Korean DRAM-amine

Electronic News, Oct 5, 1992 by Jack Robertson

The Koreans learned the lesson well from Japan: dumping pays.

Samsung, and to a lesser extent, Hyundai and Goldstar, grabbed global market share (except in Japan) by severely slashing DRAM prices in the last year. The European Community found the Koreans guilty of dumping DRAMs, slapped their wrists, and the Far Eastern suppliers hold on to their sizable market share--now at slightly better prices.

Korean DRAM makers also got increased penetration of the U.S. market with the same blitz-pricing strategy, but it remains to be seen if they will get off as lucky as in Europe. Last week the U.S. Commerce Department for the second time delayed a preliminary ruling in a separate DRAM dumping case brought against Korea by Micron Technologies. Commerce is now expected to make its initial decision this week.

Except for the complainant Micron, surprisingly there is little broad industry furor on both sides of the Atlantic that usually attends the once highly-emotional DRAM dumping cases.

The industry power players shifted in Europe--the end-equipment customers who would have suffered by any sharp antidumping duties levied on Korean DRAMs had more clout than the European device makers. It helped that the European semiconductor firms, who originally filed the DRAM dumping complaint years ago, are now far less enchanted with the anemic-profit commodity memory devices.

As a result, the always compromising EC levied a mild 10.1 percent antidumping duty on Korean DRAMs for four months. At the same time the EC is negotiating a DRAM price monitoring process with the Koreans--but it was uncertain how any possible agreement on a floor price would affect the duties now being collected. Since the Koreans had earlier built up their European inventories in anticipation of some penalty duties, they could come away Scotfree in the EC wrist-slapping.

They may not be as lucky in the U.S., where pressure is far greater to wield a punitive club in antidumping infractions. But even in a worst case scenario of stiff penalty tariffs, the Koreans can use the same appellate processes enlisted so ably by their Japanese role models to blunt the ultimate impact of any antidumping ruling.

Strangely, the industry most severely affected by the Korean DRAM pricing war--the Japanese--can only stand on the sidelines of the transatlantic dumping skirmishes with virtually no hand in the affair that impacts them greatly.

This time it was Japanese producers that lost market share in the DRAM price wars. It also caught Japan at the worst possible time, just as they had geared up large new capacity for a 4M bonanza that was slow to come. The Japanese couldn't easily resort to traditional price-dumping strategies--blocked by the bilateral Semiconductor Arrangement with the U.S. That country faced enough pressure under the treaty for lagging foreign access to its semiconductor market without igniting another fire storm on DRAM dumping.

The aftermath of the EC and American DRAM cases could have marked long range implications for Japan.

If the Koreans come away with sizable market share at no great penalty, Japan must contend with formidable competitors in the very category that dominates its semiconductor industry. Even the U.S., where DRAMs were once virtually written off, sees Texas Instruments, Micron and Motorola snipping away--and a potential giant, IBM, entering the merchant memory market.

It wouldn't surprise some analysts if the Big Five in Japan try to start shifting more away from footballed commodity DRAMs into more specific value-added devices. That would match them up again with the big American device firms pursuing the same strategy--with the outcome far too uncertain to call at this point.

With such excess Japanese DRAM capacity, why don't the transatlantic dumping cases then stick to the Koreans with retaliatory duties? After all, the EC found Goldstar was selling at 122 percent under cost, Hyundai at 57 percent under cost and Samsung at 18 percent under cost.

In Europe the answer is probably that customers preferred to buy from the Koreans, rather than put them out of the market with stiff antidumping duties, to see the Japanese move in more strongly.

There was also the suspicion that Japanese and U.S. DRAM competitors would simply raise prices under whatever EC antidumping duty was levied against the Koreans. That might have been an EC rerun of the controversial U.S. DRAM antindumping "victory" against Japan in the semiconductor treaty in 1986, when DRAM prices shot up phenomenally.

Even in the U.S. there is surprisingly little overall industry agitation over the pending Korean DRAM dumping case. It isn't even on the scope of the Semiconductor Industry Association--the traditional semiconductor dumping flag-bearer. TI and Motorola, which conceivably could benefit by any higher dumping duties imposed, are only nominally following the action. In TI's case, the firm has heavy commitments from customers who are joint investors in the new DRAM fabs opened by TI in the U.S. and overseas. These long term orders won't quickly change, regardless of the outcome of the Korean DRAM case.