hynix Semiconductor Inc. today condemned the decision of the Japanese DRAM producers to file a petition with the Japanese government requesting a countervailing duty (“CVD”) investigation against hynix alleging a massive subsidy provided by the Korean government.
Regarding the hynix debt restructuring, one of the key basis of the petition, hynix officials commented that “the creditors simply made commercially reasonable decisions based on objective data and information available. Indeed, hynix’s Korean creditors acted no differently than foreign creditors facing the same choices. Therefore, there was no illegitimate subsidy involved, which was inconsistent with the WTO Agreement on Subsidy and Countervailing Measures (“SCM Agreement”).”
hynix officials also stated that “Japan’s CVD investigation is particularly unreasonable and unwarranted at this time, when the world DRAM market has been showing a continued strong performance since 2003, and when the WTO is currently reviewing the legitimacy of CVD investigations conducted by the United States and the European Union in 2003 based on the same facts.It is simply inappropriate to begin a new CVD investigation now, when the same actions by other countries have been challenged in the WTO by Korea and are likely to be found legally defective soon.”
hynix officials thus concluded that “a CVD investigation by Japan at this particular time, therefore, completely defies common sense.” hynix officials commented that the only reason behind this petition is for Japanese producers to expand illegitimately their market shares by harassing hynix and the Korean DRAM industry. hynix officials strongly requested that unlike the U.S. government and the European Union, the Japanese government make a fair determination based on “real facts and evidence.”
hynix stressed that there are fundamental differences between a CVD investigation by Japan and CVD investigations by the United States and the European Union. First, several key issues to impose CVD duties on hynix DRAMs raise similar issues in Japan. Like Korea, the Japanese government has had to support weak domestic banks to stabilize the financial sector. If the Japanese government reads the U.S. and EU determinations carefully, it will find that the U.S. and EU logic applies with equal force to Japan. It therefore makes little sense for Japan to find a subsidy from this investigation, since it would be extremely hypocritical for Japan to criticize Korea for taking the same actions as Japan. Second, hynix’s top-quality DRAMs have helped ensure continued success of Japan’s DRAM consuming industry — such as IT, telecommunications, and electronics industries. The imposition of CVD duties on hynix DRAMs, therefore, will cause serious damage on these DRAM-consuming industries in Japan by worsening supply-demand imbalance. Finally, given the fact that Japan has been enjoying substantial trade surplus with Korea, and the two countries are currently making efforts for a future-oriented relationship including negotiations for an FTA, a CVD investigation against one of the most important export products of Korea is really unexpected and surprising.
This unexpected development might stimulate Korean public’s anti-Japan emotion and cause unnecessary social and diplomatic troubles. In the meantime, a high-ranking hynix official vowed that “hynix will continue its legal battle to terminate this illegitimate and unreasonable investigation as soon as possible.” The official added, “even if a countervailing duty is imposed, the actual impact will be minimal, as has been demonstrated in the U.S. and EU investigations, because we have prepared various business strategies with different scenarios in mind, such as expanding sales of the memory product which is not subject to the Japan CVD duty imposition, development of new overseas markets, increase of “drop-shipment” based on close cooperation with major foreign customers, and the like.” According to the official, “these are just a few examples and we have developed various strategies to minimize any impact from this investigation, so Japanese competitors will regret their action ultimately.”
