Monday, November 4, 2002
Micron Technology late Friday filed a countervailing duty case with the U.S. Commerce Department and International Trade Commission citing a raft of allegedly illegal government subsidies to DRAM makers Hynix Semiconductor Inc. and Samsung Electronics Co.
A Micron spokesman couldn't identity the total amount of subsidies cited in the filing, except that "many billions of dollars" were funneled to the Korean chipmakers in violation of U.S. countervailing duty laws. This included the $2.3 billion debt-to-equity bailout of Hynix last year by government-controlled banks, loan writeoffs to Hynix, special tax treatment and special export financing to both Hynix and Samsung.
The U.S. could impose stiff penalty duties on imported Korean DRAMs under the countervailing duty laws. The legal procedure is to file against all DRAM products made in Korea, which includes both Hynix and Samsung memory chips. However, early reaction of some sources is that Hynix is the primary target of Micron in the case.
The period covered in the complaint is the year 2001, when DRAM pricing crashed to rock-bottom levels during a supply glut. However, any subsidies provided to Hynix and Samsung in the prior five years may be considered if their effect was felt in 2001, according to Micron.
Micron President Steve Appleton said, "The ongoing subsidization of Korean DRAM manufacturers violates free market principles and has resulted in excess (DRAM) supply in the international market. Korea has not kept its commitments to the World Trade Organization and continues to violate U.S. countervailing duty laws."
Micron also claimed substantial injury and damage from the alleged Korean subsidies. The firm reported a $907 million net loss for its fiscal year ended August 29, 2002.
The U.S. memory chip firm said it has spent several years preparing its case against the Koreans. Micron had been expected to file the suit late last year, but suddenly backed off when it entered negotiations to try to acquire six Hynix DRAM fabs. A preliminary pact was hammered out, but then rejected by the Hynix board of directors. The two parties have apparently had no further contact. With no deal in the works, Micron went ahead to file its countervailing duty case.
Micron timed its filing to come just before the government-controlled bank creditors draft another financial restructuring plan for Hynix. The financial advisor to the creditors, Deutschbank, this month is making its final recommendation for Hynix refinancing, reportedly including more debt forgiveness and potentially another debt-for-equity swap. The Micron countervailing duty case adds a new complication in the Korean struggle to rescue Hynix from more than $5.5 billion in current long term debt.
By: DocMemory
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