Idaho-based Micron Technology is claiming that Taiwanese and Korean manufacturers are destroying the memory market by "dumping" goods and is seeking U.S. government assistance to stop the practice, but the real cause of the market's decline may lie elsewhere.
Overcapacity and improved manufacturing have greatly contributed to the decline of memory prices, say analysts. Meanwhile, some of the companies that have recently been hit with charges of dumping SRAM (static random access memory) are minor figures, and more important players have escaped notice.
Low prices and the intricacies of trade law will also make it difficult for Micron to obtain relief.
Dumping, the selling of goods below cost, has certainly occurred in the SRAM market, most agree. The Commerce Department assessed preliminary fines against Taiwanese companies and also U.S. firms with overseas manufacturing arms in September. SRAM chips are used in personal computers and electronic appliances.
Commerce has also been looking into DRAM (dynamic random access memory) dumping by Hyundai and other South Korean DRAM makers and is expected to announces its findings this February, according to Kip Beddard, vice president of corporate affairs at Micron. The Department has been monitoring Korean DRAM makers since 1992, he stated.
Meanwhile, Micron is trying to make the case that the proposed bailout of South Korea will underwrite the anticompetitive practices of Korean and Taiwanese firms, to the detriment of U.S. manufacturers. "I think it's tragic. We're going to take our tax dollars and bail them out," said Beddard.
But dumping doesn't explain the full story.
"In SRAM, what happened was that everybody got the recipe at the same time," said Handy. That is, in late 1995, a Silicon Valley company called Galvantech devised an inexpensive process for SRAM manufacturing. Rather than sell the process to a limited number of manufacturers, Galvantech sold the plans to lots of companies, all of which built up production capacity to take advantage of the low cost process. "You had an oversupply as a result," Handy said.
"In November of 1995, Micron was getting about $27.50 for a common type of SRAM. In March of 1996, the price was about $3," he noted.
Around this time, Taiwanese SRAM manufacturers appeared in the market and appeared to be dumping product. Micron therefore filed a lawsuit with the Commerce Department. In September of 1997, Commerce assessed preliminary penalties against a number of foreign companies, with many of the largest penalties going to Taiwanese manufacturers. Winbond Electronics was assessed with at 94.1 percent tariff, while United Microelectronics was slapped with a 63.36 penalty and Integrated Silicon Solutions received a 10.96 percent penalty. The size of the tariff generally relates to the amount the companies were undercutting what Commerce determines the price should have been absent dumping and assuming a fair return, said Beddard.
But where did these manufacturers rank in U.S. market share? Toward the bottom, according to Bruce Bonner, another Dataquest analyst. Winbond was the largest with a 3 percent market share, making that company the tenth-largest producer for the U.S. at the time. Samsung, the largest producer with an 12.5 percent market share, was found to be dumping, but was assessed with a 0.1 percent tariff penalty, said Handy.
Micron itself was not in the top ten of producers, added Bonner. "They used to do a lot more SRAM," he said.
Moreover, although Micron may be in the right on many issues, leveling the field may prove a Pyhrric victory. Commerce Department penalties are assessed on future, not past, sales. In other words, Commerce will collect fines, or tariffs, on the percentages shown above if the company in question continues to dump products. Penalties are not collected for the past wrongs.
To avoid the penalty, a company can shift to another segment of the memory market, said Handy.