11 January 2002 American memory chip maker Micron Technology is set to acquire seven production lines belonging to deeply indebted South Korean chip manufacturer Hynix in a deal valued at up to $2 billion (€2.2bn).
According to reports in the Korean business press, Micron has bid between $1.5 billion (€1.7bn) and $2 billion (€2.2bn) to acquire the production lines. It will also take a 20% stake in Hynix’s non-memory chip assets. Analysts say that if Hynix agrees to the deal Micron could acquire the new production lines for just a quarter of the cost of building them from scratch.
Micron and Hynix are respectively the second and third largest manufacturers of memory chips in the world. Both been hit hard by plummeting prices for dynamic random access memory (DRAM) chips. Hynix was bailed out several times by its own creditors during 2001 after it ran up debts of around $6.7 billion. Micron is noted as one of the most efficient memory chip makers in the world.
Rumours that Micron was interested in Hynix surfaced in December 2001 and caused much controversy among Hynix’s South Korean bankers, who feared that Micron would force creditors to take a loss on their loans. However, Hynix is not a viable company in its current financial condition and formal bankruptcy looms should Micron’s bid be rejected.
Chip industry analysts believe that consolidation is essential if memory chip prices are to be stabilised – fewer players would make it easier to set prices. If the deal goes ahead, Micron will control some 40% of the memory chip market. Competitors struggling to contain ballooning losses from their memory chip operations would prefer to see Hynix closed down.
However, South Korea is not noted as a country where deals can be quickly struck and finalised and it may take months before the “small print” in the deal is completed.