August 18, 1997 6:30 AM PDT

S. Korean DRAM battle heats up

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A fierce battle between U.S. and Asian companies in the memory chip market is escalating to new heights.

Last month, U.S. DRAM chip maker Micron Technology won a key round in the competition when antidumping measures were renewed against two South Korean companies, Hyundai and LG Semicom. The measures have been in effect since 1993, when Micron first petitioned the Commerce Department to impose them.

But the South Korean government is planning to challenge the renewal of antidumping measures through the World Trade Organization, according to the Commerce Department. The prospects for the challenge remain unclear.

"Under the current climate, not all chip companies are foaming at the mouth about dumping, and there's less pressure being placed on the United States to enforce," said Jeff Weir, spokesman for the Semiconductor Industry Association. "But Micron is heavily interested in what's happening with Korean firms."

The latest skirmishes come as the DRAM market faces a virtual freefall in pricing and Micron struggles to increase its share of a world market dominated by Korean and Japanese companies. As a result, the price drop has shaken Wall Street's confidence in Micron. (See related story)

DRAM, or dynamic random access memory, is the principal type of memory used in almost all PCs. In today's PCs, 16-megabit DRAM chips are the most popular.

Product "dumping" means that companies export goods either below cost of production or below their cost in the home market. Government subsidies have enabled South Korean memory chip makers to offer their products abroad at below-market prices, according to analysts, leading U.S. companies to complain of unfair trade practices.

The Commerce Department says its antidumping measures are designed to equalize prices rather than penalize offending companies. They require that American customs collect duty equal to the difference between a product's American price and its price in the company's home market.

Asian DRAM manufacturers command 79.4 percent of the market. America's share is 17.4 percent; Micron's is 5.8 percent of the total international market. In addition to Hyundai and LG Semicon, Samsung, NEC, Hitachi, and Toshiba occupy the six top spots for 1996 revenue.

Micron's American competitors have responded to the falling prices by reducing their involvement in the DRAM market or pulling out of the market altogether. Motorola announced its exit earlier this year, and Texas Instruments signaled its continued withdrawal when it pulled out of a Thai DRAM manufacturing plant in May.

The current pricing pressure on DRAM chips was a key factor in the government's July decision not to revoke the antidumping measures. The Commerce decision turned on whether the department could determine that there would be "no likelihood" of future dumping by the companies in question.

In its decision, the department cited a "yearlong downturn" in DRAM pricing, declining sales, and increasing oversupply. Under these conditions, the department determined, South Korean companies would be hard-pressed not to dump DRAM chips in the U.S. market--and therefore the "no likelihood" threshold would not be met.

"A comparison of U.S. market prices to Korean costs and projections of Korean costs indicates that Korean pricing would be likely to be at or below normal value in the absence of the order," the decision stated. "The history of the DRAM industry is one of dumping in periods of significant downturn."

Weir questioned whether South Korea's appeal to the WTO would do its companies any good. A decision in their favor could "generate some smoke, but if push came to shove I doubt whether the U.S. would change an intelligent trade policy because Korea was barking at the WTO," he said.

 

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