Infineon to admit DRAM price fixing

U.S. government announces company's agreement to plead guilty, pay $160 million fine.
Written by Dawn Kawamoto, Contributor on
Infineon Technologies will plead guilty to taking part in an international DRAM price-fixing conspiracy, which affected such companies as Dell, Hewlett-Packard and Apple Computer, the U.S. Department of Justice announced Wednesday.

Infineon agreed to pay a $160 million fine for participating in the international price-fixing and cooperate with the government's on-going investigation of other DRAM producers.

According to the one-count felony charge, filed in the U.S. District Court in San Francisco, Infineon conspired with unnamed DRAM makers to fix the prices of dynamic random access memory sold to certain computer and server manufacturers between July 1, 1999, and June 15, 2002.

DRAM, a memory semiconductor chip used in computers, consumer electronic products, telecommunications equipment and mobile phones, is more than a $5 billion industry.

"Today's charge and its resulting guilty plea represent an important victory in the (Justice) Department's ongoing fight to break up and prosecute cartels that harm American consumers," Hewitt Pate, who heads the antitrust division for the U.S. Department of Justice, said in a statement.

Infineon fixed prices by participating in meetings, conversations and other forms of communications with competitors to discuss which customers would receive certain prices on DRAM.

The DRAM makers then issued price quotations based on those agreements and exchanged with other makers' information on DRAM sales to certain customers, to monitor and enforce the agreed prices, according the Justice Department.

Computer makers negotiate prices for DRAM with the various vendors, said Sherry Garber, an analyst with research firm Semico.

"The PC (manufacturers) do check to see what other PC makers are paying. So there is always a lot of cross-information on who is paying what," Garber said.

Infineon representatives said the company is happy to put the controversy behind it.

"This has been an ongoing investigation for two years, and we've been happy to cooperate during that time," said Robert LeFort, president of Infineon Technologies North America. "We are happy to have it behind us now. It's good for the company, good for the shareholders, good for our employees. The good news for us is we can focus on our business."

He added the company has also put in place various policies and procedures to head off problems with price fixing.

"Our mind-set is to be a good corporate citizen and put things in place to ensure it doesn't happen again. We will compete on the technologies we have to offer," LeFort said.

Infineon, during its fiscal second and third quarters, set aside nearly $300 million to cover liabilities that may arise from the Justice Department's investigation and from lawsuits from PC makers. That amount is expected to be adequate to cover the Justice Department fine, lawsuits from companies and associated expenses, LeFort said.

In January, Alfred P. Censullo, a Micron Technology regional sales manager, pleaded guilty to a charge of withholding information and altering documents concerning a grand jury subpoena served on Micron in June 2002. Censullo is scheduled to be sentenced later this year.

The Justice Department investigation is focusing on such memory makers as Micron, Samsung and others, which had included Infineon. The European Commission, the antitrust regulatory body for the European Union, is conducting a similar investigation.

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