Samsung, SK Hynix and Micron sued over alleged price-fixing amid RAM crisis

The world's three major memory suppliers – Samsung, SK Hynix, and Micron – have been sued for allegedly price-fixing RAM for devices as demand surges due to rise in AI use. This comes at a time when companies like Apple raised prices of devices due to rising costs.

In Short

• Samsung, SK Hynix, Micron sued over alleged price-fixing of RAM
• Complaint says DRAM prices jumped about 700 per cent over four years
• Lawsuit alleges companies did not increase production to meet demand

The world is currently facing a shortage of RAM that is used in almost every electronic device, be it your smartphone, laptop, or an AI data centre. Due to the high demand and limited supply, the cost of RAM has increased drastically in recent months. And now, Samsung, SK Hynix, and Micron – three of the world’s biggest memory suppliers – have been sued for allegedly price-fixing RAM while restricting global supply.

The complaint, filed in a federal court in the US state of California, says that three companies, which account for almost the entire global DRAM market, have restricted conventional memory supply while prices rose sharply. This is claimed to have worsened the ongoing memory shortage.

At the time of writing, Samsung, SK Hynix, and Micron have not publicly responded to the lawsuit.

This comes just days after Apple became the latest company to raise prices of select devices due to rising memory costs. Phone makers like OnePlus and Nothing have also hiked prices in recent months.

What is the lawsuit?

The proposed class action has been brought by individual and business consumers. The plaintiffs accuse Samsung, SK Hynix and Micron of violating multiple US laws.

According to the complaint, the three companies began fixing supply and prices for DRAM from 2022 due to low demand at the time, driving prices up by about 700 per cent over four years. The suit says the companies “simultaneously cut production”, coordinated a shift towards high-bandwidth memory, or HBM, and exited older DDR3 and DDR4 modules, reducing the supply of conventional DRAM as prices climbed.

To give you some context, HBM is widely used in AI data centres. AI companies are said to be willing to spend huge sums to acquire HBM, which may have made memory suppliers shift focus towards HBM instead of the memory used in regular devices.

Earlier this year, Micron announced that it was shutting down its consumer memory division, Crucial, entirely to focus on AI clients. The American company recently signed 16 new agreements for memory supply that span till 2030, hinting that the memory crisis may not slow down until then.

The plaintiffs argue that, in a competitive commodity market, at least one producer would normally expand output when prices rose so sharply, but that “did not happen.” Instead, the complaint says, “None of the three used the others’ retreat to expand and win customers. All three pulled back together.”

They are seeking injunctive relief to “remedy the ongoing effects of defendants’ unlawful and anticompetitive conduct” along with treble damages, litigation costs and legal fees.

Not easy for new memory suppliers, says lawsuit

The suit also argues that no new competitor can easily enter the market. It says a single DRAM fabrication plant can cost between $15 billion and $20 billion and take years to build.

The plaintiffs argue that the processes needed to produce usable chips are protected by decades of trade secrets, that US export controls block the only other methods in China from obtaining current-generation equipment, and that even finished chips must go through 12 to 18 months of customer qualification before major buyers use them.

“The practical consequence is that when the three firms restrict supply, no outsider can expand output to undercut them,” the complaint says.

The consumers say this is not the first such case involving the same companies. The lawsuit points to a US Department of Justice investigation into an alleged conspiracy between 1998 and 2022, in which Samsung and SK Hynix pleaded guilty and paid fines of nearly $300 million and $185 million respectively. Micron avoided a fine by reporting the conspiracy and cooperating with prosecutors in the case.

The case also refers to another period of price increases between 2016 and 2018 that led to a class action in the US and an investigation by the Chinese government. “The conduct alleged here is the third such cycle in the same market, among the same firms,” the plaintiffs say.

The lawsuit was filed on June 25, and no trial date has been set.

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