It's showdown time in the stormy South Korean chip merger, as LG Semicon over the weekend reiterated its refusal to join the new combine with Hyundai Electronics Industries Co. and the government directed domestic banks to stop all credit to the balking chaebol.
As reported last week, the U.S. consultant Arthur D. Little retained by the Korean government recommended that Hyundai Electronics was in the best financial and technical position to assume control of the chip merger.LG Semicon also threatened to file a libel suit against ADL for alleged defamation, and will seek an injunction to keep the firm's recommendation from being carried out.
According to Korean press reports, LG Semicon contends that the firm has enough cash on hand to continue even if the government and domestic creditors closed down further financing. LG Semicon reportedly raised more than a half billion dollars in a recent stock offering and through asset sales.
Everyone is now watching to see which side blinks first. The Korean chip industry has only in the last month gotten a major boost from an uptick in global DRAM prices. Semiconductors, paced overwhelming by DRAMs, account for more than 12% of total Korean national exports. It isn't clear how long LG Semicon and the government can keep up the standoff without causing a major economic disruption which neither are in a position to tolerate for long.