Beijing investigates chipmakers for collusion

The Chinese government launched a probe into the three largest memory chip producers in the world including Korea’s Samsung Electronics and SK Hynix for allegedly colluding on price hikes, according to the Ministry of Trade, Industry and Energy on Monday.

Officials from the Chinese bureau visited each of the three chip producers in Korea and the United States on May 31 for a probe. The bureau, which plays the same role as Korea’s Fair Trade Commission, was launched in March. All three producers said they would sincerely cooperate with the probe.

The move by China’s Anti-Monopoly Bureau of the Ministry of Commerce, an antitrust regulator, signals a warning sign against leading chipmakers not to raise prices further as the country struggle to step up its chip-making capacity.

Samsung Electronics, SK Hynix and Micron together account for 96 percent of the global memory chip market, and should they be found to have conferred on prices, the penalty for each producer is estimated to range between $400 million and $4.4 billion, depending on their sales in China last year, according to Chinese media reports.

But chip industry insiders say for each chipmaker to have conspired to raise memory chip prices is “impossible.”

The two Korean producers have a history of being slapped fines for price fixing twice. They were fined a combined $280.4 million by European Union in 2010 for forming a cartel for DRAM price fixing for four years with seven other chipmakers. Back in 2005, they paid a combined $485 million fine for participating in a global conspiracy to fix prices in the United States.

Ever since then, the two rivals have remained cautious about any type of communication that could potentially cause any problem, they say.

“It’s just that exploding demand for chips in China pushed the prices,” said a spokesman with one of the two chipmakers.

Chinese tech firms - from smartphone producers such as Huawei and Xiaomi to computer manufacturers such as Lenovo - still rely heavily on the top three producers. Demand for chips from giant internet service providers such as Alibaba, TenCent and Baidu have been enormous as they build their own data centers.

“A memory chip price hike is the result of strong demand for servers and mobile DRAMs in China and low yields from new facilities,” said Kim Dong-won, an analyst at KB Securities. “In this respect, the Chinese government will find it challenging to find substantial evidence of price fixing.”

The world’s second-largest economy set a goal in 2015 to drag up the portion of semiconductors supplied by Chinese producers from just 15 percent as of 2015 to as much as 70 percent by 2025 under its technology push initiative.

But China has yet to become a global semiconductor powerhouse. Its self-supply ratio of chips in China remains at 25 percent and the country imported even more semiconductors last year. Shipments of foreign chips into China shot up nearly 40 percent year on year to $88.92 billion.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]