China to look into potential price fixing from major NAND suppliers

[Tabs]

It looks like China's economic regulator, the National Development and Reform Commission, is taking a serious look at the pricing situation of NAND currently in the market, to find out if there has been any price fixing taking place to artificially inflate NAND prices. Suppliers specifically named are the Big 3 - Intel/Micron, Samsung, and SK Hynix, but it's reasonable to believe that the other suppliers are likely to be put under scrutiny as well if there's any evidence found to back this up.

 

Quote

China’s economic regulator is paying close attention to a recent surge in the price of mobile phone storage chips and could look into possible price fixing by the firms that make them, a senior official told the state-run China Daily newspaper.

 

The newspaper, citing an official with the National Development and Reform Commission’s Pricing Supervision Department, said the NDRC was alerted to the situation after a sharp rise in the price of chips over the last 18 months.

 

Specifically quoted is the director of the bureau in charge, Xu Xinyu,

Quote

“We have noticed the price surge and will pay more attention to future problems that may be caused by ‘price fixing’ in the sector,”

 

Additionally, it looks like the Mobile China Alliance might be involved in spearheading the start of this investigation - they are likely to be some of the hardest hit if this is true, since none of China's own NAND manufacturers are at anywhere close to the volume of the biggest 3 NAND manufacturers, and their process technologies are currently inferior - there are no Chinese manufacturers of stacked "3D" NAND, only of traditional planar memory. The first known manufacturer in China that will begin sampling "3D" NAND is Yangtze River Memory Storage, a subsidiary of Tsinghua Unigroup, and this will be into the first half of 2018 at the earliest.

 

Quote

The NDRC has spoken to Samsung, the China Daily reported, citing Wang Yanhui, the secretary-general of the Mobile China Alliance, who the paper said had knowledge of the matter. The paper did not provide further details.

 

Wang said it was too early to predict what further measures could be taken but that the government could look at penalties issued by other countries if makers were found to be engaging in such any price fixing.

 

In my opinion, this kind of investigation is way overdue. The price of NAND in the market in the last 18 months to 2 years has been shocking. This will inevitably affect DRAM as well since manufacturers often shift capacity out of making DRAM and into making NAND as supply/demand shifted, leading to a shortage of DRAM and a worsening of prices for the consumer. This shift in price has been despite multiple expansions of production capacity from both Samsung and Intel/Micron.

 

Also, in checking for duplicates for this news item, it seems our very own @Squilliam was looking for comments about this very topic just last week. Seems he might have been right on the money.

 

Sources:

Originally from China News: http://www.chinadaily.com.cn/a/201712/27/WS5a42db7ca31008cf16da39a2.html

Western dissemination via Reuters - https://www.reuters.com/article/us-china-chips/china-regulator-flags-greater-scrutiny-on-chips-after-price-surge-idUSKBN1EL017

[Zodiark1593]

Even if price fixing was confirmed to be taking place, what exactly could China do about it? Practically speaking, it's not as though China (or anyone else for that matter) can shop elsewhere for DRAM.

[Matu20]

Is price fixing considered illegal?

[TetraSky]

7 minutes ago, Matu20 said:

Is price fixing considered illegal?

Yes.
https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-competitors/price-fixing

Other countries also have similar laws on the matter.

For example, right now in Canada, Loblaw is being targeted by 2 class action lawsuit, for price fixing, on bread.

http://montrealgazette.com/news/local-news/bread-price-fixing-dont-blindly-accept-loblaw-gift-card-law-firms-warn

 

[Tabs]

11 minutes ago, Matu20 said:

Is price fixing considered illegal?

Very. For example, financial bodies in the UK - banks and organisations regulated under the PRU, FCA etc, consider it tantamount to fraud. If companies have shared sensitive information with each other in order to make all of them benefit, it's anti-competitive. Both of these lead to staggeringly high fines and awkward regulatory investigations. 

