Samsung pleads guilty in chip price-fixing scheme

Thursday, December 1st 2005, 8:46 am
By: News On 6

SAN FRANCISCO (AP) _ The price of memory chips began to climb in 2001, even though the tech industry was suffering its worst downturn in history. The CEO of Dell blamed the high chip prices on cartel-like behavior.

Prosecutors agreed, and the world's largest maker of computer memory chips _ Samsung _ pleaded guilty Wednesday to conspiring to fix the price of the chips used in personal computers and other electronic devices.

Price fixing in the dynamic random access memory market led to higher prices of some personal computers.

Under a previously arranged deal, Samsung Electronics Co. Ltd. and its U.S. subsidiary, Samsung Semiconductor Inc., were ordered to pay $300 million _ the second-largest fine in a criminal antitrust case.

Prosecutors said Samsung, which is based in Seoul, South Korea, and other companies engaged in price fixing through e-mails, telephone calls and in-person meetings from April 1999 to June 2002.

On Wednesday, Samsung Semiconductor's chief financial officer, Dahm Huh, did not speak to reporters after the hearing. Company spokeswoman Chris Goodhart also declined comment.

The plea deal, which was announced in October, requires the company to pay $300 million, plus interest, in installments over the next five years. The government agreed to not pursue additional prosecutions against Samsung or most its officers and employees.

Seven people, including Samsung Semiconductor President Y.H. Park, are specifically excluded from such protection and could still face prosecution.

The deal also did not seek restitution from Samsung. Instead, victims _ ranging from other chip makers and computer makers to private individuals _ can sue for damages.

``We're letting that be the vehicle for victim compensation,'' Lynch said outside the courtroom.

Victims included Dell Inc., Compaq Computer Corp., Hewlett-Packard Co., Apple Computer Inc., International Business Machines Corp. and Gateway Inc., prosecutors said.

Apple and Dell raised PC prices to compensate while others reduced the amount of memory installed on their systems.

The Justice Department investigation began in 2002, a year after memory chip prices began to climb even though the rest of the tech industry was suffering its worst downturn in history. At the time, then Dell CEO Michael Dell said cartel-like behavior was to blame.

Earlier this year, Seoul-based Hynix Semiconductor Inc. agreed to pay a $185 million fine; rival Infineon Technologies AG of Germany agreed to pay $160 million last year. A fourth chip maker, Micron Technology Inc. of Boise, Idaho, has been cooperating with prosecutors and was not expected to face charges.

The outcome of the investigation also is expected to help fuel a private antitrust case filed by Rambus Inc., which licensed a memory technology that had been embraced by Intel Corp., the world's largest maker of the microprocessor brains of computers.

In 1996, Intel chose Rambus technology to help speed up systems running its then-upcoming Pentium 4.

But the chip makers did not want to pay Rambus royalties. DRAM prices fell sharply _ so much so that Intel agreed to support non-Rambus technology in the fall of 2001.

Shortly after that, DRAM prices nearly quadrupled.

In 2004, Rambus filed a private antitrust suit against several chip makers. That litigation is ongoing, as are other cases related to memory prices.

``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,'' said John Danforth, Rambus' general counsel.