Japan to impose tariff on Hynix DRAM chips

Japan plans to impose countervailing duties on DRAM (dynamic RAM) computer chips made by Hynix Semiconductor Inc., alleging that low-cost loans from state-controlled banks a few years ago amounted to unfair subsidies for the chip maker, a move similar to duties announced years ago by the U.S. and European Union (EU).

Japan intends to put in place countervailing duties of around 27 per cent as early as the end of this month, but no exact time frame has been set, according to a spokeswoman from Hynix, which said it had already been notified of the impending duties.

Hynix insists it did not receive any illegal subsidies from the government of South Korea. That nation’s commerce ministry also plans to use all legal means to fight the countervailing duties, including filing complaints to the World Trade Organization (WTO), according to a statement on its Web site.

“We do not expect this to cause serious damage to our company,” said Kim Ahyoung, from Hynix’s corporate communications office. Since the duties will only apply to DRAM chips made in South Korea, the chip maker plans to expand its partnership with Taiwanese DRAM maker ProMOS Technologies Inc. in order to meet the needs of its customers in Japan, she added.

The move by Japan follows similar rulings in the U.S. and E.U. against Hynix. In 2003, the U.S. imposed a 44 per cent tariff on Hynix DRAM made in South Korea, while the E.U.’s duty totaled 33 per cent. The U.S. duty was upheld earlier this year by a WTO panel, but the E.U. was told it had violated its obligations and should reconsider its tariff.

Users aren’t likely to see any kind of a bottleneck on DRAM chips as a result, but prices might rise in the short term as the DRAM market digests the news. DRAM trades on open spot markets like commodities such as oil and gold, and major events can have a big impact on pricing.

The U.S. and E.U. duties failed to impact Hynix’s business. Since the duties were imposed in 2003, the company has gained market share and returned to profitability. It was able to sidestep the duties by supplying its U.S. customers from non-Korean locations, namely a plant in Oregon, and it shipped memory chips to Europe from partners such as ProMOS. The company was also able to ship DRAM to non-E.U. states in Europe where they could be placed inside hardware bound for the E.U.

The duties from Japan, the U.S. and E.U. are all based on alleged unfair subsidies given to Hynix in the form of low-cost loans from state-controlled banks amid a severe DRAM market downturn that hit in 2001 and lasted nearly two years. The company has been able to repay much of its debt over the past few years and regain its number two ranking the global DRAM business.

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