For all the headlined DRAM legal eruptions last week, the memory market is unlikely to be affected. The volatile DRAM prices will be far more swayed by the old demand-and-supply cycles than any federal investigations.
The Justice Department subpoenas to most DRAM makers for a grand jury antitrust probe produces far more questions than any immediate market impact. Unless the Feds have a "smoking gun" that no one knows about, there is a lot of uncertainty on what prompted the current probe.
A few PC OEMs had muttered that possible chipmaker collusion was behind a turn-around in DRAM prices earlier this year after a steep plunge last fall. Never mind that the OEMs themselves placed a sudden rash of orders for DDR chips to gear up for Intel Corp.'s 845 double-data-rate DRAM chipset launch lastJanuary. That temporarily sent DRAM pricing back up the line --until the tight supply dissipated and prices turned down once more.
Last week DRAM spot prices plateaued out, but contract prices continued to slip. DRAM Exchange.com reported the benchmark 128Mbit PC-133 spot price was $2.45, while the 256Mbit single- data-rate moved up to $4.72 and the DDR version to $4.92. Contract prices for the 128Mbit averaged $2.40 to $2.85 and the 256Mbit between $5.00 and $5.75.
In any event, DRAM firms have a pretty good idea what each other's prices are at any given time, just from the constant on-going negotiations with customers who try to play one vendor against another.
If Justice wanted to go back to 1998 it could look into the
then-publicly-announced campaign of the Korean DRAM makers to cut back their production to try to force rock-bottom prices back up. The OPEC-like reduction in output indeed was credited by some as stopping a drastic cascading of DRAM prices. It also provided an opening for Micron Technology, which didn't cut production, to start grabbing more global market share away from the Koreans.
There is an opposite theory behind Justice's sudden DRAM antitrust interest. This scenario holds that DRAM leaders colluded to drive down prices last fall in a concerted effort to kill off weaker rivals. Then when the field was narrowed
to only a few survivors, prices could zoom upwards.
Since any targeted DRAM weaklings are all foreign suppliers, this is an unlikely concern of the U.S. government. Any such predatory pricing ploy could impact OEMs and the supply chain in this country, if indeed it did succeed in decimating DRAM competition. But that is an iffy proposition, especially in an
industry that delights in bloodletting no matter how few firms control the market.
It's odd that Justice went after DRAMs, undeniably one of the cheapest major portions of PCs or any other electronic system. The vendors are hardly lucrative enterprises gorging themselves on fat profits. Some speculation centers around influential customers energizing Justice simply to send a warning shot to keep DRAM suppliers in line, if and when any future shortages exert upward pricing pressure.
Whatever the rationale behind the subpoenas, Justice has added a new wrinkle to the always-perplexing DRAM market, just when you thought there couldn't be any more surprises.