Hynix Semiconductor, Inc. v. United States

Slip Op. 06-52

UNITED STATES COURT OF INTERNATIONAL TRADE

HYNIX SEMICONDUCTOR, INC.,
HYNIX SEMICONDUCTOR AMERICA,
INC.

Plaintiffs, Before: Richard W. Goldberg,
Senior Judge
v.

UNITED STATES,
Court No. 03-00652
Defendant,

and PUBLIC VERSION

INFINEON TECHNOLOGIES, NORTH
AMERICA CORP., and MICRON
TECHNOLOGY, INC.,

Defendant-
Intervenors.

OPINION

[ITC’s affirmative injury determination sustained in part and
remanded in part]

Dated: April 13, 2006

Willkie, Farr & Gallagher LLP (James P. Durling, Daniel L.
Porter) for Plaintiffs Hynix Semiconductor Inc. and Hynix
Semiconductor America Inc.

Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director; Ada Elsie Bosque, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice; Neal J. Reynolds, Office of
the General Counsel, U.S. International Trade Commission (Mary
Jane Alves), for Defendant United States.

Collier, Shannon, Scott, PLLC (Kathleen W. Cannon) for Defendant-
Intervenor Infineon Technologies North America Corp.

King & Spalding LLP (Gilbert B. Kaplan, Cris R. Revaz) for
Defendant-Intervenor Micron Technology, Inc.
Court No. 03-00652 Page 2

GOLDBERG, Senior Judge: In this action, Plaintiffs Hynix

Semiconductor Inc. and Hynix Semiconductor America Inc.

(together, “Hynix”) challenge the final affirmative material

injury determination made by the United States International

Trade Commission (“ITC”) pursuant to 19 U.S.C. § 1671d(b) with

respect to dynamic random access memory semiconductors of one

megabit or above (“DRAMS”), published under DRAMS and DRAM

Modules from Korea, USITC Pub. 3616, Inv. No. 701-TA-431 (Aug.

2003) (Final).1 Pursuant to USCIT Rule 56.2, Hynix moves for

judgment on the agency record.

Hynix submitted a Memorandum of Law in Support of

Plaintiff’s Motion for Judgment Upon the Agency Record (“Pls.’

Br.”), and the ITC submitted a Memorandum in Opposition to

Plaintiff’s Rule 56.2 Motion for Judgment on the Agency Record

(“Def.’s Br.”). Micron Technology, Inc. (“Micron”) submitted a

Memorandum of Law in Opposition to Plaintiffs’ Motion for

Judgment Upon the Agency Record (“Micron’s Br.”).

The Court has jurisdiction over this matter pursuant to 28

U.S.C. § 1581(c). After due consideration of the parties’

1
The ITC’s final determination report consists of two
documents, an explanatory Views of the Commission (“Views”) and a
Final Staff Report. The Court’s citations to both Views and the
Final Staff Report reference the confidential versions wherein
the relevant data and evidence appear. A public version of the
full ITC report is available at http://hotdocs.usitc.gov/docs/
pubs/701_731/pub3616.pdf.
Court No. 03-00652 Page 3

submissions, the administrative record, and all other papers

herein, and for the reasons that follow, the Court remands to the

ITC for further explanation of the causal nexus between subject

imports and the domestic industry’s material injury in light of

the drop in underlying demand for computer and telecommunications

equipment during the period of investigation. All other aspects

of the ITC’s final determination are sustained.

I. STANDARD OF REVIEW

The Court will sustain the ITC’s determination unless it is

“unsupported by substantial evidence on the record, or otherwise

not in accordance with law . . . .” 19 U.S.C. § 1516a(b)(1)(B)

(1999). Substantial evidence “does not mean a large or

considerable amount of evidence, but rather ‘such relevant

evidence as a reasonable mind might accept as adequate to support

a conclusion.’” Pierce v. Underwood, 487 U.S. 552, 565 (1988)

(quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)).

Moreover, “the possibility of drawing two inconsistent

conclusions from the evidence does not prevent an administrative

agency’s finding from being supported by substantial evidence.”

Matsushita Elec. Indus. Co. Ltd. v. United States, 750 F.2d 927,

933 (Fed. Cir. 1984) (quoting Consolo v. Fed. Mar. Comm’n, 383

U.S. 607, 620 (1966)).

The reviewing court may not, “even as to matters not

requiring expertise[,] displace the [agency’s] choice between two

fairly conflicting views, even though the court would justifiably
Court No. 03-00652 Page 4

have made a different choice had the matter been before it de

novo.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951).

“Fundamentally, in reviewing an injury determination under the

[statute], this Court may not weigh the evidence concerning

specific factual findings, nor may the Court substitute its

judgment for that of the [ITC].” Sprague Elec. Co. v. United

States, 2 CIT 302, 310, 529 F. Supp. 676, 682-83 (1981).2 Such

deference is also granted to the ITC regarding its choice of

methodology. See Am. Silicon Techs. v. United States, 334 F.3d

1033, 1038 (Fed. Cir. 2003).

II. DISCUSSION

Under 19 U.S.C. § 1671d(b), the ITC is charged with

determining whether a domestic industry is materially injured by

reason of unfairly subsidized imports. See 19 U.S.C. §

1671d(b)(1) (1999). There are two components to an affirmative

material injury determination: “a finding of present material

injury or a threat thereof, and a finding of causation.” Chr.

Bjelland Seafoods A/S v. United States, 19 CIT 35, 37 (1995); see

also 19 U.S.C. § 1671d(b)(1) (1999) (“The [ITC] shall make a

final determination of whether an industry in the United States

is materially injured . . . by reason of [subject] imports . . .

2
Sprague addressed the material injury requirement
contained in the former Antidumping Act, but the quoted language
above is equally applicable to countervailing duty cases. See
Am. Spring Wire Corp. v. United States, 8 CIT 20, 22 n.3, 590 F.
Supp. 1273, 1276 (1984), aff’d sub nom., Armco Inc. v. United
States, 760 F.2d 249 (Fed. Cir. 1985).
Court No. 03-00652 Page 5

.”) (emphasis added). “Material injury” is defined as “harm [to

the domestic industry] which is not inconsequential, immaterial,

or unimportant.” 19 U.S.C. § 1677(7)(A) (1999). When

determining whether subject imports have caused material injury

to the domestic industry, the ITC must evaluate three factors:

(1) the volume of subject imports; (2) the price effects of

subject imports on domestic like products; and (3) the impact of

subject imports on the domestic producers of domestic like

products. Id. § 1677(7)(B)(i)(I)-(III). In addition, the ITC

“may consider such other economic factors as are relevant to the

determination . . . .” Id. § 1677(7)(B)(ii).

In this case, the ITC found that the U.S. DRAMS industry had

been materially injured by reason of DRAMS imports from the

Republic of Korea sold in the United States that the U.S.

Department of Commerce found to be subsidized by the Government

of Korea (“subject imports”). Views at 3. In concluding that a

“material injury” existed by reason of the subject imports, the

ITC relied on the following findings: the volume of subject

imports both absolutely and as a share of apparent domestic

consumption and production was significant; there was “evidence

of significant underselling and price depression by subject

imports”; and “nearly all of the domestic industry’s performance

indicators [ ] during a time of increasing apparent

domestic consumption.” Id. at 41. Hynix challenges these

findings on several grounds.
Court No. 03-00652 Page 6

A. The ITC’s Findings Regarding Subject Imports’ Increases (1)
in Absolute Volume and (2) in Volume Relative to Consumption
and Production, Are Supported by Substantial Evidence and
Are Otherwise in Accordance with Law.

