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Micron, Hynix to spill beans on alliance by year's end

The real discussions are about to begin...

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Talks held by Micron and Hynix officials are progressing nicely and the two companies expect to announce the results of their negotiations by the end of the year, the two said today.

The two chip makers' initial talks have centred on developing a framework for future discussions, which will be headed by Hynix president Park Jong-sup. The pair will also set up an advisory team to look after any legal and financial issues that may emerge during the negotiations.

The talks proper will focus on ways the two companies can come together for mutual benefit. From Hynix's perspective, that means pumping in cash, either through joint ventures or plant purchases, it emerged last week. Sources close to the ailing memory maker said the company is unwilling to exchange stock for investment Micron's money, though it does seem happy with a fresh issue of new shares.

Micron's motivation, meanwhile, is clear: to increase its market share and reduce that of its rivals. Micron holds around 21 per cent of the DRAM market, just behind market leader Samsung's 23 per cent. Micron would dearly love to take the lead - and needs only a small portion of Hynix's 19 per cent share to achieve this goal.

But while Hynix is looking for cash, Micron is looking to spend as little as possible and to keep its debt low. Micron claims its seven per cent debt-to-equity ratio is the lowest in the chip business and it's certainly miles away from Hynix's debt-laden status. ®

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