Samsung fined $300 million for fixing memory prices
posted Oct 13th 2005 4:14PM
Some majorly bad news for Samsung: the company, along with its US subsidiary Samsung Semiconductor, has agreed to
pay a massive $300 million fine after being charged with price fixing by the Justice Department. Turns out that over
the course of several years the company, along with several other memory chip suppliers, had conspired to fix the
prices and gouge PC manufacturers like Dell, HP, Apple, IBM, and Gateway.
P.S. - Note that this is actually a totally different case than
the one they're potentially facing in South Korea over
the memory modules they supplied Apple for use in the iPod nano, but proof of bad behavior like this probably isn't
going to dissuade the Korean FTC from launching their investigation.
[Thanks, CoreyTheGent]
UPDATE: The AP has updated their story (for the fourth time, apparently) to clarify that this covers just DRAM, not other kinds of memory.
I would like to know where all of this fine money is going to. Since the consumer is the one paying for this why should samsung get sued and have to pay someone other than the public who has had to incure the added cost. Who I ask is getting this money?!!!!!
So are we going to start seeing $15 1GB SD cards now?
Does this mean the memory chips will be cheaper in the future with no price fixing?
for the uninitiated, what exactly is price fixing?
for the uninitiated, what exactly is price fixing?
Of course South Korea is still evolving from being a corpratist state and thus its FTC might be less watchful of one of the largest Chaebol in the country
http://en.wikipedia.org/wiki/Price_fixing
Price fixing is where different companies get together to set a price. Like, if companies decide 256MB DRAM should cost 50 dollars, that's how much we'll all have to pay because there's no other DRAM that cost less. Price fixing is like eliminating competition and free flow of supply and demand dictated by price.
victims include Dell, HP, Apple, IBM, and Gateway........ THEY FORGOT ABOUT US!!!! THE PEOPLE WHO ACTUALLY SPENT MONEY ON $150 1GB SD Cards and still whoever is smart/dumb enough to purchase a $250 2gb Memory Stick Pro Duo or any other flash memory..... wonder why a 2GB flash card is still $250-$350 while a 4GB iPod Nano w/ LCD screens, scroll wheel, battery, etc is $250...... not supply and demand as memory cards and embedded memory chips sell more volume than iPod nanos........
one example, eric:
If there were only two companies that made flash memory, they could talk to each other and decide a price that isn't affected by market demand. Usually as demand goes up, more product is made and costs go down... usually followed by price.
Seeing how there isn't another company named in this, I am guessing there is some in house shennanigans a goin on.
#7 has a pretty good explanation. I would add that generally price fixing involves multiple firms agreeing to act as a monopoly to set the price for a specific good. That means that Samsung either wasn't alone in this or the term price-fixing shouldn't be used.
Wonder if this explains why best buy charges twice as much for a stick of ram that was state of the art two years ago then one that is state of the art today.
I don't completely understand how Apple can be a victim in this instance of price-fixing, considering they're also under investigation for their deal to purchase low-cost flash memory from Samsung. Perhaps they learned of Samsung's price-fixing and were able to negotiate a deal because of it?
Samsung's been involved in several scandals that have surfaced during the past few months - price fixing; unfair trade practices; embezzelment; illegal attempts at tranferring company ownership; alleged bribes to politicians, officials, and prosecuters.
RTFA, fellas, RTFA:
"Samsung's top competitor, Seoul-based Hynix, agreed earlier this year to plead guilty to price fixing and pay a $185 million fine. Last September, rival Infineon Technologies AG of Germany agreed to a $160 million fine. Another competitor, Micron Technology Inc. of Boise, Idaho, has been cooperating with prosecutors and was not expected to face charges. "
R to the T to the F to the A.
So perhaps Samsung just sold memory to Apple for the iPod Nano for what it was worth, rather than the pre-fixed price? This settlement might actually help Apple in the Korean investigation against them and Samsung.
My understanding is that Samsung is hardly alone in South Korea as being riddled with scandal and corruption (or here in the U.S., for that matter). Daewoo smells a lot like a Korean Enron and makes Samsung look pretty clean by comparison.
Post 13: yeah, that might be true huh? interesting.
Also, if you look at samsung's flash memory growth in the last few years it was VERY fast. Overall this report says that in august 2005 Samsung held 33% (!) of the general flash supply market. With NAND flash it held 55%!
I'm not sure that they really needed any accomplice suppliers to set the price with that much marketshare. Also NAND is overtaking the other forms of flash memory being supplied, so Samsung is set to make a killing in the near future... what do you think?
Here's the link of one of the sources i looked for:
http://www.global-electronics.net/index.php?view=print&id=23262&CMEntries_ID=99491&
GUYS:
This isn't about flash memory. It's about DRAM. The alleged price fixing happened from 1999-2002.
From Reuters: "...Samsung would become the third chip maker to plead guilty in the wide-ranging probe of the prices of dynamic random access memory, or DRAM, chips."
The article mentions flash memory exactly NOWHERE. It's about computer DRAM. Geez.
I don't see the big deal with price fixing in the first place. All it does is open the doors for others to compete if they press too hard. Either someone will notice they can make them cheaper, or people will use an alternative. In the long run it hurts Samsung as well, competitively.
And the government remedy here does nothing to help the "injured" party anyway, and it's 15 years later, so what're they so proud of?
People don't seem to have as much problem with price fixing and collusion when it's on the other side of the equation with labor setting prices as a group, and guess what? In a truly free economy every transaction is voluntary anyway so how can you claim to be injured?
From Forbes/AP article: "The chips are used in digital recorders, personal computers, printers, video recorders, mobile phones and many other electronics."
Wouldn't that include both DRAM and NAND flash memory?
Anyone else see the humor in the Crucial Technology 'Don't get burned by cheap memory' banner currently at the top of the engadget pages?
#11, this does not explain why Best Buy charges more for PC100/133 SDRAM than it does for DDR. Once again, economics show that price is set by supply and demand. If only 10% of the computers used today use SDRAM, then there isn't much demand thus less supply, thus higher price. It's the same reason an part for a classic car costs more than a part for a Cavalier.
Brian, economic principle dictates that the supply and demand curves will shift in favor of the consumer with the introduction of new technology and a shift in consumer trends. Obsolete technology becomes cheaper in price compared to current technology. The only time this doesn't occur is when something becomes a collector item.
More likely is the fact that best buy realizes that most consumers don't know much about technology or economics and will pay for old ram. That way, the ram can be priced the same while yielding greater profits.
Oh, and cavalier parts are more expensive than most classic cars. That is unless you need parts for a collector's car.
I, too, am curious as to the arbitrary amount of $300 million and the final destination of the money. Does a particular state all of a sudden widen their freeway lanes? And why $300 mil. and not $200 or $400? Mysteries of the universe.
to all the people that explained price fixing, thank you
ok, so my question is where do i sign up for my money back for all the over priced cell phones htat ive been forced to buy, and the other ways that this has affected me? (starts digging around for reciepts)
#22 Brian, you are right. It also has to do with the fact that manufacturers shut down old fabs. They are expensive to run, and they need to gear up for newer chips.
Re: where the money goes...
The fine will go into a DOJ administered fund to assist victims of crime.
Source: http://www.eweek.com/article2/0,1895,1891846,00.asp