DRAM manufacturers have been accused of conspiracy to get extra profits. Debriefing
In early March, we wrote that prices for SSD and DRAM continue to grow, and this is clearly a long-term trend: there will clearly not be a fall in the near future. In just a month, the cost of DDR4 chips increased by 7% at once, and DDR2 – by 10%. And that’s just for one month. For a quarter or, even more so, a year, the indicators are simply going through the roof.
The main players in the industry attribute the rise in prices to a shortage of raw materials, problems with COVID-19, weather conditions and, most importantly, a very high demand for electronic components. But not everyone believes these explanations. Recently, the American law firm Hagens Berman filed class action lawsuit on behalf of consumers against the three largest manufacturers of RAM: Samsung Electronics, SK Hynix and Micron Technology.
What exactly has risen in price?
Virtually all types of memory including DDR4, DDR3 and DDR2. And the most expensive are the previous generations of memory, since manufacturers usually focus on new systems. But now, after 1 GB DDR2 has risen in price by 10.1% in a month, some companies have begun to modify production, reducing the release of DDR4 and DDR3 in favor of DDR2.
Accordingly, a more active rise in prices for DDR4 and DDR3 began. Samsung Corporation decided to postpone the modernization of the production of DDR chips, continuing to release DDR3. SK Hynix did the same. Micron has announced its intention to increase the production of both old and new memory sticks.
As a result, large and small customers everyone buysavailable in an effort to avoid running out of DRAM for assembled devices. In the second quarter of this year, both new and old types of memory are expected to rise in price. Experts believethat DDR4 could rise in price by 15% or more. The cost of memory chips for servers will increase by 20%.
Corporate conspiracies and cartels
Yes, not everyone agrees with the manufacturers’ arguments in terms of the reasons for the rise in memory prices. Of course, the rise in prices did not start from scratch, there are certain factors leading to an increase in the cost of production. But these factors are not strong enough to speak of such rapid growth.
As a result, consumers sued Samsung Electronics, SK Hynix and the American Micron Technology. Reason: The total market share of memory chips taken by three corporations is almost 100%. The share of these companies has to 42.1%, 29.5% and 23% of the memory market, respectively – together this is about 95%. There are other manufacturers, but their importance is still small, as is the market share.
The lawsuit by Hagens Berman indicates that prices for memory have doubled in a short period of time (which one is not specified), which led to problems in the consumer segment. It should be noted that claim filed on behalf of American consumers.
The defendants have already commented on the situation from their side. According to them, there is no monopolization of the market, first of all. The companies have become successful and gained a large market share due to their active work. Secondly, there is no cartel agreement either. Of course, manufacturers interact with each other, but these relations are exclusively market-based.
What will happen next?
Hagens Berman already submitted similar lawsuits against the same memory market players in 2018 and 2019. The court has so far considered and dismissed the claim from 2018. The 2019 lawsuit is currently under consideration and a new lawsuit is being considered. Steve Berman, managing partner at Hagens Berman, believes the three companies are cartelists who use their position to add value to products.
Now, when memory has begun to rise in price more actively than ever before, the court may take into account the arguments of the lawyers. Or maybe not, because corporations agree on such things when there is little or no risk of being caught by the hand. Now, despite all the arguments of Hagens Berman, the likelihood of punishment of the “monopolists” is not very high. Yet it is nonzero.
In any case, if prices continue to rise, there will be much more dissatisfied people. States will join them. This has already happened, and in a situation with a much more modest rise in prices. Chinese officials in 2018 held several meetings with the leaders of Samsung and Micron, after which the rise in prices calmed down somewhat.
In any case, the situation is very difficult and something needs to be done. The cost of electronic components is a global phenomenon, not only DRAM, but also processors, video chips, and now SSDs. If nothing is done at the current stage, then in a couple of months it may be too late. It is hoped that the California court to which the lawsuit is filed will be aware of this and will listen.