With a trade dispute still hanging over it in Europe, Hynix Semiconductor Inc. said last week's decision by the U.S. International Trade Commission to uphold tariffs against the company in the United States will not affect its ability to serve its customers.
The 44.71% tariff was assessed against all Hynix DRAM products shipped to the United States, after the ITC concluded that Hynix damaged the U.S. DRAM industry by accepting illegal financial aid from banks owned or controlled by the Korean government. The ruling supported a June decision by the U.S. Commerce Department that the Hynix bailout packages violated international trade practices.
Hynix last week said it will consider appealing the ITC decision to the U.S. Court of International Trade once it has received the commission's written rationale, which is expected to be released Aug. 4.
The company also said the Korean government could appeal the decision to the World Trade Organization. Korea has already initiated a complaint with the WTO on the Commerce Department countervailing duty ruling, according to Daniel Porter, outside counsel for Hynix.
Since the the U.S. government made its preliminary findings known in April, Hynix had been forced to establish an escrow account and pay the equivalent of duties on all DRAM shipped to the United States. The company said that has given it several months to devise alternate shipping arrangements with customers, which has enabled it to maintain its supply lines and largely to escape the duty payments.
Hynix, which has five DRAM fabs in Korea, also has an 8in.-wafer fab in Eugene, Ore. Because the Oregon fab is exempt
from import duties, Hynix said it has used output from the plant to serve its U.S. customers. The company has also brokered agreements with U.S. customers in which it drop ships DRAM at overseas plants.
In a statement issued last week, Hynix said it "will increase the production of DRAMs in its Eugene, Oregon fab, which is not subject to the ... duty imposition, to continue to provide quality DRAMs to its U.S. customers. Therefore, our existing customers in the U.S. will not be affected at all by the decision."
The latest data from Hynix indicates that the Oregon fab is running at the equivalent of 35,000 256Mbit DRAM wafer starts per week.
But the extent to which Hynix is able to serve all of its U.S. customers through the fab is an open question, according to some observers.
"I'm skeptical of that statement," said Sherry Garber, an analyst at Semico Research Corp., Phoenix. "If Hynix is supplying out of the Eugene fab and that's all the supply going into the U.S., then that's a true statement. But they're a pretty big company, and it would be surprising if they can satisfy all the demand in the U.S. from that one foundry."
The U.S. complaint was filed last November by Micron Technology Inc., Boise, Idaho, charging that the Korean government directed bailouts totaling $11.7 billion for the 18-month period from Jan. 1, 2001, through June 20, 2002. Micron later claimed that through the same banks, the government engineered an additional $4 billion bailout for Hynix, which gave it an unfair advantage over U.S. DRAM makers.
"These actions validate that Hynix received billions of dollars in illegal subsidies, reaffirms that free trade must also be fair trade, and demonstrates our government's commitment to enforce trade laws," said Micron chairman, president, and chief executive Steve Appleton, in a statement.
Hynix counsel Porter said the case suffered because Micron has lost $2 billion in the past two years. "Although Micron's experience was really no different from any other DRAM producer, under U.S. law it's more difficult to win a 'no injury' defense when the petitioner has lost so much money," he said.
Porter said the ITC decision may also have been influenced by a separate countervailing duty case against Hynix, now in its final stages before the European Commission. The EC early this month notified member nations of its final recommendation that a 35% countervailing duty be imposed on Hynix DRAM. The full European Union is expected to render its decision in August.
"The ITC may have been worried that if the EC imposed duties on Hynix and the U.S. didn't, then the U.S. market may become flooded with Hynix DRAMs," Porter said.