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Trade war

China launches antitrust probe against US and Korean chipmakers

Global giants Samsung, SK Hynix and Micron accused of hiking prices

China has accused U.S.-based Micron Technology of abusing its position as a top DRAM manufacturer.   © Reuters

BEIJING -- China has launched antitrust investigations into three American and South Korean chipmakers in what some analysts suspect may be an effort by Beijing to further its high-tech ambitions and gain leverage in its trade row with Washington.

Regulators are looking into Micron Technology of the U.S. and South Korea's Samsung Electronics and SK Hynix, the top manufacturers of DRAM memory chips. These three companies -- which together control more than 90% of the global DRAM market -- are accused of abusing their dominance to drive up chip prices, among other unfair practices, according to a source familiar with the situation.

China, a major production hub for smartphones and other devices, is the world's largest semiconductor market. DRAM prices have climbed steadily since 2016, apparently prompting formal complaints from big Chinese chip buyers. The chipmakers could face heavy fines if regulators find that they violated antitrust law.

Considering Beijing lacks an independent antitrust enforcement agency, some China watchers argue that industrial policy may play a role in the investigations.

"Big companies in the U.S. and elsewhere cited for abusing their dominant positions via technology licensing or fixing prices typically are severely punished," particularly in industries that Beijing considers strategic, said Hiroshige Nakagawa, a Japanese expert on Chinese antitrust law.

Advanced technology, including chips, is a focal point of trade tensions between the U.S. and China. A third round of trade talks that wrapped up Sunday in Beijing, led on the American side by Commerce Secretary Wilbur Ross, failed to bridge the gap between the two sides. China may hope that targeting Micron will give it leverage to push for concessions such as easing American sanctions on telecommunications equipment maker ZTE.

Similarly, the investigations into Samsung and SK Hynix may be an effort to deal with companies that Beijing has found to be less than cooperative on the tech front. Manufacturers including Samsung have been accused of using older technology at Chinese plants than in South Korea, and are leery of cross-licensing patents with Chinese partners, insiders say.

During a late-April visit to an affiliate of state-backed chipmaker Tsinghua Unigroup, Chinese President Xi Jinping made clear that the goal is to take on semiconductor companies in the U.S., South Korea and Taiwan. "We must build up core technologies domestically," he said.

Under the Made in China 2025 initiative for modernizing the country's industrial sector, Beijing aims to use state support to quickly cultivate homegrown world-class chipmakers to reduce the nation's reliance on imported components. The government plans to have 40% of chips sourced domestically in 2020 and 70% in 2025, compared with less than 30% last year.

The antitrust probes may represent an "attack" on the three foreign companies controlling the DRAM market, said Akira Minamikawa of financial information provider IHS Markit, who noted that China is "struggling to develop technology and secure talent."

This is not Beijing's first regulatory action against a leading foreign chipmaker. Chinese antitrust authorities hit U.S.-based Qualcomm with a 6 billion yuan ($936 million at current rates) fine in 2015 and have dragged their feet on approving the company's planned acquisition of Dutch peer NXP Semiconductors.

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