In evaluating the volume of imports of merchandise, the ITC

must consider whether any increase in volume of the subject

imports is “significant.” See 19 U.S.C. § 1677(7)(C)(i) (1999).

After its investigation, the ITC determined that “the absolute

volume of subject imports and the increase in that volume over

the period of investigation relative to production and

consumption in the United States is significant.” Views at 29.

Specifically, the ITC found apparent domestic consumption of

DRAMS products, measured in billion of bits, increased each year

of the period of investigation, from 98.8 million in 2000 to

146.7 million in 2001 and 186.9 million in 2002, and was 55.3

million in interim 2003 compared to 42.8 million in interim 2002.

Id. at 30. The absolute volume of subject imports, in billions

of bits, increased from [ ] in 2000 to [ ]

in 2001 and [ ] in 2002, and was [ ] in

interim 2003 and [ ] in interim 2002. Id.

Concurrently, domestic production, measured in billions of bits,

dropped from a level of [ ] in 2000 to [ ]

in 2001 before increasing to [ ] in 2002. Def.’s Br.

at 13. Additionally, the ITC found that the market share of

subject imports increased from [ ] percent in 2000 to [ ]

percent in 2001 and then decreased to [ ] percent in 2002 and

to [ ] percent in the first quarter of 2003. Views at 30;
Court No. 03-00652 Page 7

Final Staff Report at IV-10. Domestic producers’ market share

declined from [ ] percent in 2000 to [ ] percent in 2001

and subsequently dropped from [ ] percent in 2002 to [ ]

percent in the first quarter of 2003. Views at 38; Final Staff

Report, App. C, Tab. C-1.3

Hynix does not dispute the ITC’s factual findings regarding

the volume of subject imports, but rather contends that the ITC

erred in finding that the volume of subject imports was

significant, claiming that the only proper measure of volume

increase is an increase in market share. See Pls.’ Br. at 10.

Because “total bits supplied and total bits consumed have always

been increasing dramatically,” Hynix insists that “examining

relative changes in market shares is the only appropriate means

to assess volume.”4 Id.

Hynix asserts that the market share of subject imports

remained small throughout the investigation period, and actually

3
The ITC also found the ratio of total subject imports of
uncased DRAMS compared to U.S. production increased from [ ]
percent in 2000 to [ ] percent in 2001, then declined to
[ ] percent in 2002, “a level that was still [nearly double]
that of 2000 . . . .” Views at 30. Compared to U.S. shipments
of DRAMS and DRAM modules, the ratio of subject imports increased
from [ ] percent in 2000 to [ ] percent in 2001 and [ ]
percent in 2002. Id. n.138.
4
Hynix agrees that volume of bits is the appropriate
metric by which to measure the subject imports. See Pls.’ Br. at
10. The steady increase in volume was due in part to the
evolving DRAMS technology, which permitted an increasingly
greater density of data bits to be contained on a given DRAMS
unit. Since the subject imports were measured in bits and not
units, an increase in bit volume is due in part to technological
developments that enhanced the chip density.
Court No. 03-00652 Page 8

declined at the end of the period. Id. at 11. It argues that a

[ ] percent increase in market share between 2000 and 2002 is a

“figurative ‘blip’ on the radar screen” largely driven by the

domestic industry’s shift to servicing growing demand for DRAMS

outside the United States.5 Id. at 12. Hynix argues that such

an increase cannot be deemed significant for the purposes of

volume analysis.

The Court disagrees on both counts. First, the statute

provides that an affirmative volume analysis may conclude that

the absolute volume of subject imports, or increases in the

relative subject import volume (i.e., the market share), is

significant. 19 U.S.C. § 1677(7)(C)(i) (1999). “Any one of

these calculations is sufficient to support a finding of injury

under the statute.” Hyundai Elec. Ind. Co., Ltd. v. United

5
The [ ] percent increase in market share, according to
Hynix, also partially resulted from the temporary closure of
Hynix’s U.S. manufacturing facility, operated by Hynix
Semiconductor Manufacturing America, Inc. Pls.’ Br. at 13.
While the plant was closed for an upgrade, Hynix claims to have
produced and imported the subject imports, in part, to make up
for this lost capacity. Hynix contends competition in the DRAMS
industry is by brands, and not by country of origin, because
production can be shifted from one country of origin to another
at low cost. However, section 1677(7) does not permit the ITC to
base its “material injury” determination on a brand name basis.
The statute clearly mandates that the ITC examine the volume of
imports of the “subject merchandise” and whether the volume or
any absolute or relative increase in that volume compared to
“production or consumption in the United States” is significant.
19 U.S.C. § 1677(7)(C)(i) (1999). This requires the ITC to
examine the domestic industry as a whole, not by brand names,
and, accordingly, the ITC found that subject imports’ absolute
and relative increase in volume indicated subject imports’
significance in the U.S. market.
Court No. 03-00652 Page 9

States, 21 CIT 481, 485 (1997); see also Taiwan Semiconductor

Indus. Ass’n v. United States, 24 CIT 220, 230, 105 F. Supp. 2d

1363, 1372 (2000) (finding that a significant increase in the

absolute volume of imports is sufficient, by itself, to support a

finding that the overall volume of imports is significant);

Copperweld Corp. v. United States, 12 CIT 148, 167, 682 F. Supp.

552, 570 (1988) (holding that the statute’s disjunctive structure

signifies a congressional intent to give the agency broad

discretion to analyze import volume in the context of the

industry concerned). While it is crucial that the ITC “must

analyze the volume and market share data in the context of

conditions of competition,” especially in industries where

subject imports represent a small percentage of market share

relative to that held by the domestic industry, “[t]here is no

minimum rate of increase in subject import volume or a baseline

percentage of market share for subject imports, above which

volume will be considered ‘significant.’” Nippon Steel Corp. v.

United States, 25 CIT 1415, 1419, 182 F. Supp. 2d 1330, 1335

(2001). In the final analysis, the ITC must collect data and

formulate a reasoned explanation for the significance vel non of

volume fluctuations.

Here, the ITC’s finding that subject import volume was

significant is supported by substantial evidence. Over the

period of investigation, the absolute volume of subject imports

[ ], and because of the substantial degree of
Court No. 03-00652 Page 10

substitutability and the commodity-like properties of DRAMS

products, the ITC found that the absolute volume of subject

imports was significant during the period. See Views at 30-31.

The presence of an increase in absolute volume of subsidized

imports in a market characterized by product fungibility is

significant because such evidence tends to prove that purchasers

were acquiring subject imports in lieu of domestically produced

DRAMS.

While Hynix argues that the total bits supplied and total

bits consumed “have always been increasing dramatically,” Pls.’

