Semiconductor Industry and South Korea's Hynix Corporation [Updated May 27, 2003]   [open pdf - 270KB]

In 2001, a trade dispute developed between the United States and South Korea over allegations that the Seoul government was propping up Hynix Semiconductor Inc., presently the world's third-largest producer of dynamic random access memory (DRAM) semiconductor chips. Since late 2000, the entire semiconductor industry has been mired in its worst slump ever, especially for manufacturers of DRAMs. Where once there were many DRAM producers, now only four companies, two of them from Korea, account for over 80% of worldwide sales. Global DRAM sales had reached nearly $30 billion in 2000, but have declined by almost two-thirds since then. The U.S. industry has been winnowed from over ten DRAM producers to one: Micron Technology Inc., the world's second-largest producer. Over the past two years, Micron, Members of Congress, and the Bush Administration protested when Hynix's leading creditors - most of which are owned by the Korean government - orchestrated a series of rescue packages that have kept Hynix in business by enabling it to restructure its debt of 8.6 trillion won (more than $7 billion). Critics of the support packages have argued that they amounted to government-sponsored bailouts, and that by keeping Hynix in business they were contributing to the oversupply of DRAM chips in world markets. In early December 2001, the impetus for the dispute was apparently reduced by the announcement that Micron and Hynix had begun negotiating a possible strategic alliance. In April 2002, the two sides announced that Micron would acquire Hynix's DRAM business. Hynix's board, however, vetoed the deal. This report examines the Hynix controversy. It assesses the status of the DRAM industry and the impact of the issue on U.S.-Korea relations. The report will be updated, especially as legal actions against Hynix proceed.

Report Number:
CRS Report for Congress, RL31238
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