Hynix, Finding Way Out by Increasing Local Production in U.S.

As the U.S. made a final decision to impose a 44.29 % countervailing duty on Hynix DRAM chips, people are paying attention to how Hynix could survive.

The U.S. international Trade Commission (ITC) made the final decision, lowering the 44.71% duty decided by the U.S. Department of Commerce by a vote to ask the harm that Hynix did to the U.S. DRAM industry on July 23 (local time). According to the ITC decision, the U.S. Department of Commerce plans to issue an order to levy the countervailing duty on Hynix chips in mid-August.

The U.S. decision is also expected to influence the European Unions’ final decision on countervailing duty (preliminary 33% duty) in late August, thereby damaging Hynix’ exports.

In particular, Hynix, which showed losses for the three consecutive quarters – the fourth quarter in 2002 and the first and second quarters in 2003, will suffer from difficulties without good news like price hikes in DRAM chips.

With the U.S. ITC’s final decision, the South Korean chipmaker predicts that direct export to the U.S. market is almost impossible. It should pay the 447 won countervailing duty for every 1,000 won export. The situation in Europe, where the preliminary ruling was 33% duty, is not so different. Last year, Hynix exported DRAM chips worth $460 million to the U.S. and $210 million to Europe.

Against this backdrop, Hynix is looking for a way out though expansion of indirect exports. The company tries to export chips to the U.S. and European markets from its plant in Eugene, the U.S., whose products are not subject to the countervailing tariffs. Therefore, Hynix is increasing its Eugene plant’s production capacity.

"Increasing the capacity of the Eugene plant by more than 50% though investing $100 million could reduce damage from the countervailing duty," said Woo Eui-jui, CEO of Hynix Semiconductor Inc.

Tae-Han Kim Eun-Woo Lee freewill@donga.com libra@donga.com