WTO backs Hynix against EU on DRAM levies

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The World Trade Organisation (WTO) has sided with Hynix in the memory maker's dispute with the European Union.

The WTO decision is preliminary and yet to be formally made public. But news of the ruling has leaked out, pushing Hynix's stock up 1.9 per cent, Bloomberg reports.

The WTO publishes its final verdict in a month or so, and the EU can appeal at both the preliminary and final ruling stages. So Hynix is not out of the water yet.

According to the leaked preliminary ruling, the EU did not follow WTO rules for determining if Hynix's 2001 refinancing deal amounted to state aid outlawed by the WTO. Hynix has always denied that South Korea's government did not drive rescue funding and debt realignment it received from its creditor banks, as competitors Infineon and Micron claimed.

Infineon complained to the EU, which launched an investigation into the restructuring programme. It concluded that the aid ran contrary to WTO regulations and imposed 34.8 per cent levy on Hynix DRAM imports.

The US government came to a similar conclusion, apply a 44.7 per cent duty on Hynix's memory products, in responsed to a complaint from Micron, America's sole indigenous DRAM chipmaker.

The South Korean government, acting on Hynix's behalf, complained about both levies to the WTO. In December 2004, the WTO issued a preliminary ruling in Hynix's favour against the US tariff - in February this year, it ratified the preliminary ruling in the publication of its verdict. The ball is back in the US government's court - it has to decide whether to re-investigate the case, or simply drop the levy.

The EU is likely to face a similar choice.

Hynix, meanwhile, is still awaiting the outcome of a Japanese probe into its actions, launched last year after Micron and Elpida formally complained to the Japanese government. ®

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