A new lawsuit alleges that Samsung, Hynix, and Micron — which together control 96 percent of the DRAM market — have unjustly colluded to raise the price of DRAM from January 1, 2016 through February 1, 2018. The suit notes that RAM prices fell from 2014-2015, when the three companies were independently acting to increase DRAM capacities, but then sharply rose beginning in 2016 as all three firms decided to restrict DRAM growth to stop downward price pressure and to lead to a price increase.
We’ve documented this same increase, and while it doesn’t hold a candle to the GPU price leap of the last 9 months, it’s absolutely had an impact on the cost of a PC. One could argue that it’s probably had a larger impact on certain market segments — boutique PC builders, for example, generally weren’t impacted by the GPU price increases, while the entire market could have been impacted by RAM price jumps. In other words: One price increase dramatically impacted the fraction of the PC market that buys retail channel hardware to the point that it became impossible to recommend buying a standalone GPU for gaming, while the other may have had a much smaller effect on the entire market. According to the suit, Micron, Hynix, and Samsung simultaneously decided to agree on “supply discipline” — i.e., restricting sales to the PC space.
Here’s the lawsuit with its explanation of Micron’s behavior. All emphasis original:
For example, on March 30, 2016, Micron was specifically asked whether it would engage in supply cuts and Micron’s CEO, Mark Durcan, responded that Micron would “be foolish to be the first ones to take capacity off.” Micron’s CFO, Ernie Maddock, further confirmed that Micron would not unilaterally cut production: “it’s a really ill-advised move to be unilaterally cutting production.” But, at the same time, Micron reassured competitors that “our focus is not on market share.” Micron told its competitors that it would cease trying to take market share from Samsung and Hynix. On April 28, 2016 Samsung responded to Micron’s invitation to cut supply by publicly announcing that its DRAM supply growth had turned negative. After these communications, by June 1, 2016, DRAM prices reversed course, started shooting upwards, and continued to do so throughout the Class Period.
During the Class Period, Defendants continued their efforts to coordinate their DRAM supply decisions, as reflected in public comments by Defendants that urged each other to keep industry supply in check. Defendants each made public statements affirming their commitment to the common plan to curtail supply, and to not compete for each other’s market share by supply expansion. For example, Defendants informed the other Defendants through public statements, that they would keep total wafer capacity flat in order to constrain DRAM supply growth, they would only grow DRAM supply between 15-20 percent in 2017, even as DRAM demand grew 20-25 percent, and that they would refrain from taking each other’s market share. Defendants’ statements were matched with conduct — affirmed in industry reports and analyses – which reinforced each’s commitment to their common scheme. As a result of Defendants’ concerted actions to curtail supply and forego market share expansion, Defendants were able to raise DRAM prices steadily throughout the Class Period, and reap enormous profits, as shown in the chart below.
Two things we’d note at this point. First, there have absolutely been successful antitrust lawsuits and legal actions against various semiconductor manufacturers over the years, covering everything from LCDs to transistors. The idea that Samsung, Hynix, and Micron may have colluded is not crazy, especially given that Hynix, Infineon, Micron, Samsung, and Elpida all pleaded guilty to involvement in an international price-fixing conspiracy between 2003-2006. It’s not exactly hard to imagine that these companies might be up to their old tricks, especially since the response from these firms to the ongoing surge in DRAM prices might be charitably summarized as “LOL, K.”
According to the same lawsuit, Samsung agreed to increase memory capacity only after meeting with China’s National Development and Reform Commission (NDRC) in February. Hynix has now magically also announced that it will increase wafer capacity, and DRAM prices have begun to drop as a result. The official explanation for why DRAM prices rose is that Samsung and the other manufacturers prioritized mobile DRAM over desktop parts in the consumer market. But given that PC shipments have continued to fall from 2016-2018, there’s no explanation for why DRAM prices for PCs continued to rise, given that these increases should have otherwise encouraged one or more manufacturer to increase production, to maximize profits by taking market share. Except, of course, that hasn’t happened — and with the RAM industry now reduced to just three firms (Winbond and Nanya technically still exist, but they hold ~1.5 percent market share between them), the opportunities and benefits for collusion are enormous.
Obviously is not in a position to categorically say that these three companies colluded to raise RAM prices. But it’s not crazy to look at the huge spike in RAM costs alongside the actions all three firms didn’t take to increase production, and wonder if there wasn’t a very tidy little agreement in place to maximize profits at consumers’ collective expense.
ET Deals Roundup: $200 Gift Card with Samsung 4K TV for $600, $50 Price Drop on Inspiron 15 7000, and more
Ready to upgrade to a 4K television? Maybe you're looking for a new laptop for school, or searching for the perfect camera for an upcoming vacation. Well, there are plenty of discounts floating around this week, so we've put together a list of the hottest deals. If you're looking to save big on new gear, you're bound to find something worthwhile below.
Aptiv’s Self-Drive Car at CES 2018 Is Worlds Better
A flawless half-hour trip through busy Las Vegas streets. The only human intervention: When encountering barricades thrown up the middle of the street.
Razer Phone Gets Netflix HDR and Dolby 5.1 Sound
The company has announced a deal with Netflix that brings HDR and Dolby Digital Plus 5.1 sound to the Razer Phone.