DoJ Launches Price-Fixing Probe of NAND Flash Memory Market

The probes follow an Aug. 31 antitrust suit filed in U.S. District Court, San Jose, seeking class-action status. It alleges 23 companies, including Hitachi, Mitsubishi, Hynix Micron/Lexar, Samsung and SanDisk, “conspired to fix, raise, maintain or stabilize flash memory” prices starting in 1999. No SanDisk, Lexar/Micron and Samsung officials were available for comment. The suit charged Sherman Act violations involving NAND and NOR flash memory. Flash is used mainly in memory cards but also is found in digital audio and DVD players, digital cameras, mobile phones and videogame consoles.

The suit, filed on behalf of consumer Stuart Go, said that with flash fabrication plants costing “upwards” of $2 billion to build, the NAND/NOR market is “conducive” to “collusive activity.” “Efficient fabrication plants are large and costly,” the 32-page suit said. “Flash memory also is subject to technological advances, so that firms within the industry must undertake significant research and development programs.”

Conspirators set flash-memory pricing via a network of trade groups including the CompactFlash Association, founded in 1995, and the Joint Electronic Engineering Council Solid State Technology Association, the suit alleged. The companies also met at trade shows and San Jose-area restaurants, it said. The “cartel-like” activities arose from a September 1999 gathering of the companies at the World PC Expo in Tokyo, the suit alleged. The companies also were bound by cross-licensing agreements, including SanDisk’s 2002 flash memory pact with Samsung, it said. SanDisk has manufacturing joint ventures with Hynix and Toshiba, the former for making memory components and selling NAND “solutions,” the suit said. Hynix has had front-end memory venture with STMicroelectronics in China since 2004. And STMicroelectronics develops RISC microprocessors with Renesas, a joint venture of Mitsubishi and Hitachi.

Participants track one another’s prices on the DRAMeXchange, the suit alleged. The NAND/NOR memory market’s structure lets companies “maintain and enforce” cartels, “using methods such as price signaling,” it alleged. Hynix warned in March 2006 that flash memory prices could fall 50 percent for the year, but the next day Samsung said they would recover and stabilize, the suit said. By August 2006, flash memory prices were stable, partly due to reduced manufacturer inventory, it said.

The DoJ action seems to have grown from price-fixing inquiries in the DRAM and SRAM markets. Samsung, fined $300 million in 2005 for DRAM price fixing, faces similar charges involving SRAM, the suit said. Hynix has paid $185 million for DRAM price-fixing and six Samsung executives have pleaded guilty; one, Il Ung Kim, drew 14 months in prison. In October 2006 DoJ subpoenaed 23 companies in an investigation into “cartel activity” in the SRAM market, the suit said.

NOR and NAND chips are the main types of nonvolatile memory used in CE products to retain data when power is turned off. NOR chips excel at reading data at high speeds, making them best-suited for running software in cellphones. NAND ICs write data at high speeds, have more storage capacity than NOR and act more like hard discs. NOR chips typically are part of a PC’s main memory. NOR and NAND were developed by Intel and Toshiba in 1988 and 1989.

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SanDisk started shipping its Sansa View video MP3 players in 16 GB ($199) and 8 GB ($149) flash memory configurations. The players, SanDisk’s first with video playback, have a 2.4-inch LCD with 320x240 resolution, MPEG-4, WMV and H.264 compatibility, MicroSD/SDHC memory card slots and a lithium ion battery with a seven-hour run time for video. The video run time is based on continuous playback of 320 by 240 H.264 video at 512 kilobits a second. Sansa View also supports Audible audiobooks and JPEG and has a voice recorder with built-in microphone.