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Micron's Hynix buyout may end row

Micron Technology Inc's possible buyout of part of Hynix Semicon-ductor Inc would remove the main trade irritant between the US and South Korea, officials said.

Micron, the second-largest maker of memory chips for computers and networks, has complained for years that Hynix is subsidized by the South Korean government in violation of international trade rules.

Officials from both the administrations of US President George W. Bush and former president Bill Clinton have warned Seoul of a possible complaint to the WTO over bailouts of the heavily indebted company by banks partly owned by the South Korean government. If Idaho-based Micron absorbs the memory-chip part of Hynix's business, the basis for the friction would disappear because the two companies would no longer be competitors, a Micron spokesman said.

"We've been somewhat vocal about objecting to what the Korean government had been doing in terms of the bailouts," said Sean Mahoney. Micron's objections "came in concert with objections from our government and from the trade offices," he said.

If the sale is completed, Mahoney said that "should take care of our trade concerns, because we wouldn't be competing with the Hynix business that's left."

The other big trade irritant between the two countries -- US moves to get South Korea to do more to open its car market to US automakers -- will be dealt with in the new round of global trade-opening talks launched at WTO meetings in Qatar last year.

Automobiles are one of the industrial products on which tariffs are to be eliminated by the new negotiations. Still, the Micron-Hynix deal is far from done. Hynix said Friday Micron might offer no more than US$5 billion for the parts of the company it wants, while the asking price is US$7 billion.

The Korea Exchange Bank and other creditors are seeking US$7 billion for Hynix, which has total debt of around US$6.6 billion, because they want to recover at least US$4.6 billion of their loans, Hynix spokesman Kim Seung-soo said.

Haeng Kyoem-oh, minister for economic affairs at the South Korean Embassy in Washington, said if the deal is struck the US threat of WTO action would be taken off the table.

Richard Mills, spokesman for US Trade Representative Robert Zoellick, declined to comment.

Oh also said the part of Hynix not bought by Micron would be on its own, without support from the Korean government.

"It would be up to the remaining part of Hynix to finance its own operation," he said.

Oh said Micron was only interested in the memory chip part of Hynix, which if bought would leave slightly less than half of the company under Hynix ownership.

Mahoney confirmed that Micron is only interested in the memory part of Hynix's business. A deal would be good not only for US-Korea trade relations, but also for the Korean economy and for the computer chip industry, Oh said.

"It would help chip prices to rise," he said. "No one makes money when chips are selling for less than a dollar. We are watching closely to see what's going to happen." Micron had a 20 percent share of the memory-chip market in fiscal 2000, with sales of US$6.3 billion in the year through October 2000. Hynix had almost 19 percent of the market.

The acquisition would create the world's largest memory-chip company, outstripping Japan's Samsung Electronics Co.

US lawmakers who have been pushing both governments to resolve the subsidy issue, either by South Korea withdrawing its support for the company or by the US pressing the WTO case, are reserving judgment.

Susan Wheeler, spokeswoman for Idaho Senator Mike Crapo, said the lawmaker is watching the potential purchase closely and is hopeful it could resolve the trade row. Crapo was one of four senators who wrote in August to Zoellick, Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans, urging them to mount a WTO challenge. That letter charged that without debt rollovers and new credits from banks partially owned by the South Korean government, Hynix would have been be forced into bankruptcy.

Micron Technology Inc, which is in talks to acquire some assets of Hynix Semiconductor Inc, is likely to complete due diligence over the debt-strapped South Korean company this week and the two sides will begin negotiations next week, Yonhap News said.

Goldman Sachs & Co and Salomon Smith Barney Inc, advisers for Micron and Hynix, yesterday visited Hynix's plant in Ichon and conducted review of its finances, Yonhap said, citing an unidentified official with the creditor-led Hynix restructuring committee.

Negotiations will take place around Jan. 15. Micron is likely to offer a price and other conditions for the possible purchase, the report said. Bose, Idaho-based Micron is the second-largest producer of computer memory chips for personal computers, while Hynix is the third-largest.
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