Cheese it, youse guys, it’s da G-men!

by Jeff Dorsch, September 27th, 2007, 6:59 am

The feds are after the chips, again. This time, they’re looking at pricing practices in the NAND flash memory market. Subpoenas went to Samsung Electronics, SanDisk, and Toshiba, and more party invitations are probably in the mail.

NAND flash memory is used in digital still cameras, MP3 music players, notebook computers, and USB drives, among other products. In the not-too-distant future, your new computer won’t have a hard disk drive for the data you want to store on it; it will use a solid-state drive made with NAND flash memory.

For years, the NAND flash market has followed the classic trends in the semiconductor industry: The parts get denser, the prices drop constantly, and vendors make back their R&D investment with increased unit volume.

After NAND flash spot prices fell 50% last winter in a matter of weeks, the market saw an uptick in pricing during the following months, as supply and demand came into balance. Cut to the Antitrust Division at the US Department of Justice, where two young trustbusters are having their morning coffee and looking over the day’s headlines:

Eager-Beaver Prosecutor #1: Hey, look, prices are going up for NAND flash memory — you know, those chips that go in the iPod nano.

Eager-Beaver Prosecutor #2: Chip prices going up?! Get a grand jury going, pronto!

Not only is the DOJ taking an interest in NAND flash — Canada’s Competition Bureau is on the case, as well. You know it’s just a matter of time before the European Commission piles on.

The DOJ has been investigating the DRAM market for years, collecting legal settlements from five big vendors for fixing prices and getting guilty pleas from industry executives. That pricing collusion drove up the prices that consumers paid for PCs and other electronics. Emboldened by their success in the DRAM probe, federal prosecutors are now going after markets for SRAMs and for graphics processors and cards, expecting to find price collusion there, as well.