Br. at 10 (emphasis omitted), it does not present any alternative

explanation as to why the rate of increase in volume of total

subject imports accelerated from 2000 to 2001 and then tapered

off between 2001 and 2002. The ITC’s reasoning, on the other

hand, is discernible, and the record provides substantial

evidence in support of the ITC’s determination that the

[ ] of subject import volume over the period, as

considered within the context of the DRAMS industry, is

significant. See Views at 30. The Court therefore sustains the

ITC’s determination that the volume of subject imports during the

period of investigation was significant.

Second, even if the Court were to agree that a market share

analysis is the only appropriate analysis to make in light of the

unique characteristics of the industry, the Court would sustain

the ITC’s determination that the market share increase was
Court No. 03-00652 Page 11

significant over the period. Hynix’s argument that the [ ]

percent increase in market share cannot be deemed significant is

without merit. That this increase occurred at a time when

domestic market share dropped by approximately [ ] percent weighs

heavily in the analysis. See Final Staff Report, App. C, Tab. C-

1. This is especially true in the DRAMS industry, where

producers rely on revenue streams to finance continual investment

in new capital equipment as well as research and development

(“R&D”). Views at 23. Moreover, the market share fluctuations

are made more significant due to the fungibility of the goods in

question and the price-sensitive nature of the DRAMS market. Id.

at 25, 31; see also USX Corp. v. United States, 11 CIT 82, 85,

655 F. Supp. 487, 490 (1987) (noting that, in price-sensitive

industries that produce fungible products, “‘the impact of

seemingly small import volumes . . . is magnified in the

marketplace’”) (quoting Certain Carbon Steel Products from Spain,

USITC Pub. 1331 at 16-17, Inv. Nos. 701-TA-155, 157-60, 162 (Dec.

1982) (Final)). The ITC properly took the price-sensitive nature

of the DRAMS market into consideration when determining that the

increase in volume relative to consumption was significant over

the relevant period, see Views at 31, and the Court therefore

sustains that determination.

B. The ITC’s Finding That the Price Effects of Subject Imports
Were Significant Is Supported by Substantial Evidence and Is
Otherwise in Accordance with Law.

In evaluating the price effects of subject imports, the ITC
Court No. 03-00652 Page 12

considers (1) whether “there had been significant price

underselling by the imported merchandise” as compared with

domestic production; and (2) whether subject imports “otherwise

[depress] prices to a significant degree or [prevent] price

increases . . . .” 19 U.S.C. § 1677(7)(C)(ii) (1999). During

the investigation, the ITC collected extensive data from domestic

DRAMS producers and purchasers regarding DRAMS prices, the volume

of sales, and instances of lost sales and revenue to subject

imports. Views at 34; Final Staff Report at V-44 (Tab. V-19).

The ITC examined the pricing for eight different products and

compared the monthly weighted-average price of domestic shipments

with the monthly weighted-average price of subject imports for

each month between January 2000 and March 2003. Views at 34-35;

Final Staff Report, at V-9 to V-41 (Tabs. V-2 to V-18). Because

subject import underselling was consistent, at high margins, and

increasing over the period, the ITC found significant

underselling by subject imports. Views at 35. The ITC explained

that in commodity-type markets, which adjust quickly to price

changes, significant price disparities between suppliers would

not usually be expected. Id. Moreover, patterns of frequent,

sustained high-margin underselling by subject imports were,

according to the ITC, especially significant in this industry,

and could be expected to have a deleterious effect on domestic

prices. Id. Therefore, the ITC concluded that “[i]n the absence

of significant quantities of [subject imports] competing in the
Court No. 03-00652 Page 13

same product types at relatively low prices, domestic prices

would have been substantially higher.” Id. at 37.

Hynix does not challenge the data underlying the ITC’s

weighted-average pricing analysis. Rather, Hynix argues that the

ITC should have given considerable weight to a disaggregated

brand name analysis, and, by failing to do so, inappropriately

relied on its traditional approach of comparing a weighted-

average subject import price to a weighted-average domestic

price. Pls.’ Br. at 15-16. According to Hynix, this weighted-

average underselling analysis is much less relevant than a brand

name lowest price analysis when analyzing the DRAMS industry

because DRAMS are a commodity product with near complete

interchangeability among subject imports, domestic production,

and non-subject imports. Id. at 16. Moreover, ignoring non-

subject imports in this case is particularly inappropriate given

that non-subject imports constitute a majority ([ ] percent in

2002) of the supply. Id. Hynix contends that in a commodity

market, a supplier that is not recognized as the lowest price

leader does not impact market prices, as evidenced by statements

of Micron’s CEO, as well as surveys in the record indicating that

most purchasers were unable to identify any price leader. Id. at

19. Accordingly, Hynix argues, the ITC was incorrect in

determining that subject import prices that are below weighted-

average domestic prices can still impact the market even if they

are not the lowest single price in the market at a given point in
Court No. 03-00652 Page 14

time. Id.

Hynix explains that a lowest price analysis illustrates

that: (1) Hynix was the lowest price supplier only [ ] percent

of the time; (2) the frequency of non-subject imports being the

lowest price source grew from [ ] percent to [ ] percent over

the period of investigation; and (3) in the PC OEM channel, the

frequency of subject imports being the lowest price is even

smaller - only [ ] percent of all instances. Id. at 17. Hynix

claims that non-subject imports played a critical role in the

DRAMS industry during the period, and employing a brand name

lowest price analysis would have allowed for more adequate

consideration of the importance of non-subject imports. Id. at

20-21. Hynix therefore asserts that since subject imports were

at the lowest price only [ ] percent of the time, it was

incorrect for the ITC to blame Hynix for the injury to the

domestic industry when some other supplier was the lowest price

during the period of investigation [ ] percent of the time. Id.

at 19-20.6

There is no legal requirement that subject imports be the

lowest price product throughout the investigation based on either

a weighted-average pricing analysis or disaggregated analysis.

See Metallverken Nederland B.V. v. United States, 13 CIT 1013,

6
Discussion regarding the ITC’s consideration of the
relative impact and effect of non-subject imports is also
discussed below in Part II.C.2, along with other possible factors
that may have led to the domestic industry’s material injury.
Court No. 03-00652 Page 15

1024, 728 F. Supp. 730, 739 (1989) (“Instances of overselling do

not preclude the [ITC] from finding significant or pervasive

underselling.”). Rather, as noted above in Part I, the ITC has

broad discretion in selecting the appropriate analysis or

methodology to apply to its review of subject import price

effects. On other occasions, the U.S. Court of International

Trade (“CIT”) has specifically held that the ITC possesses “broad

discretion” in selecting methodologies to analyze price effects

in particular. See, e.g., U.S. Steel Group v. United States, 18

CIT 1190, 1218, 873 F. Supp. 673, 699 (1994); Mitsubishi

Materials Corp. v. United States, 17 CIT 301, 318, 820 F. Supp.

608, 624 (1993).

In this particular case, the ITC’s choice of a weighted-

average pricing methodology is reasonable and warrants deference

because: (1) the ITC has routinely applied the weighted-average

pricing analysis in antidumping and countervailing duty

investigations, including other cases involving commodity-like

products; (2) other CIT cases have previously sustained the ITC’s

use of weighted-average pricing methodology; and (3) the ITC

reasonably concluded that a disaggregated brand name analysis

does not fulfill the ITC’s statutory purpose to consider the

industry as a whole.

