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Chipmaker merger focusing on Micron payment

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Negotiators from Micron Technology and its rival Hynix Semiconductor of South Korea are entering an intensive new phase of talks to narrow differences over how much Micron should pay for a deal that could make it the world's largest producer of memory chips.

A team from Micron will arrive in Seoul this week to complete the process of due diligence on the books and assets of Hynix, whose liabilities have climbed to $8 billion since the South Korean government pressed it to take over the semiconductor division of LG Electronics 2 1/2 years ago.

The restructuring committee of Hynix, once a core company of Hyundai Group but now in the hands of creditors, said Sunday that consultants from Goldman, Sachs and Salomon Smith Barney had pored over records at the Hynix headquarters in Ichon, south of Seoul, on Saturday and recommended final talks with Micron as early as the next week.

Hynix, however, was reportedly pressing for considerably tougher terms than Micron was willing to offer and was also reluctant to give up all its operations to the company, which is based in Boise, Idaho.

The reason for the hardening Hynix position was a sense among executives, backed up by their creditors and Korean government officials, that the memory-chip industry was recovering from the depths to which it fell last year.

Analysts in Seoul predicted that the price of the bellwether 128-megabit dynamic random-access memory chip would soon rise to $3 each after having fallen several months ago to below $1 on the spot market. Memory chips, sold for the last year for less than it costs to produce them, could then become profitable.

Hynix officials acknowledged, however, that they still needed a huge cash infusion to overcome debts that continue to rise despite three successive increases in the price of semiconductors in recent weeks.

A merger between Hynix and Micron could result in the creation of a company that would overtake Samsung Electronics in production of memory chips. Samsung has long held a wide lead in the field, while Micron surpassed Hynix last year as the world's second-largest chipmaker.

Micron, like Hynix, predicts a cyclical revival of the industry amid consolidation that has driven numerous competitors in the United States, Japan and elsewhere out of the field. The Seoul Daily News, which is government-owned, has reported that Micron is willing to invest as much as $5 billion to take over all Hynix facilities.

The Hynix restructuring committee thinks, however, that $5 billion would cover only the price of the facilities for manufacturing memory chips, and it has suggested that Micron pay considerably more for licensing arrangements. Hynix still hopes to retain control over the rest of its operations with Micron as a minority shareholder.

Neither Hynix nor Micron has commented publicly on details of the talks, but reports from the meeting of the Hynix restructuring committee over the weekend indicated a coordinated effort to press the Hynix position before the arrival of the Micron team.