Forget "The Hulk" and "Pirates of the Caribbean." This summer's most entertaining spectacle is the ongoing saga of Micron Technology and the U.S. government vs. Hynix Semiconductor.
You've got to love the DRAM industry. Sure it's deadly serious business, with the accurate and timely deployment of billions in capital dictating the fortunes of a dwindling supplier base. But with its innumerable twists and turns, it's also the Rubik's cube of the semiconductor world. Ask why prices are climbing and you're apt to receive a half-dozen explanations, all of
which could be true at any given time. Ask why they've dropped and it's the same scenario.
Indeed, it's the rich narratives that accompany the rise and fall of the DRAM index that make the market so interesting--and which appear to have amply prepared Hynix and Micron for their epic trade battle.
In its charges, Micron claims Hynix flouted the rules of international commerce by accepting roughly $16 billion in financial aid from banks either owned or controlled by the Korean government. Hynix doesn't deny accepting several bailout packages but asserts that the government was not pulling the strings on any of the refinancing deals.
Furthmore, Hynix said it used the funds to pay down debt, not to shore up its manufacturing empire.
Micron is portraying Hynix as in league with the Korean government to force DRAM prices to levels at which rival companies are unable to compete. Yet Hynix has seen its wafer starts and DRAM market share waste away; it slipped from fourth place to third in 2002, as Micron hung on to its No. 2 position.
Were the Hynix aid packages illegal? Maybe not. But did they actually hurt Micron?
Micron also recently painted a sound financial picture for analysts during a June conference call. Yet in testifying before the International Trade Commission, the company cried poor, stating that it was forced to issue stock because it was unable to borrow investment funds on acceptable terms.
Can both claims be true? Actually, yes, but it still leaves Micron arguing both sides against the middle.
Hynix has shown equal creativity in portraying itself as victim. For starters, the company is selling itself to customers as a DRAM powerhouse at the same time it is telling the ITC that it is technologically bereft.
It's also using fuzzy logic when it comes to the bank loans it secured, legal or otherwise. By directing attention to the use of the loans and away from their source, Hynix is hiding behind a distinction without a difference, because the real issue is not how the funds were spent but whether they were legal.
But again, that's the beauty of the DRAM market. It's big enough to embrace all sorts of incongruities.
E-mail comments to Andrew MacLellan at email@example.com.