EU likely to impose punitive import duties on Hynix

The European Union is likely to approve punitive import duties on microchips made by South Korean firm Hynix Semiconductor Inc., a Commission source said Tuesday.

Some trade officials are recommending that the Union impose duties of between 30 percent and 35 percent in retaliation for what they believe is illegal state aid granted to Hynix by banks controlled by the Korean government.

However, others within the Union's executive body agree with Hynix that the decision by the banks to effectively bail Hynix out of almost certain bankruptcy is a commercial one.

"It's not a clear-cut case," said the official, adding that at this stage "retaliatory action seems the most likely course of action but there could still be quite a few changes before the final decision."

A final decision on whether to impose the duties will be taken toward the end of April. The Commission declined to comment.

European chip makers have complained about restructuring loans and debt-for-equity swaps made by South Korea's state-controlled banks to Hynix, arguing that this sort of financial support amounts to illegal state aid and allows Hynix to offer chips at prices below the cost of production.

German chip maker Infineon Technologies AG has complained loudest about Hynix. Infineon is the world's third-largest memory-chip manufacturer in sales, while Hynix is number four. Infineon's main complaint concerns DRAM (dynamic RAM) used in PCs. The chips cost about US$4 to produce, but overproduction has forced prices below that level.

Hynix officials say that private Korean banks, as well as U.S. firm Citigroup Inc. were involved in the company's restructuring. Korea Exchange Bank, Korea Development Bank, Hanvit Bank and Chohung Bank account for about 60 percent of Hynix's debt. Germany's Commerzbank AG is the second-largest shareholder of Korea Exchange Bank, after the South Korean government.

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