 

21 minutes ago, Zodiark1593 said:

Even if price fixing was confirmed to be taking place, what exactly could China do about it? Practically speaking, it's not as though China (or anyone else for that matter) can shop elsewhere for DRAM.

If price fixing is confirmed, it means we've all had to pay higher prices not due to lack of supply or actual market burden, but because it fit the whims of the leadership of these companies. China would set the example if they find this kind of collusion to have been occurring, and other financial regulators would have no choice but to start their own investigations.

[Zodiark1593]

5 minutes ago, Tabs said:

Very. For example, financial bodies in the UK - banks and organisations regulated under the PRU, FCA etc, consider it tantamount to fraud. If companies have shared sensitive information with each other in order to make all of them benefit, it's anti-competitive. Both of these lead to staggeringly high fines and awkward regulatory investigations. 

 

If price fixing is confirmed, it means we've all had to pay higher prices not due to lack of supply or actual market burden, but because it fit the whims of the leadership of these companies. China would set the example if they find this kind of collusion to have been occurring, and other financial regulators would have no choice but to start their own investigations.

Considering China has very limited DRAM manufacturing capabilities itself, what would occur if the prosecuted companies threaten to stop selling to China? Obviously, China makes a lot of phones, so I'd imagine that would be a sizeable impact.

[Tabs]

17 minutes ago, Zodiark1593 said:

Considering China has very limited DRAM manufacturing capabilities itself, what would occur if the prosecuted companies threaten to stop selling to China? Obviously, China makes a lot of phones, so I'd imagine that would be a sizeable impact.

That isn't really the point since China itself doesn't pay these companies for their goods, it's their myriad customers (the Apples of the world) that do. China has the power to initially levy heavy fines on these companies, along with forcing them to submit to strict auditing requirements - for a start.

 

Price fixing is a profit-driven enterprise; companies do it to make more money illegally. The best way to offset this - and to punitively damage the companies so they don't think of doing it again - is through their wallets. China has a massive amount of clout to be able to do this, not least of all because the majority of these companies products end up being assembled into devices made in China.

 

Don't underestimate how quickly China can adapt to a shifting market. Their NAND and DRAM production is low right now because the market is saturated by these big players, but that could easily change on the outcome of this investigation.

 

Also: The outcome of this investigation may force other regulators in other countries to do their own digging. Global companies beget global scrutiny, so this is likely to have worldwide implications if the allegations turn out to be true.

[PianoPlayer88Key]

So assuming the NAND makers ARE found guilty of price fixing ... how long until prices flash-cut back down to something like this?

 

 

 

 

Could it possibly happen within a few days or weeks of the investigation's finding?  

 

Even better, I'd love for anyone who bought at a higher-per-GB cost than the screenshot, since then, to either get a refund to what the price SHOULD have been, or a free upgrade to higher capacity / faster RAM.  For example, say you bought 16GB (2x8) of DDR4-2666 for $200.  You'd either get refunded something like $130, or, get a free 32GB (2x16) DDR4-4266 kit shipped to you.

(And if you had already maxed out for that platform - for example 128GB DDR4 on HEDT, they'd send you like 512GB DDR4 Registered ECC along with a compatible motherboard & CPU.  Okay that last one's a bit of a dream )

[Tabs]

22 minutes ago, PianoPlayer88Key said:

So assuming the NAND makers ARE found guilty of price fixing ... how long until prices flash-cut back down to something like this?

 

Could it possibly happen within a few days or weeks of the investigation's finding?  

 

Even better, I'd love for anyone who bought at a higher-per-GB cost than the screenshot, since then, to either get a refund to what the price SHOULD have been, or a free upgrade to higher capacity / faster RAM.  For example, say you bought 16GB (2x8) of DDR4-2666 for $200.  You'd either get refunded something like $130, or, get a free 32GB (2x16) DDR4-4266 kit shipped to you.

(And if you had already maxed out for that platform - for example 128GB DDR4 on HEDT, they'd send you like 512GB DDR4 Registered ECC along with a compatible motherboard & CPU.  Okay that last one's a bit of a dream )

 

It would take a long time for any pricing to change, because it would need to be determined exactly how much of the increase in price is due to the fixing versus natural rise from inflation, market pressures, etc.

