EC Hits Hynix With 33%

The subsidies found for Samsung Electronics are provisionally established to be 0.92%, below the so called "de minimis" threshold for imposing a countervailing duty. Samsung is therefore not subject to the provisional countervailing duty.
The provisional duty against Hynix will apply for a four-month period during which the EU will have to take a definitive decision.

The anti-subsidy investigation started July 25, 2002, following a complaint by German producer Infineon Technologies. The investigation for subsidies covered the period of January 1 to December 31, 2001. The value of the EU DRAM market was approximately EUR2bn in 2001. The investigation continues and all interested parties will have an opportunity to present their arguments to the European Commission so that it can reach a definitive finding.

The Hynix subsidies were found to be of two types - the refinancing of bonds provided through a programme set up by the Korean government together with the Korean Development Bank and financing provided by a group of Korean banks in October 2001. This refinancing programme was found to be specific for Hynix since it appeared to have been designed to help it in its liquidity problems. In the case of the October 2001 financing, the banks were found to have been influenced by the Korean Government. This financing was found not to have been granted under market conditions, considering both the financial situation of Hynix and the situation of the DRAM market at the time.

The USA has recently imposed a provisional countervailing duty of 57.37% on the imports of Hynix DRAMs, while Taiwan is considering starting an anti-subsidy investigation.
Hynix Semiconductor reacted strongly to the European Commission decision.

“We are deeply disappointed by this decision,” says Oh-Chul Kwon, Hynix vice-president in Korea. “The Commission staff seems to have either misunderstood or ignored both the actual facts of Hynix's restructuring and the competitive realities of the global DRAM market. We will work vigorously to ensure that the EU's final decision properly reflects the actual facts.”

The company challenged the EC's finding of a countervailable subsidy, which it says is based on an “improper understanding (or deliberate ignorance) of the actual facts”.

Hynix says it actually obtained substantial new capital at precisely the time that the EC alleges no commercial entity would extend credit to Hynix. The Korean company also maintains that refinancing under the KDB programme was strictly on commercial terms and actually cost Hynix more than comparable purely commercial loans obtained at the same time. Given that the refinancing was more expensive, not less expensive, than purely commercial loans obtained at the same time, there cannot be any “benefit”, it argues.

With respect to the October 2001 financial restructuring, Hynix highlights participation by Citibank, a purely private US commercial bank and also the Korea Exchange Bank, a private Korean commercial bank largely controlled by Commerzbank.
On the DRAM downturn, Hynix says that every available independent market analysis contradicts the Commission's allegations that this was caused by subsidisation of Hynix. The Korean company maintains that Infineon was particularly hard-hit due to its investment choices and decision to shift to certain products before the market was ready. Hynix also denies that its shipments caused harm to EU producers and says that it has lost share in the EC market, not gained it. Meanwhile both Samsung and Micron gained share in the same period, it says.
The company concludes its case by stating its belief that the decision was “politically motivated”.