First, the ITC has applied the weighted-average pricing

analysis in previous DRAMS investigations. See, e.g., Certain

Ceramic Station Post Insulators from Japan, USITC Pub. 3655 at 15
Court No. 03-00652 Page 16

n.104, Inv. No. 731-TA-1023 (Dec. 2003) (Final); Dynamic Random

Access Memory Semiconductors of One Megabit and Above from

Taiwan, USITC Pub. 3256 at 40-42, Inv. No. 731-TA-811 (Dec. 1999)

(Final); DRAMs of One Megabit and Above from the Republic of

Korea, USITC Pub. 2629 at 28-29, I-92, I-96, Inv. No. 731-TA-56

(May 1993) (Final); 64K Dynamic Random Access Memory

Semiconductors from Japan, USITC Pub. 1862 at 19, A-47, A-51,

Inv. No. 731-TA-270 (June 1986) (Final). Additionally, the ITC

has similarly applied its weighted-average pricing analysis in

other cases involving commodity-like products, and the ITC has

never found that the price-sensitive nature of those markets

invalidates or negates the results of a weighted-average pricing

methodology. See, e.g., Ferrovanadium from China and South

Africa, USITC Pub. 3570 at 19, 23, Inv. Nos. 731-TA-986-87 (Jan.

2003) (Final); Carbon and Certain Alloy Steel Wire Rod from

Brazil, Canada, Germany, Indonesia, Mexico, Moldova, Trinidad and

Tobago, Turkey, and Ukraine, USITC Pub. 3546 at 37-38, Inv. Nos.

701-TA-417-421 and 731-TA-953-54, 956-59, 961-62 (Oct. 2002)

(Final); Individually Quick Frozen Red Raspberries from Chile,

USITC Pub. 3524 at 13-14, Inv. No. 731-TA-948 (June 2002)

(Final).

Second, other CIT cases have previously sustained the ITC’s

use of a weighted-average pricing methodology. See, e.g., Nippon

Steel Corp. v. United States, 19 CIT 450, 466 (1995) (holding

that the identity of the price leader is irrelevant if subject
Court No. 03-00652 Page 17

imports undersell the domestic industry on a weighted-average

basis); U.S. Steel, 18 CIT at 1220, 873 F. Supp. at 700 (“The

court thus upholds the [ITC]’s application here of a weighted

average unit pricing methodology in [its] analysis of pricing

data.”).

Third, the ITC explained that a disaggregated brand name

lowest price analysis does not fulfill its statutory purpose to

consider the industry as a whole. Views at 35. According to the

ITC, subject import prices that are “below weighted average

domestic prices can impact the market even when they are not the

lowest single price in the market at a given point in time.” Id.

The ITC noted, in Certain Carbon Steel Products from Spain, that

in markets that are price sensitive and involve basic commodity

products, “the mere presence of an offer from an importer . . .

at a lower price can have a discernible impact.” Certain Carbon

Steel Products from Spain, USITC Pub. 1331 at 21. “Such offers

affect the ability of domestic . . . producers to price

competitively, to cover fixed costs, and to generate funds for

needed capital improvements.” Id.

In this case, the ITC examined the condition of the market,

as well as the effect of subject imports, in concluding that

“significant price underselling by subject imports . . .

depressed prices to a significant degree.” Views at 37.

Moreover, in recognition of the inherent conditions of

competition in the DRAMS industry, in which prices can change
Court No. 03-00652 Page 18

frequently, the ITC did collect monthly pricing data by brand

name. Id. at 35; Final Staff Report at V-9 to V-44 (Tabs. V-2 to

V-17). The ITC determined that it was far from obvious that the

brand name analysis led to a different conclusion than the

traditional weighted-average pricing analysis. Views at 35-36.

The ITC found that even using the brand name, lowest price

methodology, there are significant and demonstrated price effects

of subject imports because subject imports were the lowest-price

product in the U.S. market [ ] percent of the time, “more

often than DRAMS products from any other source.” Id. at 36.

The ITC explained that DRAMS industry practices (such as most-

favored-customer clauses, best-price clauses, and other less

formal arrangements) and the quick dissemination of information

demonstrate that low prices had an almost immediate impact on the

marketplace. Id. at 33 n.148; Def.’s Br. at 22.

Both the lowest price and weighted-average methodologies

have advantages and disadvantages. Hynix, however, has not

demonstrated that the ITC’s choice of methodology was an abuse of

discretion. The Court therefore sustains the ITC’s application

of a weighted-average pricing analysis in examining the effect of

subject imports on the domestic industry. Accord U.S. Steel

Group, 18 CIT at 1220, 873 F. Supp. at 700.

C. The ITC’s Impact Analysis Is Sustained in Part and Remanded
in Part.

Once the ITC has determined that both the volume and price
Court No. 03-00652 Page 19

effects of subject imports are significant, the next step in the

inquiry is to assess “the impact of imports of such merchandise

on domestic producers of domestic like products . . . .” 19

U.S.C. § 1677(7)(B)(i)(III) (1999). The ITC concluded that

“subject imports are having a significant adverse impact on the

domestic industry producing DRAM products.” Views at 41. Hynix

challenges this finding by raising three arguments. First, Hynix

claims the ITC failed to take into account the importance of the

business cycle in the DRAMS industry. Pls.’ Br. at 25-27.

Second, it faults the ITC for ignoring special indicia of

industry success by which the domestic industry allegedly gauged

its own financial condition. Id. at 27-31. In its final

argument, Hynix presents three other causes, unrelated to the

subject imports, that the ITC purportedly failed to evaluate

prior to concluding that subject imports were responsible for the

material injury. Id. at 31-49

1. The ITC’s Analysis of the Conditions of the Domestic
Industry Properly Considered the Business Cycle and the
Conditions of Competition That Are Distinctive to the
Industry.

The Court will address Hynix’s first two arguments together,

since they both raise issues relating to the ITC’s contextual

inquiry into the business cycle and competitive conditions. As

part of its impact analysis, the ITC is required to “evaluate all

relevant economic factors which have a bearing on the state of

the industry in the United States,” and must do so “within the
Court No. 03-00652 Page 20

context of the business cycle and conditions of competition that

are distinctive to the affected industry.” 19 U.S.C. §

1677(7)(C)(iii) (1999). “Relevant economic factors” include, but

are not limited to:

(I) actual and potential decline in output, sales,
market share, profits, productivity, return on
investments, and utilization of capacity,

(II) factors affecting domestic prices, [and]

(III) actual and potential negative effects on cash
flow, inventories, employment, wages, growth, ability
to raise capital, and investment[.]

Id. The ITC is provided with flexibility to determine the

significance of any particular factor or of the various factors

affecting an industry in each particular case. See Am. Spring

Wire Corp., 8 CIT at 23, 590 F. Supp. at 1277.

a. The ITC’s Treatment of the “Boom/Bust” Phenomenon in
the Impact Analysis Properly Considered the Context of
the Business Cycle and Conditions of Competition in the
DRAMS Market.

In coming to its conclusion that the subject imports caused

a material injury to the domestic industry, the ITC examined the

record evidence within the context of the business cycle and

conditions of competition that are distinctive to the industry.

