Hynix Execs Head For Jail in DRAM Scandal

Four Korean Hynix executives are heading to a U.S. jail for their roles in a global conspiracy to fix prices on dynamic random access memory (DRAM), a key type of memory found in most PCs.

The latest development comes after Hynix, the world’s second-largest DRAM maker, pleaded guilty in the same case and agreed to pay a $185 million criminal fine last year.

In the ongoing Department of Justice (DoJ) investigation, four companies and nine individuals have been charged with fines totaling more than $731 million.

According to the DoJ, the four Hynix employees conspired with unnamed employees from other memory makers to fix the prices of DRAM sold to certain computer and server manufacturers in the United States, including Dell, Hewlett-Packard, Compaq, IBM, Apple and Gateway.

Hynix participated in the price-fixing conspiracy from 1999 to 2002 by participating in meetings, conversations and other communications in the United States and elsewhere, according to court documents.

The latest to plead guilty today were D.S. Kim, general manager of Hynix Worldwide Sales and Marketing; C.K. Chung, the company’s director of Global Strategic Account Sales; K.C. Suh, Hynix’s senior manager of Memory Product Marketing; and C.Y. Choi, general manager for Marketing and Sales Support in Hynix’s German subsidiary.

Kim was sentenced to eight months of prison time; Chung, seven months; Suh, six months; and Choi, five months. In addition, each executive was fined $250,000 and agreed to cooperate in the international probe.

Samsung has already been hit with a $300 million fine in the case; Infineon’s &nbsprole in the case cost it $160 million fine and Elpida also was fined $84 million as part of a guilty plea in the case.

“We strive to preserve the integrity of our free market economy,” Attorney General Alberto R. Gonzales said in a statement. “Individuals who defraud American businesses and consumers by participating in international price-fixing conspiracies will be prosecuted and sent to prison no matter where they live or where they commit the crime.”

DRAM is the most commonly used semiconductor memory product, providing high-speed storage and retrieval of electronic information for a wide variety of computer, telecommunication and consumer electronic products. There were approximately $7.7 billion in DRAM sales in the United States in 2004.

“Prison time for price-fixers is the most potent deterrent to illegal cartel activity,” Thomas O. Barnett, assistant attorney general in charge of the DoJ’s Antitrust Division, said in a statement. “These guilty pleas demonstrate our commitment to ensuring that participants in cartels serve time in prison.”

The price of DRAM is always volatile, but 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 (SIA).

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.

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