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Chipmakers fear U.S., EU tariffs

Rulings on Hynix subsidies expected within the month  PLAY AUDIO

Mar 28,2003
Local memory-chip makers are bracing for the United States to impose countervailing tariffs on Korean dynamic random access memory (DRAM) chips at a preliminary ruling scheduled for March 31. “Under the current situation, the U.S. government may not levy countervailing tariffs on Samsung Electronics Co., but it is almost certain that it will on Hynix [Semiconductor Co.],” a government official said Wednesday. The European Union will make a preliminary ruling on April 25 on whether the Korean government has subsidized chipmakers. Industry analysts predicted that the EU executive committee was likely to impose duties of 30 to 35 percent on Hynix chips. The U.S. may impose a duty of 10 percent or 50 percent on Hynix chips, according to a commerce official in Washington, though it was not yet clear how high the tariff would be. The underlying factor in the ruling would be whether Hynix’s main creditors ― Korea Exchange Bank and Kookmin Bank ― were viewed as de facto state-owned banks, the official said, as the government held large stakes in each. The U.S. memory-chip maker Micron Technology Inc. has alleged that the Korean government has provided $11 billion in various forms of subsidies since 1998 to Hynix, the world’s third-largest producer of DRAMs after Samsung Electronics and Micron. Micron is arguing that Korea Exchange and Kookmin banks are practically owned by the Korean government, although its stakes in both are less than 50 percent. Hynix, meanwhile, has countered that any help it received from creditor banks was in line with restructuring agreements set down by the International Monetary Fund after the 1998 financial crisis. “If the U.S. and EU rule in favor of duties, Hynix will face a heavy cash shortage,” said Gu Hui-jin, a semiconductors analyst at LG Securities. “It will also significantly bog down Korea’s export of semiconductors,” Mr. Gu said. The government said it would continue to lobby the U.S. and EU against imposition of tariffs. “Even if the U.S. rules in favor of tariffs in its preliminary ruling, we still have time before the final ruling to make the utmost diplomatic efforts,” the government official said. The U.S. government’s final ruling is due in July. The EU will make its final decision in August. Countervailing tariffs are imposed to protect local businesses against subsidized imports or “dumping” ― sales of products at below-market or below-cost prices. At present, semiconductors account for about 10 percent of Korea’s overall exports. More than 50 percent of those exports are to the United States and the European Union. by Chung Sun-gu


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