The ITC’s report appropriately discussed the unique business

conditions of the DRAMS industry in the section entitled

Conditions of Competition and the Business Cycle, which is

divided into three subsections entitled Demand Considerations,

Supply Considerations, and Additional Considerations. See Views
Court No. 03-00652 Page 21

at 21–29. Within these sections, the ITC examined specific

conditions of the DRAMS industry, including the “boom/bust”

business cycle and its causes, the product life cycle and

“learning curve,” and the commodity-like properties of the DRAMS

market. See id.

Hynix argues that the ITC failed to consider the impact of

the “notorious boom/bust” pattern of the DRAMS business cycle in

a discernible fashion, thereby failing to satisfy its statutory

obligation under 19 U.S.C. § 1677(7)(C)(iii).7 See Pls.’ Br. at

25. Hynix admits that “the ITC acknowledged [the existence of]

the boom-bust business cycle,” but contends that the ITC

nevertheless failed to consider the business cycle when analyzing

the causes of, and the factors affecting, the deterioration of

the domestic industry’s financial condition over the period of

investigation. Id. at 26. Hynix’s argument relies on two

points: first, the period of investigation correlates with the

period when the industry went from the “top of the boom to the

trough of the bust”; and second, the ITC failed to reference the

term “business cycle” in the entire “Impact” section even though

the downturn of the business cycle was represented by an

7
The “boom/bust” business cycle results from two factors:
(1) the massive, though sporadic, capital outlays that DRAMS
producers must make to invest in new capital equipment; and (2)
the short product life cycles that result in diminishing returns
on these investments. The alternating “boom” and “bust” periods
are attributed to the time lags involved in adding this new
capacity. See Views at 23.
Court No. 03-00652 Page 22

“unprecedented drop in demand” in 2001. Id. at 26-27.

In this case, and contrary to Hynix’s position, the ITC

patently did address the important conditions of competition and

business cycle of the DRAMS market. To insist that the ITC

shirks its statutory duty if it fails to include the term

“business cycle” in its analysis is to engage in a formalism that

does not befit the contextual nature of an impact analysis. The

ITC is equipped with substantial discretion in how to report its

findings; as other courts have said, the ITC need not lay out its

analysis in some prescribed way, as there is no “magic word

analysis.” See NEC Corp. v. Dep’t of Commerce, 22 CIT 1108, 1123

n.9, 36 F. Supp. 2d 380, 393 (1998) (Pogue, J.) (“It is a well

recognized principle of administrative law, that [a] court may

uphold [an agency’s] decision of less than ideal clarity if the

agency’s path may reasonably be discerned.”) (quotation marks

omitted).

The ITC satisfied its statutory obligation under 19 U.S.C.

§ 1677(7)(C)(iii) because it incorporated its findings regarding

the industry’s conditions of competition and business cycle into

its impact analysis. For example, in its analysis of subject

import volume, the ITC specifically discussed domestic

consumption, the presence of other suppliers in the U.S. market,

and the “commodity-like nature of domestic and subject imported

DRAM[S] products.” Views at 31. In its price effects analysis,

the ITC discussed, inter alia, the following factors: the effect
Court No. 03-00652 Page 23

of global pricing on the industry, the high degree of

substitutability of DRAMS products, the overlapping customers and

channels of distribution of subject and domestic DRAMS products,

the presence of other supply sources in the U.S. market,

increases in demand but at slower rates, and the importance of

price in the industry. See id. at 32-38. In its analysis of the

subject imports’ impact on the domestic industry, the ITC

incorporated findings regarding capacity and production

increases, idled equipment, deferred upgrades and expansions, the

capital-intensive nature of the industry, severe price declines,

increasing demand, and the presence of other suppliers in the

U.S. market. Id. at 38-41. Thus, the record presents

substantial evidence that the ITC examined both the business

cycle and the unique conditions of the domestic industry in

determining the impact of subject imports. Weighing the ample

evidence, the ITC found that “the operation of the DRAM[S]

business cycle and product life cycles,” standing alone, could

not explain the “unprecedented severity of the price declines

that occurred from 2000 to 2001 and persisted through 2002.” Id.

at 36. Accordingly, the ITC’s impact analysis properly evaluated

all relevant economic factors within the proper contexts, and

thereby complied with 19 U.S.C. § 1677(7)(C)(iii).8

8
The Court’s conclusion that the ITC’s treatment of the
business cycle and the “boom/bust” phenomenon was sufficient also
disposes of Hynix’s complaint that the ITC ignored rebuttal
evidence that Hynix’s underselling was explained by its
Court No. 03-00652 Page 24

b. The ITC Did Not Err By Failing to Take Into Account
Any Special Indicia of Industry Success Distinctive to
the DRAMS Industry.

The ITC’s determination that subject imports contributed

materially to the steep price declines that occurred over the

period of investigation properly considered the conditions of

competition distinctive to the DRAMS industry. According to the

ITC, declining prices for DRAMS were the primary reason for the

domestic industry’s large operating losses and the drastic

deterioration of the industry’s condition since 2000. Views at

40. The ITC found that: (1) The domestic industry’s operating

income fell from a positive $2.7 billion in 2000 into a loss

position for the remainder of the period of investigation, id. at

39; (2) Capital expenditures dropped from $1.8 billion in 2000 to

$1.6 billion in 2001 and [ ], with [

], id. at 40; (3) Of the

eight domestic companies outside the Hynix family producing DRAMS

in 2000, only four remained at the end of the period of

investigation, and all four survivors were [

]. See Final Staff Report at III-1, III-12 (Tab. III-

4).

Nevertheless, Hynix contends that the record demonstrates

relatively less significant capacity-increasing capital
investments during the period of investigation. See Pls.’ Br. at
43-47. That argument is a reiteration of the “boom/bust”
argument that the ITC properly considered, and the ITC’s response
is supported by substantial evidence.
Court No. 03-00652 Page 25

the overall salubriousness of the domestic industry, at least

when examined through the industry’s accepted definition of

success. See Pls.’ Br. at 28. Hynix claims the factors the ITC

focused on – capacity utilization, production, commercial

shipments, and operating profit – differed from those by which

“the U.S. producers themselves wanted the world to evaluate their

financial condition.” Id. at 27. Essentially, Hynix argues that

any treatment of the conditions of competition in the DRAMS

industry must analyze the domestic industry’s self-defined

criteria of success.

The domestic industry’s definition of success, as derived

from Micron’s 2001 Year In Review prospectus and from a statement

from Micron’s CEO to a magazine, includes: (1) the ability to

continue capital spending; (2) the ability to continue R&D

efforts; (3) a strong market share to spread out costs; (4)

strong cash flows to fund investments; and (5) access to capital

markets to supplement cash flow. See id. at 28. Considered as a

whole, Hynix contends the record reflects strong capital and R&D

spending, all funded by cash flows and access to capital markets,

thus demonstrating the overall strength of the domestic industry.

Id. In terms of these factors, Hynix concludes, the record

reflects a well-positioned domestic industry and a well-

positioned petitioner. Id.

