*NEWS*SAMSUNG’S FULLER DISCLOSURE
*NEWS*SAMSUNG’S FULLER DISCLOSURE
2005-12-19 at 10:12:00 am #13367
Samsung’s Fuller Disclosure
Newly released documents help to explain why the chipmaker admitted guilt in the Justice Dept.’s mammoth price-fixing probe
following the Justice Dept.’s investigation of price fixing in the
memory-chip industry had reason to pay especially close attention to
court filings made public Nov. 28. Samsung Electronics, the South
Korean chipmaker, had already pled guilty in the case and agreed to a
$300 million fine . But the document sheds new light on Samsung’s
agreement to plead guilty and names seven individuals who could face
criminal prosecution in the matter.
Samsung is a key figure in the
government’s probe of an alleged conspiracy to thwart competition in
the memory-chip business by manipulating prices, starting in mid-1999
and continuing until mid-2002. In the filing, submitted to the U.S.
District Court in San Francisco, Samsung admits to several key details
of a plan to fix prices on memory chips, known as dynamic random access
memory, or DRAM.
But it also admits that some actions involved a
particular type of memory chip known as RDRAM, designed by Rambus
(RMBS), a chip technology designer that has lodged its own lawsuit
against Samsung and other memory-chip companies. Rambus alleges it was
injured by certain price-fixing actions by those companies during
roughly the same time period.
MICRON’S DEAL. Samsung, the world’s
largest producer of computer memory chips, is the third company named
so far in the government’s ongoing probe into price-fixing in the
memory-chip industry. The others are Infineon of Germany and Hynix
Semiconductor, also of South Korea. The filings mark the latest steps
in what has turned out to be the biggest antitrust investigation in U.S
Until now the Justice Dept. has levied $646 million in
fines, and sent five people to prison. A fourth company, Micron
Technologies , based in Boise, Idaho, has been cooperating with the
investigation under a leniency deal.
The admission concerning RDRAM
is significant, because Samsung admits in the filing that at least part
of the actions for which it was charged related to RDRAM. Rambus
lawyers have repeatedly sought to link the actions in the Justice Dept.
case with its own.
“TREMENDOUS” STAKE. Specifically, they have
argued that the actions to which Hynix, Infineon, and Samsung admitted
were motivated by the goal of putting Rambus out of business. But the
chipmakers have repeatedly denied there is any connection between the
price fixing to which they admitted under the DOJ matter and the
price-fixing alleged by Rambus.
Indeed, Samsung lawyer Mark
Schechter, with the Washington, D.C., Howrey firm, said Samsung’s
actions relating to Rambus’ memory technology showed the outfit’s
intent was the opposite, referring to language in the filing that
portrays Samsung as having “invested in, promoted, and marketed RDRAM.”
staked a tremendous amount on the success of that technology,”
Schechter says. “It would not have been in its best interest to
sabotage those efforts. There is little comfort here to those who would
allege that Samsung was anything other than incredibly supportive of
CALIFORNIA MEETING. In fact, Samsung was the
largest supplier of RDRAM by far during the time period covered by the
complaint. Among its customers was Sony which used – and still uses –
RDRAM in its Playstation 2 gaming console.
Rambus in 2004 sued
memory-chip makers, including Samsung, Hynix and Micron, in a
California court, alleging that those companies colluded to
artificially inflate prices on RDRAM, while similarly lowering prices
on an alternative technology, double data rate DRAM chips, and thus
make RDRAM less attractive to computer manufacturers like
Hewlett-Packard , Dell , Gateway and Apple among others.
lawsuit paints a picture in which the memory companies planned to
mislead Intel regarding how much it cost them to build RDRAM chips, and
to overstate how many of the chips they planned to manufacture. Its
complaint describes a 1998 meeting at which executives of Hynix, then a
unit of Hyundai, urged executives with other companies to provide PC
makers with artificially inflated price and production projections on
RDRAM, and by overstating production plans on RDRAM chips to Intel.
MARKET. In its complaint, Rambus cites notes of an October, 1998,
meeting at Micron headquarters in Boise, which state that Farhad
Tabrizi, a Hynix executive, reported that his outfit had shown Intel
price projections for RDRAM chips that were “two to three times” the
price of another kind of chip, and also gave Intel production
projections that amounted to “three times their actual plans.”
(INTC) was Rambus’ biggest ally in its effort to promote RDRAM as an
industry standard memory technology. In the late 1990s it insisted that
its then-forthcoming Pentium III chips would work only with RDRAM.
RDRAM was designed to move data faster than memory technologies in use
at the time (see BW Online, 10/31/05, “Rambus and a Price Fixing
Tale”). Intel wanted RDRAM to succeed badly enough that, on Feb. 21,
2000, it invested $250 million in Infineon with the purpose of
encouraging RDRAM production.
The only problem was that
manufacturers of memory — the low-margin commodity parts of the
semiconductor industry — balked at the idea of paying what they saw as
unreasonable licensing fees and royalties for RDRAM. They instead
promoted DDR, which was faster than than the older SDRAM technology,
then being phased out, though not as fast as RDRAM.
A MATTER OF
TIMING. Better yet, DDR was royalty-free. By October, 2001, Intel had
moved away from Rambus memory and toward DDR, and DDR memory technology
is now a standard component in most computers.
The time element of
Samsung’s new admissions also is key, because the period during which
Samsung, Hynix and Infineon have admitted to collusion coincides
closely with the period when Rambus was trying to establish RDRAM in
In the filings, Samsung and the government also
name seven current or former Samsung employees, including Park Young
Hwan, president and CEO of its US-based Semiconductor Division, who are
not covered by the settlement agreement and may yet be subject to
The other six are: Thomas Quinn, a Samsung
vice-president of memory sales; Kim Il Ung and Kang Yeong Ho, both
vice-presidents in charge of marketing; Lee Sun Woo and Lee Young Woo,
vice-presidents for memory-chip sales. The seventh, Rha Young Bae, is
no longer a Samsung employee.
“FINAL RESOLUTION.” When the guilty
plea was announced, Thomas Barnett, the government’s acting head of
antitrust investigations, indicated seven people — then unnamed –
were not covered by Samsung’s guilty plea, indicating they might face
criminal charges of their own. Samsung did not make any of them
available for comment.
Samsung declined to comment on the filing,
other than to say, “on Nov. 23, 2005, the plea agreement between
Samsung and [the Justice Dept.] regarding price fixing of DRAM was
filed with the clerk of the court in anticipation of a formal hearing
to enter the plea on November 30.” In the statement, Samsung went on to
say, “there has been no change in the terms of the plea agreement or in
the companies’ status since the announcement of the plea last October.
The plea agreement represents the final resolution of the federal DRAM
investigation for Samsung.”
Rambus general counsel, John Danforth,
said: “We are continuing to pursue our own antitrust case which is
based in part on the price fixing now being admitted by key members of
the DRAM industry.” He declined to elaborate