The song remains the same

The chaps at Hynix claim that the EC decision to impose a 33% duty on imports of their DRAMs is nothing more than politically motivated. Could they be right?

Well winners can lose and things can get strained. But whatever you change, you know the dogs remain. – The Dogs of War, The Pink Floyd.

Last month, a few odd readers cancelled their subscription to our informative newsletter as a result of my ‘anti-American’-suggestion that the US selfishly goes it alone in its policy making decisions without paying any attention to the UN or the World Trade Organisation.

I concluded by saying it was hardly surprising that barriers to internationalism were going up in the US, because America wasn’t the kind of country to leave its industries behind.

By way of an apology to our American readers, and to assuage the sensibilities of those who think that I have turned into a ‘leftist commie pinko’, I turn my attention this month to activities within the EU.

Specifically, let’s look at last week’s decision by the European Commission to impose a 33% duty on the imports of DRAMs produced by Korean-based Hynix Semiconductor. The EU decision follows hard on the heels of a similar piece of policy recently rolled out of the US, which has imposed a whopping 57.37% duty on the company’s chips.

As you may recall, the reason behind all this started way back in July 25, 2002 when an anti-subsidy investigation was initiated following a complaint to the Commission by Infineon Technologies, a German producer of DRAMs.

According to the EC, the result of the investigation was that Hynix had been benefiting from Korean government subsidies to the detriment of the European chip industry, which, as a result, suffered severe losses.

But the lads over at Hynix don’t agree. They say that the EC Commission has ‘wrongly concluded’ that the Korean Government somehow controls the lending decisions of Citibank, a purely private US commercial bank and also the Korea Exchange Bank, a private Korean commercial bank largely controlled by Frankfurt-based Commerzbank. With lending decisions being made to Hynix by foreign nationals answering to foreign companies, ‘it is nonsensical to ‘find’ that these decisions were somehow being directed by the Korean Government,’ Hynix says.

And the poor old chip company also finds fault with the EC’s finding that the ‘alleged subsidies’ to Hynix caused EC producers to suffer ‘material injury’, and says that this ignores the competitive realities of the market.

Hynix says that over the past few years, it has actually lost share in the EC market, not gained it! Hynix says its market share dropped by 2.7% between 2000 and 2001 and the company is now clearly finding it hard to understand how its declining market share could be the cause of any difficulties for Infineon. In contrast, Hynix says, other chip chaps like Samsung and Micron gained 7.3% and 3.3% in market share, respectively, over the same period.

So were the shipments from Samsung and Micron, rather than Hynix, the cause of volume difficulties for Infineon? The Hynix folks think so and have publicly stated that they think that the EC decision was simply politically motivated.

Fortunately, for Hynix, at least, the EC case is not yet over. The European Commission has only made a preliminary determination and under EU law, the EC Member States still have the final say on whether to impose the extra duties.

But as the trade gloom deepens, and the industries in the EU stay in recession, through their own bungled mismanagement or through fierce competition from emerging countries like China, it wouldn’t be surprising if the EC stuck to its guns. Because after all – the EU won’t leave its industries behind.

Where have I heard that before?

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