China launches probe of foreign chip makers

Chinese regulators are investigating memory-chip makers Micron Technology Inc, MU 2.00 per cent, Samsung Electronics Co and SK Hynix Inc, 000660 -1.75 per cent, all three of which said State Administra-tion for Market Regulation officials have visited their China offices recently.

The regulator didn’t immediately respond to a request for comment.

The three companies—the dominant suppliers of so-called DRAM chips—said they are cooperating with the investigation, but didn’t say what it is about. Bernstein analyst Mark Newman said it may concern the rising cost of DRAM chips that Chinese smartphone makers are facing as demand continues to outpace supply.

China might also be seeking to use the current DRAM pricing environment to gain leverage, he said.

“I wouldn’t be surprised if China is trying to negotiate some tech transfer and trying to put pressure on the incumbent memory makers to share some technology with the domestic Chinese memory makers,” he said.

China has been trying to reduce dependency on foreign chips. Nearly 90 per cent of the $190 billion worth of chips used in the country are imported or produced in China by foreign-owned companies, according to International Business Strategies Inc., a research firm.

Memory chips are used in a variety of devices, including computers as well as smartphones. DRAM, or dynamic random-access memory, is a type of chip used in processing, while NAND flash memory is for storage. China consumes a fifth of the world’s DRAM memory chips and a quarter of the NAND flash chips, according to research firm TrendForce.

DRAM prices have generally been on the rise over the past two years while NAND flash prices have been declining in recent quarters, a Bernstein analysis showed.

China has been on a drive to develop and produce memory chips domestically. Major projects include DRAM Innotron Memory’s and Fujian Jinhua Integrated Circuit Co.’s DRAM production plans as well as the Yangtze Memory Technologies Co.’s 3D-NAND plant in Wuhan.

Micron is based in Boise, Idaho. Both Samsung and SK Hynix are based in South Korea.