its Fukuoka and Kumamoto plants and Japan’s other
 four major DRAM manufacturers, Fujitsu and Toshiba also decided to stop operations
during Golden Week, while Hitachi and NEC declared that they would persist in
production.

It’s during 1999 when the other countries started to emerge and filled out the gap in
the demand and supply of DRAM in the market.

II. VIEWPOINT

Five Big Dram Manufacturer

• Toshiba, Mitsubishi, NEC, Hitachi, and Fujitsu
Rising Companies from other countries:
• HEI, Micron and Samsung

III. STATEMENT OF THE PROBLEM

a. The decisions of five DRAM manufacturers regarding the production during the
Golden Week in terms of differences in their short run break-even conditions.
b. Effect in the short-run industry supply of the decisions made by Mitsubishi, Fujitsu,
and Toshiba to stopping their production during the Golden Week.
c. Mitsubishi to exit in the industry of DRAM as predicted by some analyst and the
impact of their decision in the long-run industry supply.

IV. OBJECTIVE

This case aims:

• To discover the reason of declining DRAM Production of five big companies in JAPAN
during Golden Week.
• To know the effect of big rising companies outside the country which able to produce high
quality of semiconductors.
• To come up with the grounds of the decision of big five companies to stop production and
exit DRAM industry.
• To determine which country or companies took over the DRAM or semiconductor
industry.
 V. AREAS OF CONSIDERATION

As part of assessing Japan’s competitive advantage among its competitors and

determining the future course of action to take part of its strategic management process, we
will take into consideration its internal strength and weaknesses as well as the opportunities
and strengths.

SWOT Analysis

Strengths
• Market share of Japan is at 70%,
trusted their market share
• DRAM unit shipments
• Brand recognition and loyalty
Weaknesses
• Research and development
• Increase the competitiveness of new
products
• They did not spend their budget right
in their business, facilities, production
and upgrading products.
• Low profit margin
• Technology advancement

Opportunity Threats
• Market Size • Price wars with other players
• Growing Institutional Demand for • Technology battle with competitors
quality production • Emerging manufacturers from other
• Corporate restructuring (to have right county/ competitors
management system) • Rapid technological change
• High and strong consumer demand
for innovative products
• Proper Innovation and design

VI. ALTERNATIVE COURSE OF ACTION

1. Conduct marketing activities

2. Buy-out small companies with technology
3. Cost minimization
4. Quality production or innovation
5. Increase sales through market penetration and market development
6. Focus on Research and development
 STRATEGY IMPLEMENTATION PLAN

ALTERNATIVE
COURSE OF
ACTION FOR 5 Focus on
Market Research&
Activities Big DRAM
Development
Manufacturers

Quality
Buy-out
production or
Companies
Innovation

Cost
Minimization

▪ The CEO or the Director will be the responsible person for the above-mentioned plans or
strategies.
▪ Billions of dollars should be allocated for marketing activities, buy-out of small companies,
innovation and in research and development.
▪ This will take 2-3 years to plan and implement strategies technological development to
see the results.

VII. RECOMMENDATION

With the strategies and innovation to develop for the specific market. Five Big DRAM
manufacturers should invest in facilities for innovation and for the production capacity, spend
more fund in the newly develop innovation, product and invest in research and development.
They also need to have some modification about their objectives as well as policies of the
company to suitable and adapt the new strategies in innovating new products and new types of
semiconductors. To implement a marketing activity that will promote new product innovations.
They can also merge and acquire small companies related to technologies to get new ideas and
products. Also, they may consider the cost minimization by setting a goal of incurring the least
possible opportunity cost in the pursuit of a given activity
Japan or the five DRAM manufacturers should maintain the high market share for present
products or services in present market through greater marketing effort, more DRAM shipments
as they are known and people are loyal to them in DRAM or semiconductor industry. Study the
growing demand for quality product and invest in the proper innovation and design. Lastly, be
conscious of the price wars and other emerging companies relating to DRAM.

VIII. CONCLUSION

After the analysis of the case, the Japan lost company market shares. They did not follow
the SWOT model of marketing. Financial crisis happened in 1997 resulted to faster depreciation
of market share. From 70% market shares down to 20%. Japan lost their opportunities during the
Golden Week period. The supply and demand in DRAM market were filled out by the emerging
companies from Korea, namely: HEI, Micron and Samsung. The Golden week significantly shows
the start of the rise and fall of the semiconductor industry. E.g. Korea and Japan’s semiconductor
industry.
Good times don’t last forever. Excess capacity and plunging average selling prices resulted
in a 38 percent decline in the 1996 DRAM market.
Six Japanese firms once had a combined 80 percent share of the global DRAM market in
the 1980s, but rising competition prompted Fujitsu and Toshiba to abandon production of
standard DRAM chips.
 DRAM manufacturers must look back fondly upon 1994 and 1995 when everything was
up, up, up! There was no end in sight to the outstanding growth—until 1Q96. As seen in the chart,
average selling prices fell steeply and fell quickly.
Japanese firms now have only 20 percent of the global DRAM market share according to
CBS market watch.
Other competitors took over the DRAM market shares. According to International Data
Corporation (IDC) news reported in 1998, HEI marked the second place in its share in the DRAM
market in 1998, and even number one supplier in the world if the sales of LG Semiconductor
added. IDC said the total DRAM market is as large as $14 billion, down by 29% from $19.8 billion
in 1997, reporting HEI and Siemens were the only top ten suppliers to see their annual sales
growth. We have researched that HEI emerged as number two DRAM supplier, with its largest
market share up to 12.4% from 8% in 1997 despite the overall downturn in the industry.
Even in the time of massive fall of industry, the Korean company and German company
were able to lead the growth and sustain the market share.
IDC analyzed that the top ten DRAM suppliers occupied 94% of total market, and most
Japanese and Taiwanese suppliers lost their market share, but HEI, Micron, and Samsung are on
the rise in 1998. The analysis reveals that the market share of the Korean DRAM suppliers rose
to 41% in 1998 from 34% in 1997 although the market share and ranking of most Japanese
suppliers declined except Toshiba, Mitsubishi, and Fujitsu.

References:
http://smithsonianchips.si.edu/ice/cd/MEMORY97/SEC02.PDF
https://news.skhynix.com/hei-the-second-largest-market-share-in-the-dram-market-in-1998/
http://www.econ.hku.hk/~schiu/DiscussionQs.pdf
https://news.skhynix.com/hei-the-second-largest-market-share-in-the-dram-market-in-1998/