Micron's proposed takeover of struggling rival Hynix has collapsed, following the rejection of the equity-funded bid by the Korean chipmaker's board.

This is a surprising reason for the collapse: Micron has negotiated with Hynix for months, and secured the backing of the creditors, mostly Korean banks, which are keeping Hynix afloat.

What rising DRAM prices? The spot market price for benchmark 128Mb DRAM has fallen below $3, up to $2 below the cost of manufacture for most companies.

Let's accept that DRAM prices will rise high enough for Hynix to pay today's bills. What about yesterday's debts - the billions of dollars that it owes its banks. And what about tomorrow's commitments? Infineon reckons that Micron would have to spend $3bn to modernise Hynix. Where will Hynix find this money. Not from profit margin, that is for sure. And probably not from its banks, which wanted this problem client off their hands. ®