06/19 16:11
Micron, Samsung Subpoenaed in Memory-Chip Price Probe (Update7)
By Ron Day
Washington, June 19 (Bloomberg) -- U.S. antitrust officials are investigating whether semiconductor makers manipulated prices in the $11.9 billion memory-chip market. The government requested information from Micron Technology Inc., Samsung Electronics Co. and Infineon Technologies AG, which control 60 percent of sales.
A federal grand jury in California subpoenaed Micron yesterday, the company said. The U.S. sales unit of South Korea's Samsung was subpoenaed, spokesman James Chung said. Germany's Infineon was contacted, spokesman Ralph Heinrich said. Grand juries typically investigate criminal matters.
The 53 percent drop in spot prices of so-called dynamic random-access memory chips, to $2.03 in early May from $4.36 in early March, led some investors to speculate that semiconductor makers may have sold products at below-market prices to try to drive out smaller rivals.
``The fact that a grand jury is looking into suspected cartel activity means the (Justice Department's antitrust division) thinks it has serious reason to be interested in what's taking place,'' said Stephen Calkins, a former U.S. Federal Trade Commission general counsel, who teaches antitrust law at Wayne State University in Detroit.
DRAM chips store programs and data for use by a personal computer's main processor. Prices fell as low as 93 cents in November for the benchmark 128-megabit chip before rising to the March peak.
Shares Fall
The shares of Boise, Idaho-based Micron Technologies, the only U.S. maker of DRAMs, fell $3.52, or 15 percent, to $20.08. Samsung Electronics fell 4 percent to 348,500 won. South Korea's Hynix Semiconductor Inc. tumbled 13 percent to 290 won. Munich- based Infineon fell as much as 7.7 percent to 15.52 euros.
``It is not known if Infineon is being investigated or just requested to provide information to the grand jury,'' Infineon's Heinrich said in an interview.
In a separate case, the FTC approved a complaint charging memory-chip designer Rambus Inc. with failing to disclose patent applications to a standards-setting industry group and then demanding royalties from the world's largest chipmakers.
Hynix, the world's third-largest maker of DRAMs behind Samsung and Micron, is included in the probe, the country's Yonhap news agency reported. Kang In Young, a Hynix spokeswoman, declined to comment.
Grand Jury
A grand jury in the U.S. District Court for the Northern District of California issued Micron's subpoena, the company said. Dana Perino, a Justice Department spokeswoman, confirmed that an investigation is under way, though she declined to say whether it's a criminal inquiry and to answer other questions.
Micron, Samsung and Infineon said they would cooperate with the investigation.
To pursue criminal charges, the government would have to prove that companies agreed to set prices or reduce output, said Garret Rasmussen, an antitrust lawyer in Washington with the firm Patton Boggs. Such agreements can explicit or implied, he said.
In price-fixing prosecutions, the Justice Department typically proves its case with help from a company informant who participated in the plan. Otherwise, charges can be hard to prove when no direct evidence exists, he said.
``Micron does not believe it has violated U.S. antitrust laws,'' Kipp Bedard, Micron vice president of corporate affairs, said in a statement. ``The DRAM business is highly competitive and subject to extreme volatility. Competitive forces in today's market have led to DRAM prices reaching unprecedented lows.''
Micron failed last month to buy Hynix for $3 billion.
Prices, Losses
In Asia, home to three of the industry's five largest producers, many chipmakers had record losses last fiscal year after the spot price of DRAMs collapsed. In a spot market, companies buy goods for immediate delivery and pay in cash.
Micron has had five straight quarterly losses, while Infineon has had four losing quarters in a row. Samsung's first-quarter profit surged 58 percent, partly on the rise in memory-chip prices before the latest decline.
``It takes a billion dollars or more to build a semiconductor plant,'' said James McBride, who helps manage about $2.5 billion at Kornitzer Capital Management, which owns 223,846 Micron shares. ``It's like the auto industry. How many little guys can you have? It's interesting that the government is kicking the industry when it's down.''
Contract, Spot Markets
Larger DRAM makers such as Samsung Electronics and Hynix sell most of their production on contract and are less affected by the slide in spot prices; smaller chipmakers typically rely on the spot market.
Analysts and investors said that while spot and contract chip prices have taken uncharacteristically wide swings this year, they haven't seen evidence of price-fixing, collusion or other anticompetitive practices in the memory-chip market.
``It's unusual for the spot market to be significantly below the contract price for an extended period, but I think it's normal market dynamics,'' said Hans Mosesmann, a Prudential Securities analyst. He rates Micron Technologies shares ``buy'' and doesn't own them.
The issue of chipmakers joining to manipulate spot prices has been raised before. Mosel Vitelic Inc. Vice President Thomas Chang told Bloomberg News last month that the company had agreed with rivals to withhold chips from the market to try to boost chip prices.
Japanese chipmakers, which once dominated the memory-chip market and were investigated by the U.S. in the 1980s for anticompetitive practices, are quitting the DRAM business after prices fell below production costs last year. |
