Little Impact Seen from Samsung’s New Legal Dispute

Posted by: Ihlwan Moon on September 18, 2007

The U.S. Justice Department’s investigation into possible price-fixing by makers of so-called NAND chips is certainly a psychological blow to Samsung Electronics. After all the South Korean company accounts for nearly half of the global production of NAND flash chips used to store data for portable music players, digital cameras and handsets. Yet the consensus among industry watchers is that financial impact from the probe would be very little, if any at all.

Circumstances surrounding the flash chip industry give little incentive for Samsung to collude with others for price fixing, according to analysts. Firstly, NAND prices have been falling by 50%-60% annually since the flash chip began going into handheld products in earnest early this decade. Then Samsung has been enjoying a fat margin, sometimes exceeding 40%, from its NAND business. “I can’t think of any real motive for price-fixing,” says Jay Kim, chip analyst at brokerage Hyundai Securities in Seoul.

Samsung has had plenty of legal headaches. In 2005, Samsung was fined $300 million in a U.S. probe into a price-fixing scheme with other computer memory device makers to keep the prices of chips artificially high. Currently, it is also facing scrutiny by antitrust regulators in South Korea, the U.S., and Japan, for possible price fixing of liquid-crystal display panels. Samsung and Toshiba, the world’s No. 2 NAND maker, have said they are cooperating with the U.S. investigation over the flash chip.

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