DOJ To Open Price-Fixing Query Into NAND Memory Market

Ep0xi writes "Following on previous investigations into price fixing in the SRAM and DRAM memory market, the US Department of Justice has begun an antitrust investigation of the NAND flash-memory industry.' Edwin Mok, a financial analyst at Needham, added that the NAND market was competitive. Mok, who covers SanDisk, said he would be surprised if the company did anything wrong. 'I don't see a huge impact on the company or the stock,' he said. SanDisk shares were up $1.30, or 2.6 percent, to $51.29 on Friday. But [another industry analyst] said NAND prices showed an unusual 5 percent increase in the second quarter and are expected to climb an additional 8 percent in the third quarter, before declining again in the fourth quarter. Demand remains strong.'"

Proper price

[Workaphobia]

So what should flash memory be costing these days anyway, for the end user? I've been going by the rule $10 a gigabyte. If they're price fixing to avoid passing on savings to customers, about how much of a difference would that be?

Re:

[gravos]

Maybe, but only if you are buying a large amount. 2GB USB sticks are so cheap now that they routinely show up for free after a rebate, or sometimes around $5 if you don't want to deal with the rebates.

We sure have come a long way from floppy disks in such a short time...

Re:

[lsatenstein]

If DDR2 ram is $75.00 a gig, then perhaps the flash guys think that the flash memory prices are too low. But DDR2 is used in PCs mainly, while the flash memory market includes cameras, cellphones, pcs and a whole host of systems where the bios or information is needed between poweroffs or to be preserved between system boots. I think that ddr2 memory should also be around $10.00 per gig. Why not?

Price Fixing, but price dropping?!

[Seumas]

I'll preface this by saying that I own stock in Sandisk (SNDK).

I am not selling SNDK at this point, because I find any insinuation that they are involved in price fixing questionable. The price per gigabyte for flash memory has been dropping significantly quarter after quarter, though they do note that prices have increased slightly the last two quarters. While I'm not an analyst by any means, I don't see this as a significant or indicative trend and unless they have incriminating emails passing around between CEOs, I'm sure these increases could be attributed to a number of things such as the school year and Christmas coming up (which increases demand) and the recent manufacturing shutdown at a major Samsung plant (which reduced production).

You also have Apple talking about new laptops down the pipeline that will potentially use a lot of flash and a flood of new hardware such as the new fat-wide ipod and the iphone which increase need for flash storage. So you have vastly increasing demand for the product with an industry that is still trying to ramp up production to keep up. I don't see how a slight price increase over two quarters would be a surprise?

Re:

[Hal_Porter]

The odd thing is that in Korea Samsung was investigated by the Korean FTC for selling flash chips to Apple at below the manufacturing price -

http://filesharingtalk.com/vb3/f-news-section-95/t-korean-ftc-could-investigate-apple-samsung-103919 [filesharingtalk.com]

So on the one hand they get accused of dumping, on the other price fixing. Mind you DRAM manufacturers used to accuse each othe of (and I suspect probably did) both at various times, so it's not necessarily impossible.

Re:

[BarfBits]

Apparently the economic principle that demand affects price is being
ignored by the regulators. I'm guessing the intimidation factor worked
so well with the DRAM price fixing charge that the regulators figured
it will also work with NAND flash pricing. This time around I'm not
sure they can directly induce a price drop. Instead the most likely
scenario, as most often is the case, is that market forces will flood
the supply chain with NAND flash, IMHO.

Re:

[tepples]

The question that shold be asked is, if prices were supposed to continue to fall, how cheap would it eventually become?

At some point, the cost of the CF, SD, or USB interface logic outweighs the cost per bit, and it becomes more economical to produce large devices. That's why we don't see a lot of new-in-box 64 and 128 MB flash memory products or 10 GB 3.5" hard disk drives for sale anymore.

What Prompted This Probe?

[Nymz]

This seems really odd to me, as the article doesn't mention any actionable reason, only that prices have gone up here and there. They're going to need documents, emails, whistle-blowers, recorded conversations, or something tangible in order to prove there's an active colusion going on.

Re:

[farkus888]

it would seem. but keep in mind the collusion charges against gas companies had equally little reason for suspicion when they started and it seems to have fizzled into being less newsworthy than the latest no panties starlet picture class news. but the difference now is oil at $80 a barrel if I just heard the news in the background correctly and I am paying what I paid for gas when oil was at $60 a barrel. I don't much care if they manage to prove their case if it scares them into dropping prices enough for

I thought this was the FTC's domain

[Apple Acolyte]

I'm confused, I thought price fixing was the FTC's domain.

Re:

[phoenixwade]

I'm confused, I thought price fixing was the FTC's domain.

Only as it would apply to the company's bookkeeping, and how it would affect the shareholders.

Generally, the DOJ goes after criminal misconduct, and consumer misconduct type issues, and the FTC goes after Shareholder type issues. That's obviously an oversimplification, but it's a good starting point.

Re:

[Apple Acolyte]

If that's true, take a look at these examples of the FTC looking at price fixing:

nytimes article [nytimes.com]

allbusiness.com article [allbusiness.com]

I suppose the DOJ has jurisdiction if it's criminal, but price fixing allegations that don't rise to that level are the FTC's to look at?

Sweet!

[Impy the Impiuos Imp]

"You, the geniuses who invent and improve the RAM capacities, shall sell them only in a manner we, the angry, scientifically illiterate, power hungry, charismatic savages in government, with armed thugs under our thrall, permit you to."

We now return you to your regularly scheduled world of curtains with pretty pictures projected on them.

What now?

[Kelz]

Its almost a brand new industry (though with a lot of old players), and the price has dropped like a rock in the last 10 years. Its almost becoming a commodity now!