As discussed above, 19 U.S.C. § 1677(7)(C)(iii) propounds a

non-exhaustive list of “relevant economic factors” the ITC must
Court No. 03-00652 Page 26

consider in its impact analysis. See 19 U.S.C. § 1677(7)(C)(iii)

(1999). Thus, Hynix’s argument that the ITC should have looked

at only five factors is flatly contradicted by the language of

the statute. Moreover, as the ITC points out, even employing the

five factors preferred by Hynix, it is still clear that the

health of the domestic industry was declining. For instance, the

domestic industry’s capital expenditures declined, its market

share declined, its cash flow declined precipitously from [

] in 2000 to [ ] in 2001

before recovering slightly in 2002, and domestic producers’

credit ratings were lowered. See Views at 39-40; Final Staff

Report at VI-2 (Tab. VI-1). Furthermore, the ITC discussed,

inter alia, capacity and production increases, idled equipment,

deferred upgrades and expansions, the capital-intensive nature of

the industry, severe price declines, and the presence of other

suppliers in the U.S. market in its analysis of subject imports’

impact. See Views at 39-40. As demonstrated by the above

considerations, the ITC satisfied its statutory obligation under

19 U.S.C. § 1677(7)(C)(iii) to examine the conditions of

competition distinctive to the industry.

2. The ITC’s Evaluation of Other Alternative Causes
Contributing to Material Injury is Sustained in Part
and Remanded in Part.

Hynix argues that the ITC disregarded, without substantial

evidence, the impact of three other factors contributing to the

infirm state of the domestic DRAMS industry: (1) the presence of
Court No. 03-00652 Page 27

non-subject imports, (2) Micron’s technological and production

difficulties, and (3) the unprecedented drop in underlying demand

for computer and telecommunications equipment. According to

Hynix, these other factors predominate any analysis of causation

of the domestic industry’s woes, and the role of the subject

imports – when cast against the backdrop of these other “relevant

economic factors” – emerges as merely tangential. For the

reasons below, the Court upholds, as being supported by

substantial evidence, the ITC’s determination that neither non-

subject imports nor Micron’s technological and production

difficulties were primary causes of the domestic industry’s

material injury. However, this Court remands to the ITC for

further clarification and explanation of the causal nexus between

the subject imports and the material injury to the domestic DRAMS

industry in light of the unprecedented drop in underlying demand

for computer and telecommunications equipment during the period

of investigation.

As noted above, the ITC’s impact analysis “shall evaluate

all relevant economic factors which have a bearing on the state

of the industry in the United States[.]” 19 U.S.C. § 1677(7)(C)

(1999). This subsection directs the ITC to evaluate other

possible concurrent causes that contribute to, or are primarily

responsible for, the material injury to the domestic industry.

By mandating consideration of “all relevant economic factors,”

the statute prevents the ITC from attributing to subject imports
Court No. 03-00652 Page 28

an injury whose cause lies elsewhere.

The requirement to look to “all relevant economic factors”

is inextricably intertwined with the ITC’s causation inquiry. As

noted above, any affirmative material injury determination by the

ITC must be supported by (1) an actual, present material injury

and (2) a finding that the material injury is “by reason of”

subject imports. See 19 U.S.C. § 1671d(b)(1) (1999); see also

Gerald Metals, Inc. v. United States, 132 F.3d 716, 720 (Fed.

Cir. 1997) (“[The] statute mandates a showing of causal – not

merely temporal – connection between the [subject imports] and

the material injury.”); U.S. Steel Group v. United States, 96

F.3d 1352, 1358 (Fed. Cir. 1996) (“[T]o claim that the temporal

link between these events proves that they are causally related

is simply to repeat the ancient fallacy: post hoc ergo propter

hoc.”) (emphasis omitted). Where, as here, the ITC has already

established a nexus between the subject imports and the domestic

industry’s injury, the impact analysis must broaden to evaluate

competing causes in order to assess whether subject imports are a

mere ancillary cause of the injury, and therefore not within the

purview of the statute.

An importer does not escape countervailing duties by

pointing to “some tangential or minor cause unrelated to the

[subject] goods that contributed to the harmful effects on

domestic market prices.” Gerald Metals, 132 F.3d at 722. The

converse of that proposition is equally true: the ITC may not
Court No. 03-00652 Page 29

satisfy its burden of proof if subject imports contributed only

minimally to the injury. See id.; see also Taiwan Semiconductor

Indus. Ass’n v. United States, 23 CIT 410, 416, 59 F. Supp. 2d

1324, 1331 (1999) (explaining that other causes of injury can

have “such a predominant effect in producing the harm as to . . .

prevent the [subject] imports from being a material factor”)

(quotation marks omitted) (alteration in original).

In Gerald Metals, the U.S. Court of Appeals for the Federal

Circuit (“Federal Circuit”) overruled the CIT affirmance of an

ITC determination that Russian and Ukrainian magnesium producers

were injuring domestic producers by dumping magnesium in the U.S.

market. According to the panel, the CIT’s causation inquiry was

inadequate for its failure to consider the large excess volumes

of fair value Russian magnesium imports that, according to the

appellant, were present in the market as well. The panel held

that it was not enough for the CIT to find any minimal

contribution to the domestic industry’s material injury. Given

the large volume of non-dumped magnesium imports, the Gerald

Metals court found that the record did “not show that [the

subject] imports of pure magnesium from Ukraine were the reason

for the harmful effects to the domestic magnesium industry.” Id.

at 722-23. Gerald Metals impliedly instructs the ITC to inquire

whether subject imports are a mere de minimis cause of a material

injury to domestic industries, especially where the producer of

the subject goods claims another cause predominates.
Court No. 03-00652 Page 30

The Federal Circuit further clarified the causation inquiry

in Nippon Steel Corp. v. ITC, explaining that “an affirmative

material-injury determination under the statute requires no more

than a substantial-factor showing.” 345 F.3d 1379, 1381 (Fed.

Cir. 2003). Accordingly, subject imports “need not be the sole

or principal cause of injury. . . . [so] long as [their] effects

are not merely incidental, tangential or trivial . . . .” Id.

The Federal Circuit, in affirming the CIT’s Taiwan

Semiconductor case, provided the following instructions for the

ITC regarding causation: “[T]he [ITC] need not isolate the injury

caused by other factors from injury caused by unfair imports. . .

. Rather, the [ITC] must examine other factors to ensure that it

is not attributing injury from other sources to the subject

imports.” Taiwan Semiconductor Indus. Ass’n v. ITC, 266 F.3d

1339, 1345 (Fed. Cir. 2001) (quoting H.R. Doc. No. 103-316, vol.

1, at 852) (alteration in original).9 The ITC is charged with

the burden of an earnest investigation into whether other factors

render the subject imports a tangential, de minimis cause of the

domestic industry’s material injury. An affirmative material

injury determination does not rest on substantial evidence when

the ITC fails to analyze compelling arguments that purport to

9
The Taiwan Semiconductor case, which followed the passage
of the Statement of Administrative Action for the Uruguay Round
Agreements Act, Pub. L. No. 103-465, tit. II, 108 Stat. 4809
(1994), held that the Gerald Metals causation holding, though
regarding law that had been superceded, applied equally to the
newly passed act. See Taiwan Semiconductor, 266 F.3d at 1345.
Court No. 03-00652 Page 31

demonstrate the comparatively marginal role of subject imports in

causing that injury.

a. The ITC’s Impact Analysis Properly Concluded That
the Presence of Non-Subject Imports Did Not
Prevent the Subject Imports from Being a Material
Cause of Injury to the Domestic DRAMS Industry.

