The European Commission confirmed yesterday that it has opened an
investigation into alleged unfair public subsidies to two South
Korean computer chip makers, Samsung Electronics and Hynix
Semiconductor.
The probe was sparked by a complaint last month from German chip
maker Infineon Technologies, which voiced concern about the effect
of subsidies on the DRAM (dynamic RAM) chip market.
The alleged subsidies take the form of tax benefits, export
credits, subsidised loans, debt rollovers and debt-to-equity swap
programmes, the commission said. It is expected to conclude its
investigation in the first half of next year.
The probes come at a time when chip prices are tumbling. Hynix
alone has benefited from subsidies worth $7bn (£4.4bn), said
Michael Schuette, a lawyer in the Brussels office of law firm
Freshfields Bruckhaus Deringer, which is acting on behalf of
Infineon.
"These subsidies enabled Hynix to stay in business even though it
has been unable to pay its debts," Schuette said. "They have been
granted at a time when closure would have been the right thing for
Hynix."
Infineon claims that the South Korean government granted loans to
Hynix at rates of between 6% and 10%, at a time when credit
agencies had downgraded the company to junk bond status. Junk bond
financing typically costs about 20% in interest.
Infineon claimed that the Korean government granted Samsung tax
benefits for losses it made on its exports. These amounted to 2% to
3.5% of its export revenue to Europe, worth 764 billion South
Korean won (£410m), Schuette said.
Samsung is the biggest DRAM producer in the EU and worldwide, with
a 25% market share in Europe. Hynix holds between 15% and 18% of
the market. Third is US company Micron Technology, with about 13%,
followed by Infineon with 8%.
Both Hynix and Samsung denied violating trade rules, and said they
would co-operate with the investigation.
Infineon and Micron are considering lodging a similar complaint
with US trade officials. "We have been waiting until an
investigation gets going in Europe first, though," Schuette said.