China launches DRAM chip price probe into Samsung, SK Hynix and Micron

Samsung Electronics, SK Hynix and Micron Technology account for over 95 percent of the DRAM market. (Getty Images)
Updated 05 June 2018
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China launches DRAM chip price probe into Samsung, SK Hynix and Micron

  • Beijing is investigating price-fixing allegations as DRAM prices have risen sharply
  • Samsung and SK Hynix deny any wrong-doing

BEIJING: China has launched a probe into Samsung Electronics, SK Hynix and Micron Technology, the three semiconductor makers who control the market for DRAM memory chips.
Beijing is investigating price-fixing allegations as DRAM prices have risen sharply, the first such probe by China, said a source.
“The investigation has kicked off in earnest,” the source said.
The move comes at a time of improved relations between Seoul and Beijing after bilateral tensions last year, but analysts said the matter was separate from past rows as well as the US-China trade dispute.
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 contend that there has been no price-fixing.
“It is a situation where strong demand is boosting prices and factories can’t keep up with demand, even at full capacity,” said Moon Sung-wook, a senior industry ministry official.
He said that South Korea’s industry minister, who is visiting Beijing as part of efforts to boost his country’s investment in China, may discuss the probe in a meeting with his counterpart later on Tuesday.
All three firms said officials from China’s State Administration for Market Regulation had visited their offices. A Samsung spokesman said the company was cooperating with Chinese authorities, but did not provide more details. A SK Hynix spokesman declined to comment.
The crackdown on chipmakers was to ensure fair competition, said the Global Times, a state-backed Chinese tabloid.
Prices for DRAM chips, which help devices perform multiple tasks, have more than doubled in two years as servers, gaming PCs and cryptocurrency 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 still the largest importer of memory products, consuming 20 percent 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 OEMs due to high DRAM prices,” said Avril Wu, senior research director of DRAMeXchange, a Trendforce division.
A potential probe was first flagged late last year 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 percent of the market.
Samsung had a 44.9 percent market share in the first quarter, while SK Hynix has 27.9 percent and Micron has 22.6 percent, according to Trendforce.
In April, both firms 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 Group, the world’s largest PC maker, saying last month its gross profit margin dropped by 0.4 percentage points, mainly due to higher component costs, including memory chips.
Research firm Gartner has forecast average selling prices for DRAM chips to climb 14.8 percent this year.
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 barely affected by the news. Samsung finished the day 0.4 percent higher and SK Hynix was up by 1.4 percent.
China’s price-fixing fines have varied in recent years.
In 2016, it fined a GM local joint venture $29 million and a local Medtronic unit $17.2 million for separate price-fixing violations.


Egypt inks deal with Cyprus for power link to Europe

Updated 5 min 39 sec ago
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Egypt inks deal with Cyprus for power link to Europe

  • It is estimated the project will take 36 months to implement from the start of construction, with the lowest point 3,000 meters below sea-level
  • Phase 1 will see the interconnector carry a capacity of 1,000 MW which can be upgraded to 2,000 MW at a later stage

NICOSIA: Egypt has signed a deal with a Cypriot firm to lay a 310-kilometer (195-mile) cable under the Mediterranean to export electricity to Europe, the company said on Thursday.
Nicosia-based EuroAfrica described the deal, worth an estimated two billion euros, as a “landmark.”
“Cyprus now becomes a major hub for the transmission of electricity from Africa to Europe,” said company chairman Ioannis Kasoulides.
It is estimated the project will take 36 months to implement from the start of construction, with the lowest point 3,000 meters below sea-level.
Phase 1 will see the interconnector carry a capacity of 1,000 MW which can be upgraded to 2,000 MW at a later stage.
“The national electricity grid of Egypt will be linked to the European electricity system through Cyprus and will contribute to energy security,” Kasoulides said.
Following the crises in Crimea and eastern Ukraine, the EU has been keen to develop alternative sources of energy to reduce its dependence on imports from Russia.
In the past year, gas has started flowing from four major new fields off Egypt’s Mediterranean coast, and output is already sufficient to meet domestic needs.
The Arab world’s most populous country is now seeking to develop the infrastructure to export its newfound energy wealth, both as liquefied natural gas and as electricity.
Egypt is also seeking to import gas from fields off Cyprus and Israel to boost the profitability of the new liquefaction and export facilities it is developing on its Mediterranean coast.
In September, Egypt signed a deal with Cyprus to build an undersea pipeline to pump Cypriot offshore gas to Egypt for processing for export to Europe.
The plans have led to closer eastern Mediterranean ties, with Cyprus, Egypt, Greece and Israel holding regular high-level meetings.