U.S. Imposes Big Tariffs On Korean Chipmakers

dipfan writes "This is serious - the U.S. government has decided to levy steep import tariffs on South Korean computer chips (and Vietnamese catfish). The result is a 44 percent tariff on DRAM semiconductors made by Hynix. The case was brought by Micron Technology on the grounds that the South Koreans were receiving unfair subsidies. Hynix says the tariff is 'outrageous', and the South Koreans plan to appeal to the World Trade Organisation."

Comments

Took a while to arrive

[red_dragon]

This tariff has been in the air for Hynix for a few months now. They're getting it easier than originally proposed: the tariff was originally 57%. Also, the US is not the only one sticking it to the Koreans: the European Commission smacked them with a 37% duty too.

This is another example of freedom and democracy

[confused philosopher]

Actually it is an example of pig headedness. If the US market breeds unfair competition, then it should rethink its business model instead of imposing large and/or illegal tarrifs.

Did you know that the US thinks the Canadian Wheat Board subsidized farmers off the books, to sink American farmers, and so Canadian farmers are being unfairly abused by the American market.

Or how about the illegal [as the WTO ruled] tarrif on Softwood lumber?

Or how about the Mad Cow related Canadian beef ban, when the cow has ties to Montana, USA?

Double standard? You bet.

Re:Coincidence?

[HornyBastard77]

No I think it has more to do with Hynix making posting a loss (of about $800 mil, and its operating loss). If they were able to recoup their costs then Micron's claims of them artificially deflating their prices would not hold much water. As it stands, this does appear to be a case of government aided dumping.

background to the dispute

[odin53]

Not that I support the tariff, but it seems like slashdotters don't know the whole story, so let me explain.

Hynix, for the last few years, has been losing a LOT of money, mostly due to the commoditization of DRAM and general Asian economic malaise. A couple years ago, Micron offered to buy Hynix. Hynix refused and instead kept taking out loans and otherwise attempted to stay afloat. (Hynix was bailed out a couple times after the first proposal. Some of these loans were from government owned banks; also, apparently, Hynix received some direct subsidies from the Korean government.)

Last year, though, Hynix's bad fortune came to a head, and the company was on the verge of collapse. Micron again offered to buy Hynix, and after extensive negotiations, it seemed like the merger would go through. But for some inexplicable reason, at the last minute Hynix refused the offer, claiming it wasn't high enough. (I say inexplicable because there were no other buyers or potential buyers and Hynix was ridiculously deeply indebted -- in this situation (i.e., close to bankruptcy with a viable way out), refusing to merge was almost probably (at least in America) not in the best interests of its shareholders.) Some creditors tried to band together and force Hynix to sell itself (after the two bailouts, creditors were the biggest shareholders) but that didn't pan out.

As Hynix's debt grew and grew and its financial state deteriorated (even after two huge bailouts) everyone knew that Hynix needed to get acquired -- even the government encouraged it. However, Korean politicians, civic groups and industry leaders outwardly opposed Hynix's acquisition by a foreign company; they wanted to figure out a way to keep Hynix Korean. From what I remember, a few months ago Hynix went through a restructuring/recapitalization and got some debt relief, but its financial prospects haven't improved.

Hynix's survival is very, very strange given its circumstances, except when you realize that its survival is only due to tremendous political pressure to keep the company alive for a Korean acquirer. Otherwise, I think that financial analysts have uniformly agreed that Hynix needs to get acquired by somebody.

For better or for worse, Micron had a strong argument. Hynix should probably not be independent right now, and is only so because of the direct (and indirect) help of the Korean government. Also, the overall effect has been really bad: Hynix's non-creditor shareholders have been screwed repeatedly in the bailouts (convertible debt is great for creditors, horrible for current shareholders); Korean government-owned banks have arguably wasted insane amounts of money by riskily throwing it Hynix; and now, prices for DRAM will artificially go up because of the tariffs.