Hynix argues that the ITC improperly dismissed the

substantial data on the adverse effects of non-subject imports.

See Pls.’ Br. at 33-34. Hynix contends that non-subject imports

must be examined because DRAMS are a commodity market and

generally interchangeable, and the volume of non-subject imports,

in absolute terms, was much larger than subject imports during

the period of investigation. Id. at 33. By not examining the

effects of non-subject imports, the ITC, according to Hynix,

failed to satisfy its statutory obligations to provide

substantial evidence supporting its conclusion that “‘subject

imports . . . were large enough and low-priced enough to have a

significant impact’ and that this was so ‘regardless of the

adverse effects of [sic] caused by non-subject imports’ . . . .”

Id. at 37 (quoting Views at 40-41).

The ITC addressed the role of non-subject imports on

numerous occasions in its report, see Views at 24-25, 31, 37, 40-

41, and its conclusion that non-subject imports did not prevent

subject imports from being a material cause of injury is

supported by substantial evidence. The ITC noted that, during

the period of investigation, non-subject imports in the U.S.
Court No. 03-00652 Page 32

market were present at higher absolute volumes than subject

imports, and that non-subject imports increased market share “by

a substantially larger amount than subject imports.” Id. at 31.

Even though “[n]on-subject imports were responsible for the bulk

of the market share lost by domestic producers during the period

of investigation[,]” id. at 40, the ITC maintained that the

effect of non-subject imports was not so significant as to render

subject imports a mere ancillary and tangential cause of the

domestic industry’s material injury. In support of its

conclusion the ITC presented two reasons: first, a significant

portion of non-subject imports were specialty products for which

domestic producers had no significant competing production during

the period of investigation; and second, even those non-subject

imports consisting of substitutable products did not have the

price effects that subject imports did during the period of

investigation. Id. at 37, 40.

The ITC correctly noted that not all of the non-subject

imports were readily substitutable with domestic products. Seven

of the fifteen non-subject importers that responded to the ITC’s

questionnaire maintained that they sold, on occasion, Rambus

DRAMS and non-standard, non-substitutable DRAM modules. See

Final Staff Report at II-13. The non-standard or specialty DRAMS

or DRAM modules imported by some of those importers amounted to

nearly [ ] of their total U.S. sales of non-subject

imports. Id.
Court No. 03-00652 Page 33

Moreover, and most significantly, the ITC found the

frequency of underselling by non-subject imports was lower than,

and increased at a lower rate than, the underselling frequency of

subject imports during the period of investigation. Views at 37.

Thus, the ITC reasonably found that the more limited

substitutability of non-subject imports, coupled with the fact

that non-subject imports undersold domestic DRAMS products at a

lower frequency than subject imports did, indicated that non-

subject imports had less impact than their absolute and relative

volumes might otherwise have indicated. The above-mentioned

findings provided substantial evidence for the ITC’s conclusion

that non-subject imports did not have such a predominant effect

in producing harm as to prevent the subject imports from being a

material factor.

b. The ITC’s Impact Analysis Properly Concluded That
the Effect of Micron’s Difficulties on Price
Declines Did Not Prevent Subject Imports from
Being a Material Cause of Injury to the Domestic
Industry.

Hynix argues that the record evidence demonstrates that

technological and production difficulties were an admitted cause

of Micron’s poor financial performance and that the ITC ignored

this information when analyzing other factors affecting the

domestic industry. See Pls.’ Br. at 47. Hynix points to the

acknowledged production difficulties ensuing from Micron’s risky

investment in 0.11 micron technology in 2002, just before the

market strengthened for DRAMS products based on the 0.13
Court No. 03-00652 Page 34

geometry. Id. According to Hynix, since Micron accounted for

[ ] of the 2002 domestic industry production and sales,

Micron’s admitted mistakes explain [ ] of the harm experienced

by the domestic industry. Id. at 49.

The ITC’s position was that whatever difficulties Micron

experienced, there was a sweeping downturn in the U.S. DRAMS

industry, the causes for which could not be attributed to the

poor decision-making of one firm, no matter how large. See Views

at 39 n.177. Under section § 1677(7)(B)(ii), the ITC “shall

evaluate all relevant economic factors” that may be relevant to

its determination of causation. 19 U.S.C. § 1677(7)(C)(iii)

(1999) (emphasis added). Applying the logic of the Federal

Circuit’s Taiwan Semiconductor case, the ITC need not isolate the

injury caused by Micron’s admitted business difficulties from

injury caused by unfair imports, and apportion relative amounts

of causation as a jury in a comparative negligence case. Here,

the ITC complied with its statutory obligation by evaluating the

effect of Micron’s difficulties on the U.S. market’s downturn,

and by ultimately concluding that notwithstanding Micron’s

admitted failures, subject imports contributed to the material

injury in a legally significant way.

c. The ITC Must Explain Further the Effect of the
Underlying Drop in Demand for Computer and
Telecommunications Equipment.

Hynix argues that by failing to discuss the unprecedented

drop in underlying demand for end-use products (specifically,
Court No. 03-00652 Page 35

computer and telecommunications equipment), the ITC improperly

ignored a key factor affecting DRAMS pricing during the period of

investigation.10 See Pls.’ Br. at 38. According to Hynix, as the

demand for underlying information technology downstream products

decreased, the DRAMS demand growth rate slowed, and the DRAMS

industry suffered a derivative injury.

Hynix contends that the unprecedented drop in demand in the

downstream industries over the period of investigation

predominates any discussion of the source of the domestic

industry’s doldrums. It calls the Court’s attention to industry

characteristics discussed above, in particular the constantly

increasing supply and demand of the DRAMS industry. While output

growth continued unabated, Hynix suggests that demand growth

slowed on account of declining demand of certain end-use

products. Furthermore, Hynix claims the record illustrates that

demand plays a crucial role in determining DRAMS prices and that

subject imports did not affect the level of demand. Id. at 40.

As such, according to Hynix, the ITC should have distinguished

the domestic industry’s injury that may have been caused by

subject imports from the harm caused by this drop in underlying

demand. See id. at 40-43.

10
This alleged failure is distinguishable from the
treatment of the “boom/bust” phenomenon discussed above, because
the drop in demand for downstream products occasioned an
unanticipated drop in demand for the DRAMS that are used in those
products, and thus was a non-cyclical event.
Court No. 03-00652 Page 36

The record demonstrates that 2001 was the first year in

history in which the number of personal computers sold declined

rather than increased. Views at 36. The record also shows that

the demand for DRAMS “is derived from and driven by the demand

for end-use products such as computers and peripheral equipment,

communications equipment, and game consoles.” Id. at 21. The

ITC acknowledged that the slowing growth of apparent U.S.

consumption of DRAMS products in the latter portion of the period

of investigation may have been due in part to a decline in the

quantity of personal computers sold, noting that questionnaire

respondents cited a slump in the telecommunications and network

industry and a general recession as other possible reasons. Id.

at 36; Def.’s Br. at 43. Nevertheless, the ITC concluded that

“[w]hile slowing demand played some role [in the price

deflation], together with the operation of the DRAM[S] business

cycle and product life cycles, the unprecedented severity of the

price declines that occurred from 2000 to 2001 and persisted

through 2002 indicates that supplier competition was an important

factor.” Views at 36.

