DOJ May Settle with Memory Chip Maker

Micron Technologies is expected to work out a settlement
with the U.S. Department of Justice (DOJ) in the next few weeks as part of an
ongoing investigation into the dynamic random access memory (DRAM) market, has learned from sources.

The anticipated deal comes after an executive for Micron agreed to plead
guilty to obstructing the grand jury investigation of a suspected conspiracy
to fix the price of DRAM products sold in the United States.

Micron’s regional sales manager for upstate New York, Alfred Censullo, was
charged in U.S. District Court in San Francisco last month with obstruction
of justice for altering and concealing documents containing competitor
pricing information, which were requested in a federal grand jury subpoena.
Censullo was responsible for Micron’s DRAM sales to customers in his region,
including the server division of IBM .

DOJ spokesperson Blaine Rethmeier could not comment on the Micron’s case
outside of Censullo’s charges, but did say that the department has an
ongoing investigation of suspected price fixing in the DRAM industry. The
Antitrust Division’s San Francisco Field Office is conducting the inquiry with assistance from the FBI.

Boise, Idaho-based Micron spokesman Dave Parker was not immediately
available for comment but told Bloomberg news this week that his company has
“fully and actively cooperated with the DOJ and will continue to cooperate
with the DOJ as appropriate.”

Micron’s investigation has a wide-reaching impact on the rest of the DRAM
players, including Germany’s Infineon Technologies AG and South Korea’s
Samsung Electronics and Hynix Semiconductor. But Micron’s settlement with
the DOJ has the most impact on Los Altos, Calif.-based Rambus , which also specializes in high-speed chip-connection

The thinking in some circles is that if Micron is in the process of
settling with the DOJ, it would lend credibility to the evidence that turned
up at Rambus’ Federal Trade Commission (FTC) trial last summer, even though the two
instances of alleged price collusion would be distinct and separate.

Word of the Micron/DOJ settlement was also fueled by news that judges
with the FTC have issued a two-month extension of
the deadline for giving an initial decision in the case against Rambus.

“If Rambus were to pursue a civil case of anti-competitive behavior
against specific DRAM manufacturers, it would be likely considered to be
deliberate intent …and thus open to treble damages,” American Technology Research analyst Erach Desai said in a note to investors. “It would seem foolish to us if
Micron was to settle with the DOJ and leave themselves potentially
vulnerable on the civil side, but we are not lawyers and logic has hardly
been the underlying driver for the machinations behind the Rambus legal

During the FTC trial last summer there was scattered evidence and
testimony that suggested some of the major DRAM manufacturers deliberately
low-balled the pricing of SDRAM in the late 1990s.

“[This was] so that Rambus’ alternative (RDRAM) would never become
economically feasible even though RDRAM was technically superior and had
been widely endorsed by Intel, the premier CPU chip provider for PCs,” Desai

Intel has since invested $450 million in Micron to
advance their joint efforts in wafer production and memory technologies.

In 2001, Infineon Technologies accused Rambus of
deception while it was working with the JDEEC Solid State Technology
Association — a standards-setting board — to develop DDR
SDRAM memory technology. The U.S. Supreme Court recently
denied Infineon its final appeal to revive its fraud case against rival

DRAM prices are currently trending upward. Recent market surveys showed a 15 to 20 percent increase month over month of order forecasts for October from major OEMs as inventory built up for Christmas.

Analysts say memory content has flattened out in the past month, but
attributed it to low end customers “taking a breather” until the pricing

That has been cold comfort for Micron, whose fourth quarter and year-end
results ended in a net loss of $123 million, its 11th straight quarterly

To overcome its troubles, Micron has been slowly restructuring its
business units to reflect changes in the memory marketplace, including its battles
overseas with its South Korean rivals.

Recently, the world’s second-largest
computer memory chipmaker decided to phase out production of
synchronous SRAM products at its worldwide operations. In April, the company sold off
some of its inventory to Cypress Semiconductor .

Micron reorganized last year to focus on migrating its products
from .13 to .11 micron manufacturing process technology.

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