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Europe judges Hynix rescue funding illegal

30-35 per cent tariffs sought to punish illicit Korean government aid

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The European Commission wants punitive tariffs of 30-35 per cent imposed on all Hynix chip imports after it found the world's third largest memory maker guilty of receiving aid from the Korean government. Such aid is banned by the World Trade Organisation and illegal in the EU.

The demand, reported by the Financial Times this past Friday, follows an eight-month investigation into Hynix's relationship with the Korean government. That enquiry was prompted by complaints made by rival memory maker Infineon.

Infineon's complaint centred on financial assistance rendered to Hynix by its creditor banks. Since the Korean government holds major stakes in many of those banking organisations, that assistance was tantamount to illegal government intervention, Infineon claimed.

Micron, another Hynix rival, filed similar complaints with the US trade regulatory organisation, the FTC.

Micron, of course, attempted to buy Hynix early last year. Hynix rejected its advances.

The banks provided financial aid to Hynix in order to keep the loss-making company afloat. Such institutional creditors have continued to pour bailout money into Hynix to prevent its collapse. The most recent rescue loan took place late last year.

Hynix has racked up net losses of some $7.6 billion over the past three years. Micron claims some $11.9 billion that was allegedly received by the semiconductor company amounts to illegal government financial intervention.

In the EU, the punitive duties on Hynix shipments to Europe ere expected to be agreed on or before 24 April. However, levying the duties could take a lot longer to implement. The proposed duty of 30-35 per cent would likely make Hynix's products uncompetitive.

In the US, Hynix faces an import ban. Its North American fab, in Oregon, would be safe from the import ban. While Europe is not one of Hynix's core markets, a US ban could topple the highly unstable memory maker.

Which is, of course, exactly what Micron and Infineon would like. ®

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