Companies That Rigged Bids on Samsung Chip Equipment Hit With 10.45 Billion Won 'Hammer Blow'

2024.06.03. The Fair Economy — It has been revealed that 12 companies engaged in bid rigging for nine years in the process of supplying control and monitoring systems needed for Samsung Electronics' semiconductor manufacturing.

The Fair Trade Commissio recently announced that it had decided to issue corrective orders and impose a combined 10.459 billion won (about $7.5 million) in fines on 13 businesses, in connection with bid rigging — predetermining winning bidders and bid prices — by 12 companies engaged in machinery manufacturing for semiconductor production and other businesses, in 334 bids for control and monitoring systems for semiconductor processes and related work ordered by Samsung SDS between 2015 and 2023.

According to the Fair Trade Commissio, control and monitoring systems for semiconductor processes are mainly designed to maintain optimal conditions for semiconductor manufacturing and ensure worker safety. These include the "SMCS," which monitors toxic gas leaks and helps workers evacuate quickly in the event of a hazardous situation; the "PCS," which monitors and controls chemical discharge equipment; and the "FMCS," which maintains the optimal temperature and environment for semiconductor manufacturing. The cost of building, maintaining and managing each system is also reflected in the cost of manufacturing semiconductors.

Building each system requires control panel production, software development, and information and communication construction work, among other tasks. Samsung SDS is mainly commissioned by Samsung Electronics to place orders for some of these three categories.

In 2015, Samsung SDS switched its procurement method for control and monitoring systems — which had effectively operated through private contracts — to genuine competitive bidding, as part of cost-cutting efforts. The Fair Trade Commissio pointed out that this prompted the 12 companies to begin colluding in order to prevent low-price bids and block the entry of new competitors.

Around 2015, these companies agreed that each would continue winning the contracts for items it had previously received through private contracts, even after the change in procurement method, and that the other companies would take part in the bidding as decoys to make this happen.

Subsequently, the pre-selected winner for each item transmitted bid prices and quotations to the dummy bidders via email, KakaoTalk, and other channels after the bid announcement. The dummy bidders then executed the agreement by bidding at the transmitted prices.

The Fair Trade Commissio said of the measure, "This is the first case in which collusion carried out over a long period in connection with semiconductor manufacturing, a core national industry, has been detected and sanctioned. We hope this will serve as an opportunity to root out collusive practices that could weaken the competitiveness of the semiconductor industry."

It added, "We plan to further strengthen our monitoring of collusion in the intermediate goods sector that weakens industrial competitiveness and causes harm to consumers, and to respond strictly whenever violations of the law are detected."

The 12 companies involved in the collusion in this case are PS Eng, Duta IT, Mecha Technology, Einstek, Changgong FA, Chang Sung ACE Co., Korea Data Corporation, TASCO, Power Telecom, Welcron CO., Ltd, Hanwha Energy Convergence Division, and Hyupsung Gijeon.

Separately, the Fair Trade Commissio explained that although Daean C&I did not take part in the collusion in this case, it was included among those sanctioned to ensure the effectiveness of the corrective order and fine, since PS Eng spun off and merged the business division related to this case into Daean C&I in November 2023 and then shut down.