In response to complaints from mobile phone manufacturers, regulatory authorities have turned their attention to the memory chip market, where prices have been on a six-quarter upward trend and are expected to rise further in the first quarter of next year. On December 21, sources told the 21st Century Business Herald that the National Development and Reform Commission (NDRC) has already started discussions with Samsung regarding this issue. However, it remains unclear whether an antitrust investigation will be launched.
Samsung is the world's leading manufacturer of memory chips, holding approximately 48% of the DRAM market and 35.4% of the NAND Flash market. These two types of chips are essential components in smartphones, computers, and servers. According to China Flash Memory Market (CFM), the global storage chip market reached $950 billion in 2017, with DRAM accounting for about $50.35 billion and NAND for around $40 billion.
The price surge began in Q3 2016 due to supply shortages, causing a ripple effect across various products such as smartphones, solid-state drives, and memory modules. For instance, popular mobile phones saw price hikes of 100–200 yuan, while flagship models were priced up to 300 yuan higher than previous versions. Some memory bars experienced a 300% price increase within a year.
Industry analysts initially predicted that the price increases would subside by the second half of 2017, but the decline has been delayed until late 2018. This prolonged period of rising costs has placed significant pressure on mobile phone manufacturers, with storage costs now reaching 25%–35% of the total production cost. One manufacturer revealed that flash memory prices have increased by over 30%–40% this year, with 32GB and 64GB units rising by $5 and $10 respectively, and 128GB units increasing by $20.
The global memory chip market is dominated by a few major players: Samsung, Micron, Toshiba, Hynix, and Western Digital. Together, Samsung, Micron, and Hynix hold over 90% of the DRAM market share. These companies have seen massive profits, with Samsung reporting record revenues and profits in 2017. In Q3 2017 alone, Samsung earned $54.5 billion in revenue, with a net profit of $12.76 billion—an impressive 179% year-on-year increase.
Despite challenges in its consumer electronics division, Samsung’s semiconductor business became its main profit driver. In Q2 2017, Samsung Semiconductor’s revenue surpassed Intel for the first time, reaching $15.73 billion. Its stock price also rose significantly, from 1.33 million won in June 2016 to 2.86 million won in November 2017, marking a decade-high.
Looking ahead, Samsung and Hynix have announced plans to raise DRAM prices by 3%–5% in the first quarter of 2018, signaling continued price increases for storage products. As the world’s largest producer and consumer of electronic goods, China has become a key market affected by these price hikes. However, PC and smartphone manufacturers, including industry giants like Foxconn, have little leverage against the dominant chip suppliers.
Some industry insiders suspect that a price cartel may be at play, reminiscent of a similar situation in 2000. At that time, companies like Samsung, Hynix, and Micron faced U.S. antitrust investigations after manipulating DRAM prices, resulting in fines totaling over $729 million. The U.S. Department of Justice found that Samsung had engaged in price fixing between 1999 and 2002, leading to a $300 million penalty.
Although it is not yet clear if regulators will investigate the current price trends, the potential for collusion remains a concern. Such behavior allows dominant firms to control prices, maximize profits, and eliminate competition. As Chinese companies begin to enter the memory chip market, they may soon face intense price competition from industry leaders like Samsung and Micron.
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