Hynix threatens to take Japanese tariff to WTO

The Korean government and Hynix Semiconductor Inc., the world’s second-largest memory chip maker, have threatened to go to the World Trade Organization if Japan follows through on plans to slap punitive tariffs on the company’s computer chips. The Korean Foreign Ministry’s bilateral trade bureau said yesterday that it was informed by Japan that countervailing tariffs of 27.2 percent would be levied on Hynix’s dynamic random access memory chips over the next five years, starting Jan. 27. Japan has claimed since last year that a massive bailout between 2000 and 2002 by Korean state-owned banks has enabled Hynix to export chips below the cost of production. The bailout, Japan argues, was a veiled form of government subsidy. In a statement, the Ministry of Commerce, Industry and Energy said, “The Japanese ruling is unreasonable and disappointing, as it is based on unilateral calls by Japanese semiconductor firms and has no legal basis.” The statement also said that both sides have been working hard to resolve the issue but Tokyo’s unnecessarily hard-line stance hindered any progress. The ministry, after consulting Hynix and the Foreign Ministry, plans to take the matter to the WTO’s dispute arbitration panel and is considering further legal action inside Japan. It also warned that the Japanese move could have negative repercussions on not only the two countries’ cooperation in the semiconductor sector but also on trade and industry generally. It is the first time Japan has threatened to use tariffs to counter alleged subsidies by another government. Hynix also expressed its opposition to the tariffs. “It is unfair for the Japanese government to regard the debt restructuring plan as a government subsidy, because it is obvious that we raised funds to pay back the debt and gain creditor control,” the company said in a statement. The company added that levying high duties now would be unjustified, as Hynix’s five-year credit rescheduling, which started in 2001, expires in a year. Even if Japan imposed a tariff, Hynix’s plant in China could help minimize the damage. The company also plans to expand sales of memory chips such as NAND flash chips for portable digital music players. Yim Hong-bin, an analyst at Mirae Asset Securities Co., said Japan accounts for about 10 percent of Hynix’s global DRAM sales. “Considering that the operating profit of NAND flash chips is more than double the operating profit for DRAMs, profits would drop by no more than 5 percent.” by Seo Ji-eun