Hynix ready to be 'disposed of'


Chip analysts say there is too much capacity for the relatively cheap memory chips that Hynix makes

By Alex Frew McMillan and wire reports

SEOUL, South Korea -- Hynix Semiconductor stock rattled to a record low on Monday as the Korean government urged its lenders to "dispose" of the company.

"If there is no possibility of Hynix being revived, the company should be disposed of," Finance Minister Jeon Yun-churl said on Monday.

Indeed, brokerage Samsung Securities Co. said Monday it had taken a hit to its earnings to write off exposure to Hynix, though it did not reveal the extent of the damage to its holdings.

The brokerage did report, however, that its net profit plummeted 70 percent, to 57 billion won ($44.9 million) for the year ended in March.

With the stock market riding high in Korea in 2002, analysts had expected earnings for the brokerage to rise over the prior year.

Hynix future in doubt

The future of Hynix was cast in doubt on April 30, when its board rejected a deal to sell the bulk of its operations to Micron Technology of the United States (full story).

According to reports out of Korea, the government is willing to start court receivership proceedings if the company's board rejects a carve-up of the company.


CEO Park Chong Sup stepped down after the board rejected a sale of most of Hynix to Micron Technology

Hynix creditors are now mulling a breakup of the chipmaker, splitting it into three parts to maximize the amount a sale could raise. The banks, which are owed $5 billion, had backed the $3.4 billion sale to Micron.

"We will come up with a reasonable and strong restructuring plan for the company after consulting with an outside expert," Korea Exchange Bank, the lead creditor, said in a statement on Friday.

The creditors are left with dwindling options to recover their loans. But they have stated that the company has little chance of surviving on its own (full story).

The company's board has yet to make clear what future for Hynix it will accept. But after the collapse of the sale to Micron, CEO Park Chong Sup resigned. On Friday, the company named Park Sang-ho as his replacement (full story).

Stock crunches to 725 won

Against that bleak background, Hynix shares crunched to never-before-seen lows on Monday. They lurched to 725 won in morning trade, recovering to 740 won by mid-afternoon.

That is still a drop of 8 percent, though, which has been the main driver in bringing the Kospi index 2.3 percent lower to 836.96 in mid-afternoon trade.

Professional investors view the collapse of the Hynix sale as a setback to corporate reforms in Korea, which market watchers say have gone further there than anywhere else in Asia.

One day before the collapse of the Hynix talks, Korea's market had got a boost from the sale of most of bankrupt Daewoo Motor Co. to a team led by General Motors of the United States.

Reuters contributed to this report.