Hynix Semiconductor Inc. sparred with Micron Technology and Infineon Technologies Tuesday at the International Trade Commission over who has been the most aggressive in DRAM price cutting in the industry downturn.
Micron and Infineon charged that $16 billion in Korean government subsidies to Hynix in 2001 and 2002 allowed Hynix to become the lowest-price DRAM producer, able to cut prices to the bone to grab sales. Officials of the two companies said the price bludgeoning caused them to suffer substantial financial losses, severely impacting their ability to fund critical new capital investment.
Hynix denied it was the low price leader and asked the ITC to look at confidential pricing data in the case to find producers who were selling at rock bottom prices. Gary Swanson, senior vice president of sales for Hynix Semiconductor America, San Jose, Calif., said "there are occasions when (any) supplier becomes aggressive in price. We have seen this from Micron and Infineon."
Farhad Tabrizi, Hynix vice president for worldwide marketing, claimed the two DRAM makers "tried to price Hynix out of the market and push Hynix out of business."
The ITC will decide next month whether government subsidies to Hynix caused major injury to the U.S. DRAM industry represented by Infineon and Micron. The U.S. Commerce Department last week imposed final 44.71% countervailing duties on Hynix for government-directed bailouts of the chip firm through domestic banks it owned or controlled.
Steve Appleton, chairman, president and CEO of Micron, told the ITC that price cutting by Hynix "has created difficult times for us to raise (capital) funds. We couldn't find any financial institution to lend us money and were forced to raise money through stock at the worst (stock) prices ever.
"Our actual capital expenditures far exceed our cash flow," he said, adding that Micron's cash flow dropped from $2 billion in its fiscal 2000 year to $172 million in its current fiscal quarter.
Robert LeFort, president of Infineon Technologies North America Corp., said, "artificially low prices that can be offered by someone who doesn't have to pay his own bills are capable of having a harmful impact well beyond actual sales volume or market share."
Hynix attorney James Durling countered that Micron and Infineon gained market share in North America in the last several years to a combined 40.5% in 2002, while Hynix lost North America share to 10.4% in 2002.
He said the Korean government subsidies were to restructure existing Hynix debt and were not used to boost capital spending. The attorney said Hynix's capex in the 2001-2002 period of inquiry had fallen from 2000 levels to $500 million in 2002, which he claimed was less than Micron's $900 million last year.
The two sides differed on whether Hynix DRAM imports to the U.S., a confidential figure, were "small" or "significant." Durling said that imports from Samsung and some other foreign DRAM suppliers had a bigger impact on the market than Hynix's shipments. Infineon's LeFort said Hynix's price cutting on any imported DRAMs had a "ripple effect" because of pervasive "Most Favored Customer" clauses of major OEM purchasers who demanded the same low price given to any other customer.
"A single irrational price offering between Hynix and one customer can spread through the entire DRAM market," he said.
Gilbert Kaplan, attorney for Micron, charged that even after the 2001-2002 period of inquiry the Korean government directed another $4 billion bailout of Hynix. "The Korean government clearly indicated it will cover the losses of Hynix no matter how long it takes," he said. "Micron has to compete against the subsidy for years into the future."
Hynix's Tabrizi asserted that the global market downturn -- driven by a sharp drop in customer demand -- not Hynix, is responsible for the severe DRAM market downturn. "Boom-bust cycles have always been a feature of the DRAM market and are quite normal," he said.