S. Korea condemns U.S. punitive duties on Hynix

S. Korea condemns U.S. punitive duties on Hynix

Park Chan-Kyong, Agence France Presse, Seoul

South Korea on Wednesday condemned a U.S. decision to impose
punitive duties on ailing computer chipmaker Hynix Semiconductor,
threatening action at the World Trade Organization (WTO).

The Ministry of Foreign Affairs and Trade said it "deeply
regretted" the U.S. Commerce Department's preliminary decision to
impose crippling duties on Hynix on charges the South Korean
company had received government subsidies.

The U.S. Department of Commerce said dynamic random access
memory (DRAM) chips from South Korea were unfairly subsidized and
countervailing duties would be imposed on chips shipped by Hynix
and Samsung Electronics.

Hynix faces a similar probe in Europe, where the European
Commission (EC) called for import duties of 30-35 percent on
Hynix's shipments to the European Union (EU) and a preliminary
ruling is due late this month.

Hynix was hit with a massive 57.37 percent punitive tariff,
much steeper than the widely expected 30 percent, with Samsung
facing only a 0.16 percent tariff.

The U.S. Commerce Department initiated an investigation into
Hynix Semiconductor and Samsung Electronics in November following
a petition by Micron Technology to determine if the South Korean
government had extended subsidies to local DRAM makers.

"We express regret that the U.S. government accepted
unilateral allegations by the accuser and decided to impose high
countervailing duties of 57.37 percent" on Hynix, the ministry
said.

It said the bailout package extended by local banks to Hynix
was purely a private decision and could not be viewed as a form
of government subsidy simply because some banks involved were
state-controlled.

Under the preliminary ruling, Hynix must deposit temporary
duties worth US$25 million every month for its U.S. shipments of
DRAM chips pending a final ruling which will come in July.

South Korea's Ministry of Commerce, Industry and Energy
insisted the government had taken no part in the bailout
program which was decided upon by Hynix creditor banks.

"We will do our best to have the final ruling reflect our
position. Should these efforts fail, we would also study various
countermeasures including legal action at the WTO," assistant
minister Kim Jong-Kap told AFP.

Hynix also expressed shock and dismay at the U.S. decision,
which it said was illegimate and based on wrong information.

The company plans to increase production at its U.S.
subsidiary in Eugene, Oregon and expand exports to Asia and other
regions.

Last year, DRAM chips made up 35 percent, or $5.97 billion, of
South Korea's total semiconductor exports, of which 32 percent or
$1.94 billion were shipped to the U.S.

Hynix has racked up net losses of 9.5 trillion won ($7.5
billion) over the past three years, including 1.95 trillion won
of loss last year.

Kyobo Securities industry analyst Kim Young-Jun said the U.S.
ruling may lead to a fall in DRAM chip spot prices in the short
term.

He said the U.S. market takes up about a quarter of Hynix
sales with only half affected by the countervailing duty, as it
produces some of the chips in Eugene, Oregon.

"Samsung Electronics and Micron Technology may enjoy higher
market share but they have to endure additional price falls," he
said, noting April and May are typically the low season for
chips.

The prospective chip price declines will facilitate industry
consolidation by weeding out the weaker players, from which
majors like Samsung should benefit in the long run, he said.