Hynix Pays $185 Million Antitrust Fine

The U.S. Department of Justice (DOJ) announced on April 21 (local time) that Hynix Semiconductor Inc. has agreed to plead guilty of price collusion and pay a fine of $185 million (approximately 185 billion won).

This is the third largest antitrust fine in American history, and the largest in five years.

The U.S. DOJ said that worldwide major DRAM manufacturers, including Samsung Electronics, Hynix Semiconductor and Infineon were suspected of reducing production to increase prices, and started an investigation into the matter in June, 2002.

Related to this, Hynix announced, “We established some 346.6 billion won in allowance reserves for handling losses last year, so there are no additional burdens. Rather, the uncertainty in the management has been relieved.”

What Hynix Is Charged With-

According to the U.S. DOJ, senior executives of Hynix participated in meetings, conversations and communications in the United States and elsewhere to discuss DRAM prices to charge certain customers, and agreeing to fix the price with other competing companies.

DRAM is a semiconductor memory product used widely in computers and mobile phones.

According to the complaint filed in the U.S. District Court in San Francisco, Hynix conspired to collude DRAM prices from April 1, 1999 to June 15, 2002.

Besides Hynix, the German manufacturer Infineon, pleaded guilty last year and was fined $160 million, and Samsung Electronics is currently under investigation.

DOJ’s investigation into the DRAM conspiracy from complaints that Dell Inc., Hewlett-Packard Company, Apple Computer Inc., IBM and other U.S. firms were being affected by the price collusion.

Aside from this investigation, Rambus, a U.S. semiconductor designer, claimed damages of $1 billion against DRAM manufacturers and the German company Siemens last year.

Hynix Finishes Loss Handling-

Hynix’s fine is lower than the allowance reserve it has already accumulated (346.6 billion won), so there is a special profit of 161.1 billion won from the balance. and there is nothing to be burdened with for the company. Samsung Electronics also accumulated an allowance reserve of $100 million (approximately 100 billion won) last year.

As management performance showed improvement faster than expected, Hynix creditors advanced the work-out (company improvement works) graduation period by a year and eight months.

Hynix is currently in a patent lawsuit with Rambus and Toshiba in the SDRAM DDR2 flash memory field.

Considering that Europe has not approved of Rambus’s patent rights, and the suit against Toshiba is in the initial stage, it will not highly affect management normalization for Hynix.

It is forecasted that the sharply falling of the DRAM price will be a bigger factor instead.

Hynix shares fell by 1.14 percent (150 won) to close at 13,000 won on Friday, April 22, but it was analyzed that this was due from a fall in DRAM prices rather than the fine payment.

Kwon-Heui Hong Do-Young Kim konihong@donga.com nirvana1@donga.com