Samsung, SK Hynix, and Micron hit with lawsuit over alleged DRAM price fixing
The memory market’s “big three” have been hit with a class action lawsuit for price fixing
Samsung, SK Hynix, and Micron, the three largest global memory suppliers (the “big three”), have been hit with a class action lawsuit in California for alleged DRAM “price fixing”.
This lawsuit claims that all three companies co-ordinated to reduce their production of conventional DRAM memory to shift production towards HBM (High Bandwidth Memory). HBM memory is primarily used for AI accelerators for datacenter-grade hardware configurations. This shift involved winding down production of DDR4 and DDR3 memory. After this shift, DRAM pricing surged for consumers.
The lawsuit claims that all three companies “simultaneously cut production” and shifted their resources to HBM memory. The lawsuit claims that at least one of these suppliers should have increased its traditional DRAM production in response to this shift as prices began to decrease. Instead, all three took the same actions at the same time, and the price of DDR3 and DDR4 surged.
The reality is that DRAM manufacturers can take actions that reduce supply and raise prices without fears of being undercut by their rivals.
The DRAM oligopolists have simultaneously cut production, coordinated a pivot to HBM and exit from DDR3 and DDR4, and otherwise decreased and locked up conventional DRAM supply while prices charged up with mind-blowing scale and rapidity,
– Garciaguirre et al v. Samsung Electronics Legal Filing
The lack of meaningful competition hurts consumers
Samsung, SK Hynix, and Micron account for the vast majority of the world’s memory supply. Creating new fab space would cost potential newcomers tens of billions in funding and years of time. This leaves consumers exposed when suppliers simultaneously take actions that would decrease supply.
This is not the first time that DRAM companies have been hit by price-fixing claims. Samsung and SK Hynix pleaded guilty to such claims in 2005 in a case from the US Department of Justice.
consumer purchasers of conventional DRAM and devices incorporating it have paid supracompetitive prices and have otherwise suffered the impacts of a distorted market crippled by the behavior of DRAM oligopolists
– Garciaguirre et al v. Samsung Electronics Legal Filing
As it stands, Samsung, Micron, and SK Hynix have no major external competitors. This means that simultaneous actions from the big three can completely shift the DRAM market. If all three act together to reduce supply, they can each raise their prices without negative consequences. If no third parties can meaningfully increase global supply, customers will be left with higher prices and no alternatives.
The practical consequence is that when the three firms restrict supply, no outsider can expand output to undercut them,
– Garciaguirre et al v. Samsung Electronics Legal Filing
Everybody hates DRAM companies (except their investors)
This lawsuit comes at a time when consumer DDR5 DRAM prices have increased by more than 4x. NAND flash pricing has also risen significantly. DRAM customers and consumers have no love for memory companies, as their extreme prices have driven up the cost of consumer electronics. If a device uses a notable amount of memory, it is now much more expensive than before.
While today’s DDR5 and NAND prices are caused by the extreme demand of AI datacenters, it is worth noting that Samsung, SK Hynix, and Micron were all equally unprepared for this increase in demand. None of these suppliers prepared for any spikes in demand. Why? The simple answer is that they benefit from supply shortfalls and increased memory prices. They can also rely on their competitors thinking the same thing.
Yes, this lawsuit is about DDR3 and DDR4 memory supply, not DDR5. Regardless, it relates to the tactics that memory manufacturers allegedly use to profit from supply shortfalls. This lawsuit will need to prove its claims in court. As of now, the claims in this lawsuit against Micron, SK Hynix, and Samsung are mere allegations.
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