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Last updated: July 14, 2005 6:06 pm

Hynix Semi reveals STMicro approach

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Hynix Semiconductor, the South Korean chipmaker, on Thursday said it had been approached by Franco-Italian rival STMicroelectronics about a “strategic alliance” for its memory chip businesses.

An alliance would boost the companies' competitiveness against rivals such as Samsung Electronics and Intel.

The Korea Economic Daily on Thursday reported that STMicro had offered to transfer parts of its NOR flash-memory chip facilities in exchange for a 5-10 per cent stake in Hynix, which this week completed its debt work-out programme 18 months ahead of schedule, freeing it from management by its creditors.

“STMicroelectronics offered to have a discussion about a strategic alliance but we have not talked about anything specific,” said Kim Ah-young, a Hynix spokeswoman. “We are already building a manufacturing facility in China together.”

The companies are collaborating on a $2bn dynamic random access memory (D-ram) and NAND flash memory chip plant in Wuxi, China, which is expected to start producing 8-inch memory chip wafers by the end of the year. NOR flash and NAND flash chips, which store data after power is turned off, are used in mobile phones, digital cameras and MP3 players, while D-ram is mainly used in personal computers.

Shares in Hynix, the world's second-largest chipmaker, rose as much as 9.3 per cent on Thursday to their highest level in more than three years, but closed 8.35 per cent higher at Won22,050.

Analysts said they expected to hear rumours of potential takeovers now that Hynix had completed its debt work-out, with STMicro's rapprochement likely to start the process. The Maeil Business Newspaper this week reported that LG Electronics was interested in diversifying into computer chips and so was considering making a bid for Hynix.

On Tuesday Hynix graduated from creditor control after securing $1.3bn in syndicated loans and floating $500m in bonds. Creditors, led by Korea Exchange Bank, plan to sell a third of their shares, worth Won2,280bn ($2.2bn), by the end of the year but are locked into holding the remaining 50 per cent until 2007 unless a strategic buyer emerges earlier.

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