Hynix to Close US Chip Factory Amid Downturn

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A resilient DRAM market downturn has prompted Hynix Semiconductor to plan the shuttering of a memory chip factory in Eugene, Oregon by the end of September, the company said Thursday.

Hynix said it is still looking into various options on how to use the factory after it closes, and could reopen the facility to manufacture other chip products. The South Korean company may also sell the factory, or break up the operation and sell the equipment separately from the land and building.

DRAM companies have been scrambling to figure out ways to combat a glut in their main memory chip products. DRAM prices have remained near or below the cost of production since late last year. The problem started when DRAM makers built too many new factories, anticipating that Microsoft's Vista OS would cause consumers and companies to start buying new PCs en masse. Vista has boosted the PC market, where around two-thirds of all DRAM go, but the uptick hasn't been as fast or broad as expected.

Nearly all DRAM makers have posted massive losses due to the downturn. Qimonda AG, for example, posted a net loss of €1.08 billion (US$1.7 billion) for the first six months of its fiscal year, ending March 31. That figure exceeded its sales over the same time, which were €925 million, down 57 percent compared to the same time a year ago.

Closing the Eugene factory is significant for Hynix. The plant has been a life raft for the company over the past five years as the company battled countervailing duties levied by Japan, the U.S. and EU in a row over loans from South Korean government-backed banks that helped Hynix through a cash crisis in 2001 and 2002. The three governments had said the loans amounted to illegal aid from the state and were anti-competitive.

The tariffs were specifically levied on Hynix chips made in South Korea, so the company was able to use the Eugene plant and a contract manufacturing agreement with Taiwan's ProMOS Technologies to help skirt the duties.

In April, the Council of the European Union lifted its 33 percent tariff, retroactive to the end of 2007.

The countervailing duties have had almost no impact on Hynix. During the 2003 to 2007 timeframe the EU tariff was in place, Hynix thrived. The company is now the world's second-largest DRAM maker, up from fourth in 2003, and its stock has soared nearly 500 percent since 2001.

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