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Micron chief says Hynix deal still doable

Posted: 09 Jul 2002 ?? ?Print Version ?Bookmark and Share

Keywords:Micron Technology? Hynix Semiconductor? memory? DRAM?

Micron Technology Inc.'s chief executive officer, Steven Appleton, believes his company could still strike a deal with Korean memory maker Hynix Semiconductor Inc., overcome union resistance and weave Hynix's aging facilities into Micron's operations.

"There is not a mismatch with our values and the workforce's values there. I think the controversy is really at the senior level. The creditors versus the people running the company and the shareholders," Appleton said in a recent interview with EE Times.

Despite being jilted earlier this year by Hynix's board, which voted down a $3.5 billion blueprint for the sale of its memory operations, Appleton said he would reconsider the deal if contacted again. The two companies have not talked since the Hynix board rejected Micron's offer. "If they sort through the issues that they have and it looks like a reasonable process for us to reengage, then sure we are open to it," he said. "At this point today, though, we have no predictability whatsoever about what might occur."

As memory chip prices stagnate around the break-even level, Hynix is struggling to maintain operations and pay down its more than $6 billion in debt. At the same time, it is facing a substantial upgrade of its facilities to remain competitive. To do so, it would likely need a third bailout from its creditors, which seems unlikely, analysts have said.

Toward the end of this month, its creditors, which now own 80 percent of the company after converting bonds into equity, will move to take control of the board. That would open the way to new negotiations with Micron, the world's second-largest memory maker.

Since the wintertime talks fell apart, little has changed for Hynix in terms of its long-term viability. DRAM pricing spiked in the first quarter, but disappointing demand among businesses and consumers for PCs looks like it may linger. So with flat memory pricing expected for the rest of this year, help is not likely to arrive for Hynix in any other form. "Hynix has essentially been bankrupt, they're still bankrupt and they will be bankrupt without substantial restructuring," Appleton said.

Micron has the means and, Appleton argued, the track record to show that it could make a buyout successful. In 1998, Micron said it would take over the globally spread memory operations of Texas Instruments, Inc. and by 2000 was able to successfully fold them into its operations, achieving the economy of scale that has made it the industry's lowest cost memory chip producer.

That sharply differs from Hynix's experience. In 1999, Hynix, then called Hyundai Electronics, merged with the memory chip division of LG Electronics, due in part to the urging of the South Korean government. But the combined debt of the companies and their similar facilities hamstrung Hynix.

Appleton said the contentious relationship between Micron and Korean memory makers, usually manifested in allegations of product dumping or government subsidies, shouldn't factor into whether the companies can strike a deal. "Fundamentally, they're good people. They execute well," he said of Hynix. "At the operational level, we have a lot of confidence that we can make it work."

? Mike Clendenin

EE Times

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