Tue, Aug 10, 2004 - Page 11 News List

Hynix wins creditor approval for China chip plants

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Hynix Semiconductor Inc., the world's second-largest computer memory chipmaker, won creditor approval to build two plants in China, paving the way for the company to expand and keep up with rivals.

Lenders representing more than 75 percent of the South Korean chipmaker's debt approved plans for Hynix to jointly build the plants with Europe's STMicroelectronics NV, main creditor Korea Exchange Bank said in a statement that didn't specify the investment amount. Internet-based news provider Edaily earlier reported the plants would cost US$2 billion.

Hynix, which forecast its first annual profit since 1999 this year, needs new plants to drive down costs and compete in a market forecast to grow 49 percent to US$26 billion in 2004. The Icheon-based chipmaker has fallen behind rivals such as Micron Technology Inc. in building the most advanced plants that make chips out of 12-inch wafers.

"It's a must for Hynix to hasten investments, especially for the 12-inch plant, because it can't stay competitive by standing still," said Koh Jun, a chip analyst at Daewoo Securities Co. in Seoul. "It's good for Hynix that creditors finally approved this."

Industry leader Samsung Electronics Co. of Suwon, Korea, and Boise, Idaho-based Micron Technology Inc., which lost its rank as the second-largest producer during the second quarter to Hynix, have 12-inch manufacturing facilities.

Creditors own more than 80 percent of Hynix after bailing out the company in 2002. Hynix and STMicroelectronics will each spend US$500 million on the plants and borrow a combined US$1 billion from China, Edaily said yesterday.

To fund the plant, Hynix has agreed to sell its non-memory chip business to a Citigroup Inc. unit for 954 billion won in cash and assumed debt.

"We welcome the decision," Hynix spokesman Bang Min Ho said. "This helps Hynix and its strategic plans."

Hynix has also said it needs to boost overseas production because it would help the company, subject to punitive trade tariffs from the US and Europe and possible extra duties from Japan, dodge extra taxes. Building plants in China also helps better position the company in the world's fastest-growing major economy, Daewoo's Koh said.

"China's own demand is expected to be explosive so if you're going to build a plant overseas, China makes the best sense," Koh said.

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