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Hynix bailout to scarcely impact DRAM market

The third bailout in two years of South Korean chipmaker Hynix Semiconductor Inc may have little impact on Taiwan's DRAM industry, analysts said yesterday. On Monday Hynix' creditors approved a US$4 billion lifeline to keep the chipmaker in business until it could be sold to help them recover the 6.2 trillion won (US$5.2 billion) they are owed by the company.

"I don't think there will be any impact on Taiwan DRAM companies," said Chris Hsieh (謝偉民), a chip industry analyst at ING Financial Securities in Taipei.

"This is just another day in the Hynix saga."

Chip industry analyst, Jeremy Chen, at Yuanta Core Pacific Sec-urities Co (元大京華證券) agreed, saying: "From the supply side the impact should be limited. The bailout won't be received until the later part of next year."

DRAM chips are used for short-term memory in devices as varied as computers and answer machines.

IT research company, Dataquest Inc, a unit of Gartner Inc, has predicted that the global DRAM market will be worth US$16.2 billion this year, up 37 percent from US$11.86 billion in 2001.

But the "honeymoon is over," Chen said. Average DRAM prices have slipped between 3 and 5 percent in December.

Taiwan's leading DRAM manu-facturers are expected to suffer as a result. In December alone, month-on-month sales at Winbond Electronics Corp (華邦電子), Nanya Technology Corp (南亞科技), Power-chip Semiconductor Corp (力晶半導體) and Promos Technologies Inc (茂德科技) fell between 5 and 7 percent, Chen said.

Hynix Semiconductor Inc's rival Micron Technology Inc was irked at news of another bailout. "The Korean government's continued billion-dollar bailouts of Hynix are in clear violation of free market principles," WTO and US trade regulations, Micron said in a statement.

The memory chipmaker is seeking to have the US International Trade Commission restrict imports on South Korean chips for what it calls government subsidies that helped force Micron to report eight straight quarterly losses. A judgment is due in mid-year.

Successes in chip-making research and development have led to greater efficiency and higher yields per square inch of silicon. This has resulted in an oversupply of chips, and a sharp decline in DRAM chip prices. For most of 2002, memory chips have been sold at below production costs, according to dramexchange.com.

Industry moves to upgrade to larger wafers yielding more chips will also slash production costs. Short on cash, Hynix has not been able to invest in new equipment and is at least two generations behind the Taiwanese.

"Next year Hynix will find its DRAM technology lagging behind [the Taiwanese]," Chen said.

This will make Hynix' chips more expensive to produce, giving the Taiwanese a competitive advantage.
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