While the ITC need not isolate the injury caused by the drop

in underlying demand, once acknowledging its potential impact,

the ITC must examine the effect of underlying demand to ensure

that it is not attributing an injury caused by the demand drop to

subject imports. See Taiwan Semiconductor, 266 F.3d at 1345.

The ITC does not satisfy its burden of examining other factors,
Court No. 03-00652 Page 37

and ensuring that it is not attributing injury from other sources

to subject imports, by simply noting a potential factor and

issuing a conclusory assertion that such a factor did or did not

play a major role in causing a material injury. See Consol.

Edison Co., 305 U.S. at 229 (“Substantial evidence . . . . means

such relevant evidence as a reasonable mind might accept as

adequate to support a conclusion.”).

The ITC’s finding that slowing demand growth was not a

significant cause of price deflation was based on a single

statement that price movements in the DRAMS market do not

correlate with DRAMS market growth. See Views at 36

(“Historically, there appears to be no clear correlation between

growth of the DRAM[S] market and price movements.”). This

statement was supported with the single observation, in a

footnote, that “1996 to 1998 saw rapid DRAM[S] output growth as

well as large price declines.” Id. at 36 n.163 (citing Micron’s

Br., App. (Tab 12) (Micron’s Pre-Hearing Br. Ex. 6) (documenting

[ ] percent annual output growth accompanied by annual price

declines of over [ ] percent)).

However, it is unclear why data related to output growth

should be interpreted as illustrating demand growth, especially

in light of the ITC’s recognition of the chronic disequilibrium

between supply and demand in the DRAMS industry. See id. at 23.

The ITC does not explain at all how output numbers can be used to

elucidate the effect of demand fluctuations. Of course,
Court No. 03-00652 Page 38

increasing output may under some circumstances result from

increasing demand. However, the ITC makes no effort to explain

the nexus between the cited output numbers and the movement, if

any, of demand in the DRAMS industry during the period of 1996 to

1998.

Alternate explanations for the data exist that do not lead

to a conclusion that demand and price are unrelated. For

example, a failure by DRAMS producers to forecast a drop in

demand for DRAMS end-use products could result in overproduction,

and explain the simultaneous high output growth and price

deflation. In fact, holding constant the rate of output growth,

attenuated demand growth would almost certainly catalyze a

downward price movement.

Moreover, even assuming arguendo a positive correlation

between increasing output growth and increasing demand growth,

the Court is unable to discern the path by which the ITC ruled

out alternate explanations for the cited data. For instance,

high output growth rates and falling prices could indicate

technological advancements that lead to decreased unit costs.

Such a development would similarly result in increased output and

reductions in price, but in no way would evidence a non-

correlative relationship between demand and price. The ITC’s

failure to consider this alternative explanation for the output–

price data is even more curious in light of the recognized

relation between technology and price in the DRAMS industry:
Court No. 03-00652 Page 39

“Largely because of the perpetual improvements in production

efficiencies experienced by this industry, prices are usually

declining.” Views at 25.

The record contains data showing that as U.S. consumption

growth decreased from 2000-2002, prices fell. See Final Staff

Report, App. C, Tab. C-1 (documenting a growth rate of [ ]

percent from 2000 to 2001, and a growth rate of [ ] percent

from 2001 to 2002); Micron’s Prehearing Br., Ex. 6 (documenting a

price decline of [ ] percent from 2000 to 2001, and a price

decline of [ ] percent from 2001 to 2002). Since domestic

consumption is a more common proxy for demand than output,11 this

evidence suggests a contrary conclusion: that price and demand

indeed are correlated.

At this point, the Court is unable to consider the output

growth – price deflation relationship from 1996 to 1998 to be

persuasive evidence of a lack of correlation between demand and

price. To borrow a phrase from courtroom practice, the ITC has

not laid an adequate foundation to convince the Court that its

proffered evidence proves what the ITC claims it proves. To

sustain this portion of the ITC’s determination would render the

Court’s review little more than a perfunctory rubber stamp. Cf.

11
On other occasions the ITC has referred to measuring
demand by apparent consumption (actual shipments plus captive
consumption) as its “usual practice.” See, e.g., DRAMs and DRAM
Modules from Korea, USITC Pub. 3839 at 10, Inv. No. 701-TA-431
(Feb. 2006) (Section 129 Consistency Determination).
Court No. 03-00652 Page 40

Colorado Interstate Gas Co. v. Fed. Power Comm’n, 324 U.S. 581,

595 (1945). Accordingly, that issue is remanded to the ITC for

further explanation.

III. CONCLUSIONS

In light of the foregoing analysis, the Court remands to the

ITC for further consideration of the causal nexus between the

subject imports and the material injury to the domestic DRAMS

industry in light of the unprecedented drop in underlying demand

from 2001 to 2002.12 Specifically, the ITC must explain, if it is

12
While this case was stayed pending the adjudication of
Hynix’s challenge to the Department of Commerce’s determination
that the Korean semiconductor industry was illegally subsidized,
a World Trade Organization (“WTO”) panel, sitting in review of
the same DRAMS countervailing duty order, pointed out the same
deficiencies discussed in Part II.C.2.c of this opinion. The WTO
panel ultimately held that the ITC’s final determination
contravened Article 15.5 of the Subsidies and Countervailing
Measures Agreement. See Panel Report, United States –
Countervailing Duty Investigation on Dynamic Random Access Memory
Semiconductors (DRAMS) from Korea, WT/DS296/R (Feb. 21, 2005).
Following the issuance of the panel report, the United States
Trade Representative requested that the ITC, pursuant to 19
U.S.C. § 3538, bring its affirmative injury determination in
compliance with the WTO panel’s report. The consistency
determination that followed addressed the panel’s concerns about
the ITC’s attribution of injury to subject imports. While the
consistency determination is not part of the record in this case,
the Court has reviewed it. In the interest of expediting this
litigation, the Court advises the ITC that a simple reiteration
of that determination on remand would almost certainly fall short
of the substantial evidence required in this case. The Court’s
review of the consistency determination is preliminary, but
inasmuch as the ITC addresses the decrease in demand growth in
isolation from the other conditions of competition (in
particular, the “boom/bust” phenomenon), that determination fails
to address the Court’s concern that the ITC has not explained how
the slowing of demand growth did not cause the domestic
industry’s problems. Any analysis leading to that conclusion
must account for the actual economic state of the industry during
Court No. 03-00652 Page 41

able, why the 1996-1998 data indicating a negative correlation

between output and price is evidence that demand and price are

unrelated in the DRAMS industry. If the ITC is unable to provide

such an explanation, it must either (1) point to other record

evidence that shows the drop in underlying demand was not a

predominant and legally significant cause of the domestic

industry’s problems; or (2) conduct further investigations to

determine the effect of the drop in underlying demand. All other

aspects of the ITC’s affirmative material injury determination

are sustained. A separate order will issue in accordance with

these conclusions.

/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge

Dated: April 13, 2006
New York, NY

the period of investigation. The consistency determination arose
in a different context, and the ITC is surely more familiar with
the dispute as framed in the WTO litigation. However, if the ITC
is to respond effectively to the Court’s concerns in this case,
it must discuss the effect of demand on price, if any, in the
context of the chronic disequilibrium between supply and demand.