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Trade war

China alleges 'massive' evidence of chipmaker antitrust violations

Beijing says probe into Samsung, Micron and SK Hynix has made 'important progress'

The inclusion of Micron has sparked fears the probe could form part of a counteroffensive by China in its trade war with the U.S.   © Reuters

SEOUL/BEIJING (Financial Times) -- Chinese investigators said they found "massive evidence" of anti-competitive behaviour by the world's top three makers of computer memory chips, in a probe that could exacerbate global trade tensions.

Officials in Beijing said a price-fixing investigation into South Korea's Samsung Electronics and SK Hynix and US-based Micron Technology had made "important progress," without offering any specific examples of wrongdoing.

"The anti-monopoly investigation into these three companies has made important progress ... [It] has yielded massive evidence," said Wu Zhenguo, head of China's anti-monopoly bureau under the State Administration for Market Regulation.

Samsung and SK Hynix declined to comment, while Micron did not respond to a request for comment.

The three companies control as much as 95 per cent of the global market for dynamic random-access memory (DRAM) chips, which are widely used in computers and smartphones.

After steadily falling for most of the past three decades, the price-per-bit of DRAM chips rose 47 per cent in 2017, according to the US research firm IC Insights, and has continued to increase this year.

The Chinese investigation follows a class-action lawsuit in the US, lodged in April, which alleges that the three companies conspired to inflate DRAM prices. The companies are contesting the case.

In 2005, Samsung and Hynix paid out $300m and $185m to settle price-fixing charges from the US Justice department. The two companies, and seven others, were hit with fines totalling 331m euros from the EU commission in 2010 for price fixing between 1998 and 2002.

The high cost of chips has hurt many electronics makers, especially in China where manufacturers often operate on tighter margins. Investigators visited the sales offices of the three companies in China in May and the companies have said they will cooperate with the investigation.

Kim Young-woo, an analyst at SK Securities, said Beijing could impose fines of more than $2.5bn on each of the three chipmakers in the worst-case scenario if they are found to have fixed prices.

"This would create additional pressure to cut DRAM prices and build more wafer factories as joint ventures with local Chinese companies to spur the transfer of technology to China," he said.

China last year accounted for 51 per cent of Micron's semiconductor sales, 40 per cent of Samsung's sales and 33 per cent of SK Hynix's, according to SK Securities.

The probe casts a shadow over Samsung, the world's largest chipmaker by sales, whose soaring profits in recent years have been fuelled almost entirely by the memory chips required by computer servers and cryptocurrency mining devices.

But Beijing's interest in nurturing domestic technology groups, including chipmakers, also threatens to hollow out business in neighbouring South Korea, where semiconductors this year accounted for 20 per cent of all exports.

The inclusion of Micron has sparked fears the probe could form part of a counteroffensive by China in its trade war with the US.

"This seems to be part of Beijing's negotiating tactic amid the ongoing trade war. Beijing may be using this as a bargaining chip for its trade talks with the US," said Daniel Kim, an analyst at Macquarie.

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