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U.S. Probe Targets Memory Chip Firms


The Justice Department has launched an antitrust investigation into whether semiconductor manufacturers manipulated prices in the $11.2-billion memory chip market.

Federal investigators issued subpoenas to Micron Technology Inc., Samsung Electronics Co. and Infineon Technologies, the companies confirmed Wednesday. In addition, Hynix Semiconductor Inc. received a request from U.S. regulators for information, a South Korean news agency reported.

The investigation comes as the memory chip business struggles against weak demand for personal computers.

All but one of the companies contacted by the Justice Department posted losses, and analysts were puzzled by the timing.

"If you want to catch a crook, you look at who's getting rich," said David Wu, vice president of research at Wedbush Morgan Securities in Los Angeles. "Right now, they're all losing money."

Micron, Samsung and Infineon said they would cooperate with the investigation. Executives for Seoul-based Hynix could not be reached for comment.

The four companies control 80% of the global market for dynamic random access memory, or DRAM, chips used in personal computers and other electronic devices. Analysts estimate that Micron and Samsung each have a 25% share of the DRAM market, while Hynix has 20%, and Infineon has about 10%.

Officials at the Justice Department declined to answer questions about the probe.

Micron acknowledged that it received a grand jury subpoena Monday. "Micron does not believe it has violated U.S. antitrust laws," Kipp A. Bedard, Micron's vice president of corporate affairs, said in a statement.

A downturn in PC sales last year led to a 60% decline to $11.2 billion in DRAM sales, the industry's steepest drop. Prices for 128-megabyte chips hovered around $2.50 on Wednesday. Prices, which have been as high as $20 a chip, hit $1 in November before rising to more than $4 in March.

"It's one of the single most competitive sectors in the semiconductor industry," said Dan Scovel, analyst with Needham & Co. in New York. "It takes huge investments. It has extremely volatile market characteristics. It's a nightmare for business planning."

With the DRAM business in a tailspin, analysts are puzzled by the investigation.

Three of the four companies posted losses last year. Micron, based in Boise, Idaho, lost $625 million. Based on Wednesday's exchange rate, Munich, Germany-based Infineon lost $564.9 million in 2001. And Hynix lost $4 billion last year. Only Samsung, which also makes televisions, cell phones and other electronic gadgets, was profitable.

The memory chip market has been so fiercely competitive that companies in recent years have traded accusations of "dumping," or flooding the market with low-priced chips to drive rivals out of business.

Because of brutal price competition, the field of competitors has dwindled from more than a dozen players just 10 years ago. The drive toward consolidation may not be over. Micron and Hynix earlier this year agreed to merge their DRAM operations, but a disagreement among Hynix board members nixed the deal in April.

News of the investigation sent shares of memory chip companies tumbling. Micron lost $3.52, nearly 15%, to $20.08 on the New York Stock Exchange. Infineon dropped 4.8% on the Frankfurt exchange. Samsung declined 4% and Hynix fell 13.4% in Seoul trading.

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