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Reports: China begins anti-trust probes on US, South Korean chip makers

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Reports: China begins anti-trust probes on US, South Korean chip makers

China has begun antitrust investigations into three U.S. and South Korean chip makers on allegations that they have been using their market leadership to boost chip prices, among other unfair practices, the Nikkei Asian Review reported June 5, citing a source familiar with the situation.

Regulators are probing Idaho-based Micron Technology Inc. and South Korea's Samsung Electronics Co. Ltd. and SK hynix Inc., which together control more than 90% of the global dynamic random-access memory, or DRAM, chip market. DRAM chips are critical to the processing function in computers, smartphones and other devices.

DRAM prices have risen steadily since 2016, which seems to have triggered formal complaints from big Chinese chip buyers. The three chip makers could face heavy fines if found to have violated antitrust law, the Nikkei said.

Micron, Samsung and SK Hynix said Chinese regulators visited their China offices recently, The Wall Street Journal reported June 4. The three chip makers told the Journal that they were cooperating with the investigation but did not indicate the probe's coverage.

In December 2017, the China National Development and Reform Commission reportedly monitoring rising prices of mobile phone storage chips and raised the possibility of price fixing by major chip makers.

Bernstein analyst Mark Newman said China might be using the pricing investigation to pressure chip makers to share technology with China, according to the Journal report. "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.

Samsung Electronics shares were down 1.17% while SK Hynix shares advanced 0.78% as of 11 p.m. ET on June 4. Micron Technology shares closed up 0.61% on June 4.

China has been moving to lower its dependency on foreign chips. Nearly 90% of the $190 billion of chips used in the country are imported or made in China by foreign-owned companies, the Journal reported, citing research firm International Business Strategies Inc. China buys a fifth of the world's DRAM chips, the Journal added, citing research firm TrendForce.

The second-largest economy in the world has been ramping up efforts to develop and produce memory chips domestically. DRAM Innotron Memory and Fujian Jinhua Integrated Circuit Co. are among Chinese firms with major DRAM projects, the WSJ reported.

Beijing has launched a Made in China 2025 initiative to modernize the country's industrial sector. Part of this involves supporting homegrown world-class chip makers, with a government target to source 40% of chips domestically in 2020 and 70% in 2025, compared with less than 30% in 2017, the Nikkei said.

The reported probe comes amid continued trade talks between the U.S. and China, with advanced technology seen as one of the focal points. On May 17, Chinese regulators approved Toshiba Corp.'s pending $18 billion sale of its memory business to a consortium led by U.S. private equity firm Bain Capital LP after reportedly delaying the regulatory review due to ongoing trade tensions with the U.S.