 

Individual markets may have been fixed differently.

 

This is an incredibly messy business to untangle if it turns out that way.

 

[Misanthrope]

1 hour ago, Matu20 said:

Is price fixing considered illegal?

Yes. But this is China we're talking about: If this blows up and parties are punished my assumption would be that the State was just pissed they weren't the ones doing the fixing.

[Bcat00]

2 hours ago, Zodiark1593 said:

Even if price fixing was confirmed to be taking place, what exactly could China do about it? Practically speaking, it's not as though China (or anyone else for that matter) can shop elsewhere for DRAM.

Its not just china thats going to br up in arms if china does prove it.

 

all the big countries arent going to sit tight either because they are also effected.

A domino effect if you will.

[sof006]

Hope something is done about this. The price of 8GBs of RAM is ridiculous. I'm wanting to upgrade to 16GBs but the price is stupidly high.

[Bananasplit_00]

I honestly hope they find that they are all in on it, everyone of them gets sued out of oblivion by the entire world and we can have 16GB kits of DRAM for <€100 again... 

[Sakkura]

9 hours ago, Tabs said:

Also, in checking for duplicates for this news item, it seems our very own @Squilliam was looking for comments about this very topic just last week. Seems he might have been right on the money.

That thread is about DRAM, not NAND flash.

[aliasdred]

2 hours ago, sof006 said:

Hope something is done about this. The price of 8GBs of RAM is ridiculous. I'm wanting to upgrade to 16GBs but the price is stupidly high.

Stupidly high you say?

Lemmy tell you my story then....

I dreamed for a new gaming system upgrade(after 7yrs of using AMD Phenom II)...

Choose i5 8400 as the best budget option...

Turns out a 2x8gb kit costs me more than the CPU and the Full ATX RGB motherboard.

[sof006]

3 minutes ago, aliasdred said:

Stupidly high you say?

Lemmy tell you my story then....

I dreamed for a new gaming system upgrade(after 7yrs of using AMD Phenom II)...

Choose i5 8400 as the best budget option...

Turns out a 2x8gb kit costs me more than the CPU and the Full ATX RGB motherboard.

Exactly. I bought my Ryzen 1700X for £250 and my RAM was almost the same price. I remember this time say 3/4 years ago the price would have been roughly £80.

[Tabs]

4 hours ago, Sakkura said:

That thread is about DRAM, not NAND flash.

The two are linked however, DRAM manufacturing is very similar in nature to NAND manufacturing, except creation of NAND generates more profit. Manufacturers have been shifting production from DRAM and into NAND, causing issues with DRAM supply, and if price fixing is confirmed, it's lead to no better pricing for consumers for NAND either. This will have knock-on effects for the entire storage market if the investigation turns anything up.

[Sakkura]

10 minutes ago, Tabs said:

The two are linked however, DRAM manufacturing is very similar in nature to NAND manufacturing, except creation of NAND generates more profit. Manufacturers have been shifting production from DRAM and into NAND, causing issues with DRAM supply, and if price fixing is confirmed, it's lead to no better pricing for consumers for NAND either. This will have knock-on effects for the entire storage market if the investigation turns anything up.

That isn't really true. If anything, they're actually switching production the other way, from NAND to DRAM.

[Doobeedoo]

I just look forward to see DRAM and NAND prices cut on half. Getting a 16GB 3200Mhz DDR4 is quite expensive, also still far off until 1TB SSD can be more affordable, like Samsung ones. 

