China alleges ‘massive’ evidence of chipmaker violations
Beijing vows to deepen antitrust probe of chipmakers Samsung, Micron and SK Hynix
Authorities in China have alleged “massive evidence” of antitrust violations by the world’s top three memory chip manufacturers, in the latest industrial spat that threatens to upset global trade relations.
Officials in Beijing said an investigation into South Korea’s Samsung Electronics and SK Hynix and US-based Micron Technology had made “important progress”, and vowed to deepen their probe into the trio, which account for more than 95 per cent of the world’s supply of DRAM chips.
The probe casts a shadow over Samsung, the world’s largest chipmaker by sales, whose soaring profits in recent years have been fuelled almost entirely by the memory chips required by evermore powerful computer servers and cryptocurrency mining devices.
But Beijing’s interest in nurturing domestic technology groups, including chipmakers, also threatens to hollow out business in neighbouring South Korea, where semiconductors this year accounted for 20 per cent of all exports.
“The anti-monopoly investigation into these three companies has made important progress . . . [It] has yielded massive evidence,” said Wu Zhenguo, head of China’s anti-monopoly bureau under the State Administration for Market Regulation.
The inclusion of Micron has sparked fears the probe could form part of a counteroffensive by China in its trade war with the US.
“This seems to be part of Beijing’s negotiating tactic amid the ongoing trade war. Beijing may be using this as a bargaining chip for its trade talks with the US,” said Daniel Kim, an analyst at Macquarie.
China last year accounted for 51 per cent of Micron’s semiconductor sales, 40 per cent of Samsung’s sales and 33 per cent of SK Hynix’s, according to SK Securities.
The three companies named in the investigation, which kicked off in June, are serious competition for nascent state-backed Chinese groups.
In 2015, Beijing unveiled a national initiative to become a global high-tech superpower in key sectors including semiconductors. Chinese firms have received massive state subsidies for the research and manufacture of memory chips.
That has also fuelled complaints that Chinese state-owned companies are stealing US technology to further that goal, accusations that have featured prominently in the US-China trade war.
This month, Washington filed criminal charges against Fujian Jinhua, a Chinese state-owned company, for the alleged theft of trade secrets from Micron as Washington ratchets up its fight against Chinese economic espionage, and it has banned the Chinese group from buying US-made components.
The semiconductor investigation also reflects China’s increasing wiliness to exert its antitrust powers over multinational companies. The anti-monopoly bureau within the commerce ministry has worldwide jurisdiction over any deal above a certain size if the regulators judge that it will have a broad effect on Chinese consumers and suppliers.
Kim Young-woo, an analyst at SK Securities, said Beijing could impose fines of more than $2.5bn on each the three chipmakers in the worst-case scenario.
“This would create additional pressure to cut DRAM prices and build more wafer factories as joint ventures with local Chinese companies to spur the transfer of technology to China,” he said.