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April 25, 2006 10:04 pm

Chipmakers fall on Hynix damages ruling

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Shares in South Korean chipmakers fell on Tuesday after a US jury ordered Hynix Semiconductor to pay Rambus damages of $307m for infringing the US chipmaker’s patents.

Hynix said that it would continue to push a separate claim that the patents on which Rambus based its case were anti-competitive, and so should be ruled unenforceable.

“We expect a final ruling on this case in the summer after an additional hearing on Rambus’s antitrust activities and we plan to actively respond through necessary legal procedures,” Hynix said.

Hynix shares fell 1.92 per cent to Won33,250 and its bigger rival Samsung Electronics fell 1.93 per cent to Won660,000.

Analysts said it was not clear yet how the tentative ruling against Hynix would affect the other pending patent suits by Rambus. The Californian company has also filed patent infringement claims against Infineon and Micron Technologies, and last year added Samsung to the list after the world’s biggest maker of memory chips failed to agree terms to renew an existing royalty agreement.

Park Young-joo, an analyst at Woori Investment & Securities, expected Tuesday’s news to prompt Hynix to enter negotiations with Rambus to cut the actual compensation.

Hynix has set aside about Won170bn ($180m) to cover various patent suits filed against it but analysts said the company may need an additional Won200bn, if the damages are confirmed in the final ruling. Hynix has said it would appeal any negative ruling.

“The damages are bigger than expected. But it would not have a big impact on Hynix’s earnings, because the company is performing well,” Michael Min at Korea Investment & Securities said, comparing the case with Infineon’s settlement.

Infineon last year settled its case with Rambus, agreeing at the time to license the company’s technology and pay up to $100m if the other companies resolved their disputes.

Hynix is also facing another suit from Toshiba over patents related to Nand flash memory chips and D-Ram chips.

Hynix earned Won289.4bn in net profit in the first quarter on sales of Won1,511bn. Its operating profit margin stood at 25 per cent, much higher than its rivals such as Micron and Infineon.

But its profit is expected to decline in the second quarter, due to the stronger won and a continued price fall in flash memory chips used in digital cameras and MP3 players.

Rambus rose to become one of the chip industry’s hottest stocks in the late 1990s on hopes for its technology, which speeds the rate at which D-Ram memory chips can retrieve data. However, the big manufacturers that dominate the industry balked at paying its high royalty rates.

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