Samsung Puts $100 Million in Reserve for Price-Fixing Case

Samsung has announced that it will set aside US$100 million in case the U.S. government finds it guilty of fixing dynamic random-access memory (DRAM) prices.

The U.S. Department of Justice has been looking into allegations of price fixing in the memory industry for more than two years.

Infineon Technologies has already pleaded guilty to participating in a global cartel to fix DRAM prices sold to certain PC and server markets in the U.S. from July 1999 to June 2002. Infineon agreed to pay $160 million in fines earlier this month.

The Motive

Brian Matus, vice president of market research firm IC Insights, told the E-Commerce Times, “By putting aside $100 million, it almost sounds like Samsung is implying that they are going to be found guilty.”

“As the largest supplier of DRAM in the world, Samsung is not going to be immune to the price-fixing scandal,” Matus said. “With Micron essentially admitting involvement, Infineon pleading guilty and Hynix implicated in fixing DRAM prices, you would presume that Samsung is part of that game as well.”

Micron and Hynix are also under investigation. Those two companies, together with Infineon and Samsung, control more than 75 percent of the market for DRAM chips.

Some analysts said a calamitous slowdown in the DRAM market predicted for 2005 led to the cartel-like behavior.

“We are entering the height of the DRAM boom, and the industry will be heading into a recession during 2005,” Andrew Norwood, principal analyst for Gartner’s semiconductor research group, said.

Busting the Big Four

“While the DRAM vendors are gaining profits, they are increasing their capital expenditures on new production facilities. These will come online in late 2005 and through 2006, triggering an oversupply-driven downturn.”

Matus said that although $100 million is a mere drop in the bucket for Samsung, the full extent of the company’s guilt and the fines it might be assessed remain to be seen. He said the price-fixing cartel among the “big four” memory makers is an interesting case that is still unfolding.

“We’ve seen signs that there was price-fixing going on in the past, but this is probably the first full-scale investigation where we’ve had governments working together and companies are admitting they are guilty,” Matus said. “It is pretty unusual.”