Picture: REUTERS
Picture: REUTERS

Seoul — China has launched a probe into Samsung, SK Hynix and Micron Technology, the three semiconductor makers who control the market for dynamic random-access memory (dram) memory chips.

Beijing is investigating price-fixing allegations as dram prices have risen sharply, the first such probe by China, said a source with knowledge of the matter.

"The investigation has kicked off in earnest," the source said, requesting anonymity due to the sensitivity of the matter.

The move comes at a time when Seoul and Beijing have just gotten back on a more even footing after bilateral tension in 2017, but analysts said the matter was separate from past spats as well as the current US-China trade disputes.

Rather, the high cost of chips has hurt many electronics makers, with Chinese manufacturers among the hardest hit as they operate at lower margins than rivals.

A senior South Korean government official said Samsung and SK Hynix contended that there has been no price-fixing.

"It is a situation where strong demand is boosting prices and factories can’t keep up with that level of demand even at full capacity," said Moon Sung-wook, the senior industry ministry official, said by telephone.

South Korea’s industry minister, who is visiting Beijing as part of efforts to boost his country’s investment in China, asked his Chinese counterpart for fair treatment for South Korean companies involved in the probe, the ministry said in a statement.

Chinese commerce minister Zhong Shan "promised to handle the matter fairly", the South Korean industry ministry added.

All three firms said officials from China’s State Administration for Market Regulation had visited their offices recently. A Samsung spokesperson said the company was co-operating with the Chinese authorities, but did not provide more details.

A SK Hynix spokesperson also declined further comment.

The crackdown on chip makers was to ensure fair competition, said the Global Times, a state-backed Chinese tabloid run by the ruling Communist Party’s official People’s Daily.

Prices for dram chips, which help devices perform multiple tasks, have more than doubled in two years as servers, gaming PCs and crypto currency mining devices demand more firepower to process large amounts of streaming data.

Although China is investing heavily to build up its still-nascent chip industry, it is currently the largest importer of memory products, consuming 20% of the world’s dram, according to research firm Trendforce.

"The investigation not only reflects the current oligopoly in dram market, but also shows the cost pressures faced by Chinese original equipment manufacturers due to high dram prices," said Avril Wu, senior research director of DRAMeXchange, a Trendforce division.

A potential probe was first flagged late in 2017 when Chinese state media reported that regulators approached South Korea’s Samsung over rising prices.

The dram sector has been a frequent target of regulatory probes globally over price-fixing allegations as the industry has seen a flurry of deals that left the two South Korean firms and their US rival commanding 96% of the market.

Samsung had 44.9% market share in the first quarter, while SK Hynix has 27.9% and Micron has 22.6%, according to Trendforce.

In April, they were slapped with a class-action lawsuit brought on behalf of US consumers over allegations that they conspired to inflate dram prices.

Manufacturers have also joined a chorus of complaints with Lenovo, the world’s largest PC maker, saying in May its gross profit margin dropped by 0.4 of a percentage point mainly due to higher component costs, memory chips in particular.

Research firm Gartner has forecast average selling prices for dram chips to climb 14.8% in 2018.

But there may be some relief in sight, with Apple’s chief financial officer predicting in early May that dram prices may be "near the peak, possibly at the end of this year". Shares in the South Korean firms were little affected by the news. Samsung finished the day 0.4% higher and SK Hynix was up 1.4%. China’s price-fixing fines have varied in recent years.

In 2016, it fined a GM local joint venture $29m and a local Medtronic unit $17.2m for committing separate price fixing violations. In the previous year, regulators fined eight shipping companies from Korea, Japan and Europe a total of $65m for coordinating bids and routes to keep prices high.