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U.S. Opens Investigation of Flash Memory Price Fixing
POSTED: 9:54 a.m. EDT, September 15,2007
The U.S. Justice Department started a criminal investigation of makers of the flash memory chips that go into cameras and music players, broadening its crackdown on possible price fixing in the semiconductor business.

Samsung Electronics Co., the world's second-largest chipmaker, and Toshiba Corp., Japan's biggest maker of semiconductors, said today they are cooperating with the probe. The companies are the top two makers of flash memory chips.

The Justice Department has spent more than three years conducting a criminal antitrust probe of makers of another type of memory chip, known as DRAM, charging four companies and 13 people, and levying fines of $731 million. In October, U.S. authorities opened an investigation of the SRAM market.

``I'm not surprised by the action, given recent investigations into SRAM and DRAM,'' said Edwin Mok, an analyst at Needham & Co. in San Francisco. ``These are usually multiyear events. While some executives may be affected, it may not have a big impact on individual companies or the industry.''

The market for Nand-type flash memory semiconductors, used as storage in portable consumer electronics ranging from digital cameras to some versions of Apple Inc.'s iPod music player, is forecast to grow 15 percent this year to $14.2 billion, according to El Segundo, California-based iSuppli Corp., a research firm.

Industry Probe

``The Antitrust Division is investigating the possibility of anti-competitive practices in the flash memory industry,'' said Justice Department spokeswoman Gina Talamona.

Samsung ``will cooperate fully,'' said John Lucas, a spokesman for the Suwon, South Korea-based company. ``Samsung is strongly committed to fair competitive business practices and forbids anti-competitive behavior.''

In 2005, Samsung agreed to pay $300 million to settle Justice Department claims of price fixing in the DRAM market.

``Most suppliers mentioned are DRAM makers who should have learned the lesson of the price-fixing case,'' said Kim Nam Hyung, an iSuppli analyst, who was surprised by the announcements. ``Suppliers' operating profits in Nand products were very sound, which means they were not in a desperate situation forcing them to collude, unlike in the DRAM case back in 2001 when most lost money.''

DRAM, or dynamic random access memory, provides the main memory for personal computers. SRAM, or static random access memory, handles other data tasks for PCs and electronic devices.

Toshiba Subpoenaed

Toshiba has been subpoenaed and ``is cooperating in what appears to be an industrywide investigation,'' the Tokyo-based company said in an e-mailed statement.

Renesas Technology Corp., a joint venture of Hitachi Ltd. and Mitsubishi Electric Corp., also received a subpoena, the Tokyo-based company said through U.S. spokeswoman Akiko Ishiyama. Renesas is cooperating and couldn't comment further, she said.

Samsung was the largest maker of flash memory chips last year. Toshiba was second, followed by Hynix Semiconductor Inc., Micron Technology Inc. and STMicroelectronics NV.

Intel Corp., the world's largest semiconductor maker overall, entered the flash market through a joint venture with Micron. Chuck Mulloy, a spokesman for Santa Clara, California- based Intel, said he wasn't aware of a probe.

``Micron hasn't received a subpoena and doesn't expect to,'' said Daniel Francisco, a spokesman for that company, based in Boise, Idaho.

Bobby Lee, a U.S. spokesman for Ichon, South Korea-based Hynix, said he was unable to comment. Michael Markowitz, a spokesman for Geneva-based STMicroelectronics, said his company hadn't been contacted by the Justice Department.

SanDisk Chief

SanDisk Corp., the world's largest maker of flash memory cards, said in a regulatory filing today that it had received subpoenas, including one for Eli Harari, its chief executive officer. SanDisk packages flash chips into cards that can be read by cameras, phones and other devices.

The company produces the chips themselves in a joint venture with Toshiba. Michael Wong, a spokesman for Milpitas, California- based SanDisk, declined to comment.

The Canadian Competition Bureau also notified SanDisk that it had begun a probe of alleged anti-competitive actions in the Nand flash market, SanDisk said in the filing.

John Pecman, an assistant deputy commissioner in the criminal matters branch of the Canadian Competition Bureau, confirmed the investigation.

``We have sent target letters to a number of industry participants to let them know that we're also investigating,'' Pecman said today in an interview from the bureau's offices in Gatineau, Quebec. ``Given the international scope of the industry, we try to work in parallel with other international agencies.'' He refused to elaborate.

SanDisk shares rose $1.30, or 2.6 percent, to $51.29 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has gained 19 percent this year. Micron shares, down 21 percent this year, fell 28 cents to $11.

From: bloomberg
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