Nine firms fined for 20 years of bid rigging in semiconductor design software

Suppliers of software essential to semiconductor design have been caught rigging bids for nearly 20 years, the Korea Fair Trade Commission said Sunday.

The Fair Trade Commission said it decided to issue corrective orders and a combined 206 million won ($155,000) in fines against nine companies that colluded in bids for electronic design automation (EDA) software and related products procured by the Electronics and Telecommunications Research Institute and other public institutions.

The nine companies subject to sanctions are Dahan Tech, Celloco, Soar Solution, ITN, Eltech, EDnC, EDMC, EDMFG and Comtech System.

EDA software automates and supports the entire process of designing and verifying semiconductor chips. Foreign manufacturers hold an 85 percent share of the domestic market, and business in South Korea is conducted mainly through distributors and agents that source and sell overseas products.

According to the Fair Trade Commission, the companies pre-agreed on bid winners or bid prices in 95 procurement competitions over roughly 20 years, from February 2005 to October 2025. As a result, they won contracts in 91 of those 95 bids, with the total contract value of the rigged bids reaching about 6.2 billion won.

ETRI, the Agency for Defense Development, the Public Procurement Service and the Korea Aerospace Research Institute were among the main buyers of EDA software, primarily for semiconductor chip research and development. Of the 95 rigged bids, 49 — or 51.6 percent — were contracts put out by ETRI.

The investigation found that the companies joined the collusion to prevent contract values from falling. When a competitive tender drew only a single bidder and was voided, it would typically be converted into a negotiated contract, which tends to result in a lower final price.

The collusion took two forms: cases involving only three companies — EDnC, EDMC and EDMFG — and cases in which other firms also participated.

The three companies were found to have operated in effect as a single entity. The chief executive of EDnC, together with a spouse and two children, held significant stakes in each of the three firms and oversaw their combined operations. Employees shared work through a single management team or moved between the companies.

Because the three firms handled the same EDA software products and served the same clients, any one of them could supply a contract regardless of which formally won it. They would designate a winner based on each company's circumstances, with the others entering as dummy bidders. A sales manager responsible for the client would decide on the intended winner and the dummy bidders, then send the participating companies and their bid prices by email to a management team employee, who would submit the bids accordingly.

In the collusion cases involving outside firms, the company that primarily handled the products a client required would designate itself as the intended winner and ask the others to serve as dummy bidders. Those firms would then submit bids at the prices the intended winner communicated by email.

Among the individual fines, EDMFG received the largest penalty at 75 million won, followed by EDnC at 59 million won, Dahan Tech at 33 million won and Celloco at 22 million won.

The Fair Trade Commission said the action was significant because it uncovered and penalized bid rigging in the EDA software sector — critical to semiconductor design — at a time when the industry's importance is growing. The commission added that collusion aimed at preventing voided bids cannot be justified, as it artificially inflates contract prices and increases the financial burden on procuring institutions.

The commission said it plans to respond more strictly to similar violations in the future, noting that it recently raised the minimum fine for illegal concerted actions by a significant margin.