Abstract
Powerchip Semiconductor Corporation has a horizontal firm structure in an industry that is predominantly organized vertically. While it has been successful in up markets, in the current down market its strategic rationale was being tested. As a capital-intensive manufacturer of DRAMs that had to license its designs from abroad, was it able to compete with large vertically integrated firms that controlled the whole value chain? How did its approach compare to that of its partner Elpida? Can Powerchip and Elpida together make up a "virtual integrated device manufacturer"? The case examines some of the unique characteristics of the DRAM industry, in which manufacturers employ large scale to compete on cost in the production of standardized commodities.