Hynix Cops Guilty Plea in DRAM Debacle

Korean chipmaker Hynix agreed today to a guilty plea and a $185 million fine
for conspiring to fix prices in the dynamic random access memory (DRAM)
market. The fine is the third-largest criminal antitrust fine in U.S.

Hynix is the second DRAM manufacturer to be caught in the Department of
Justice’s (DOJ) ongoing investigation of international price fixing. Last
September, the German firm Infineon pleaded
guilty and paid a $160 million fine.

According to the one-count felony charge filed Thursday in San Francisco,
Hynix participated in the conspiracy from 1999 to 2002 by participating in
meetings, conversations and other communications in the United States and

“Today’s charge and its resulting guilty plea are another significant step
in the department’s ongoing fight to break up and prosecute
international cartels that harm American consumers,” U.S. Attorney General
Alberto Gonzales said in a statement. “This case shows that high-tech
price-fixing cartels will not be tolerated.”

Although the DRAM market is one of the most volatile industries, a check of
prices in the years in question illustrates huge market swings.

Between November 2001 and the first few months of 2002, memory prices spiked
to an estimated three times their normal levels after a two-year plunge but
then dropped again, according to the Semiconductor Industry Association

The trade group said the DRAM marketplace started off as a $20.7 billion
industry in 1999 and skyrocketed to $28.8 billion in 2000. That number
dropped to $11.2 billion in 2001, but then started to bounce back in 2002 to
$15.3 billion.

“This case illustrates the international scope of our criminal
investigations and underscores the importance of looking beyond our nation’s
borders to prosecute and deter cartels,” said R. Hewitt Pate, assistant
attorney general in charge of the DOJ’s Antitrust Division.

Under the plea agreement, which must be approved by the court, Hynix has
agreed to cooperate with the government in its ongoing investigation of
other DRAM producers. Infineon agreed to a similar deal in its plea bargain.
Five months later, Hynix became the next DRAM maker to plead guilty.

“We expect that Hynix’s cooperation will provide valuable assistance in our
continuing investigation,” said Scott D. Hammond, the Antitrust Division’s
deputy assistant attorney general for criminal enforcement.

According to the DOJ, American companies directly affected by the
price-fixing conspiracy were Dell , Compaq,
Hewlett-Packard , Apple , IBM and Gateway .

Individual Hynix officials may also face fines and prison time.

In the Infineon case, four executives pleaded guilty in December to the DRAM price-fixing conspiracy. The Infineon employees are serving jail terms of between four and six months and each paid a fine of
$250,000. Three of the jailed Infineon employees are German citizens.

In December 2003, the DOJ charged Alfred P. Censullo, a regional
sales manager for Idaho-based DRAM manufacturer Micron Technology, with
obstruction of justice. Censullo pleaded guilty to the charge and admitted
to having withheld and altered documents responsive to a grand jury subpoena
served on Micron in June 2002. Censullo was sentenced to serve six months
of home detention.

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