Samsung's Lord Weinstock

According to an unnamed executive at the company’s R&D centre in Suwon, the elevator lights have been dimmed, and every other light in the toilets has been turned off.

It reminds one of the cost-cutting measures of Lord Arnold Weinstock of GEC who once ordered that every other light bulb at his company’s premises should be removed to save electricity charges.

Weinstock became obsessed with cost-cutting. One night he was in a train passing a GEC factory which had all the lights on. Outraged at such apparent waste he rang up the factory manager next day, only to be silenced by the two words: ‘Night shift’.

Over at Samsung, the power-saving moves are part of a wider, six-week long investigation into cost-cutting following a brutal memory price war in the first half of the year.

Samsung, with 27 per cent worldwide DRAM market share, and 44 per cent worldwide NAND flash market share, has been particularly exposed to memory price erosion and suffered a 40 per cent drop in Q2 profits in consequence.

The memory business is a miserable business model. The product is standardised to the point of ultimate commoditisation. Any one of half a dozen suppliers of identical product can bomb the price by over-producing.

Memory executives can’t really win. If they try and keep prices up, then the anti-trust guys get them. For instance, a couple of years ago Samsung paid a $300m fine for price-fixing in the DRAM market.

If execs try to gain market share then prices fall to unprofitable levels. For instance, earlier this year Samsung was refusing to supply tier one customers because prices were too low.

So you can’t control your prices, you can’t control supply, and you have to build a new factory every two years to stay in business, and factories cost $3bn a throw.

Somehow one doesn’t feel that the bottom line is going to be much improved by turning off every other light in the toilets.

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