[Mr.Meerkat]

1 hour ago, Tabs said:

Manufacturers have been shifting production from DRAM and into NAND, causing issues with DRAM supply

Ah yes, that's why the prices for SSDs has more or less doubled as well  

[Squilliam]

15 hours ago, Tabs said:

It looks like China's economic regulator, the National Development and Reform Commission, is taking a serious look at the pricing situation of NAND currently in the market, to find out if there has been any price fixing taking place to artificially inflate NAND prices. Suppliers specifically named are the Big 3 - Intel/Micron, Samsung, and SK Hynix, but it's reasonable to believe that the other suppliers are likely to be put under scrutiny as well if there's any evidence found to back this up.

 

 

Specifically quoted is the director of the bureau in charge, Xu Xinyu,

 

Additionally, it looks like the Mobile China Alliance might be involved in spearheading the start of this investigation - they are likely to be some of the hardest hit if this is true, since none of China's own NAND manufacturers are at anywhere close to the volume of the biggest 3 NAND manufacturers, and their process technologies are currently inferior - there are no Chinese manufacturers of stacked "3D" NAND, only of traditional planar memory. The first known manufacturer in China that will begin sampling "3D" NAND is Yangtze River Memory Storage, a subsidiary of Tsinghua Unigroup, and this will be into the first half of 2018 at the earliest.

 

 

In my opinion, this kind of investigation is way overdue. The price of NAND in the market in the last 18 months to 2 years has been shocking. This will inevitably affect DRAM as well since manufacturers often shift capacity out of making DRAM and into making NAND as supply/demand shifted, leading to a shortage of DRAM and a worsening of prices for the consumer. This shift in price has been despite multiple expansions of production capacity from both Samsung and Intel/Micron.

 

Also, in checking for duplicates for this news item, it seems our very own @Squilliam was looking for comments about this very topic just last week. Seems he might have been right on the money.

 

Sources:

Originally from China News: http://www.chinadaily.com.cn/a/201712/27/WS5a42db7ca31008cf16da39a2.html

Western dissemination via Reuters - https://www.reuters.com/article/us-china-chips/china-regulator-flags-greater-scrutiny-on-chips-after-price-surge-idUSKBN1EL017

That's crazy! 

 

Called it? 

[DeScruff]

6 hours ago, aliasdred said:

Stupidly high you say?

Lemmy tell you my story then....

I dreamed for a new gaming system upgrade(after 7yrs of using AMD Phenom II)...

Choose i5 8400 as the best budget option...

Turns out a 2x8gb kit costs me more than the CPU and the Full ATX RGB motherboard.

Similar story here.

Though earlier this year I did bite the bullet, and bought 16GB of ram... It was stupidly expensive, but its not like you can find 16GB for $120 these days. At the time all I could think was "I spent too much on this stuff". But today, it be an absolute steal.

[Zodiark1593]

48 minutes ago, Sypran said:

Similar story here.

Though earlier this year I did bite the bullet, and bought 16GB of ram... It was stupidly expensive, but its not like you can find 16GB for $120 these days. At the time all I could think was "I spent too much on this stuff". But today, it be an absolute steal.

Know what, I'm semi-glad to be on DDR3 as the prices aren't so stupidly high. 16 GB for about $130, though that is still much higher than I would pay.

[Valentyn]

15 hours ago, Misanthrope said:

Yes. But this is China we're talking about: If this blows up and parties are punished my assumption would be that the State was just pissed they weren't the ones doing the fixing.

Yup! I wonder what if any actions China would take if there was price fixing.

 

Although I bet they'd only be taking action if it was negatively affecting them; as opposed to the rest of the world.

[Tabs]

25 minutes ago, Valentyn said:

Yup! I wonder what if any actions China would take if there was price fixing.

 

Although I bet they'd only be taking action if it was negatively affecting them; as opposed to the rest of the world.

This is definitely possible; the indications are that this investigation is only progressing because the Mobile China Alliance - a conglomerate of 30+ Chinese mobile carriers - complained to the NDRC about the cost of NAND. Price fixing would be unfairly impactful on smaller providers, which was the reason the Mobile China Alliance got started in the first place, to give a unified front whenever problems arose that affected the entire industry over there.

 

The truth is though, most countries probably wouldn't just go out to investigate this unless an actual complaint was received.