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Company: MEMC Electronic Materials (WFR)
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  Product differentiation is hard if you're selling sand

Silicon is a commodity and currently, there are few ways for companies to differentiate their wafers from the competition. Thus, industry competition is based on pricing, often forcing companies to reduce profit margins in order to remain competitive.

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2 votes

  Semiconductor industry is cyclical

The semiconductor industry is cyclical. Because pricing can be volatile, revenues and profits can also be very volatile.

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  Vulnerable to the demand of a few key customers

MEMC provides large amounts of silicon to a few key customers; while this allows the company to benefit from economies of scale, it also makes the company extremely vulnerable to the supply decisions of those key customers.

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