Seoul, 25 April 2003
hynix Semiconductor reacted strongly to today’s decision by the European Commission to impose provisional countervailing duties on certain types of dynamic random access memory (DRAM) semiconductor chips produced in South Korea.
“We are deeply disappointed by this decision,” said Mr. Oh-Chul Kwon, Vice President of hynix in Korea. “The Commission staff seems to have either misunderstood or ignored both the actual facts of hynix’s restructuring and the competitive realities of the global DRAM market.
We will work vigorously to ensure that the EU’s final decision properly reflects the actual facts. – The EC’s finding of a countervailable subsidy is based on invalid factual conclusions The EC found two instances in which it could claim that hynix benefited from a Korean Government subsidy (1) a debenture programme aimed at temporarily providing a market-based measure to normalize the bond market and managed by the publicly-owned Korean Development Bank (KDB); and one part of the hynix restructuring (in October 2001) which included a a debt-to-equity swap and a new loan by several commercial banks.
In each case, the EC’s decision is based on an improper understanding (or deliberate ignorance) of the actual facts. With respect to the KDB program, the Commission ignores the fact that hynix actually obtained substantial new capital at precisely the time that the Commission alleges no commercial entity would extend credit to hynix. The Commission confuses severe liquidity problems in the Korean bond market with hynix inability to obtain capital. As importantly, refinancing under the KDB programme was strictly on commercial terms and actually cost hynix more than comparable purely commercial loans obtained at the same time.
Under the law, there cannot be any “benefit” when the refinancing was more expensive, not less expensive, than purely commercial new loans actually obtained at the same time. And with respect to the October 2001 financial restructuring, the EC Commission wrongly concludes that the Korean Government somehow controls the lending decisions of Citibank, a purely private U.S. commercial bank and also the Korea Exchange Bank, a private Korean commercial bank largely controlled by Commerzbank. With lending decisions in both cases being made by foreign nationals answering to foreign companies, it is nonsensical to “find” that these decisions were somehow being directed by the Korean Government. – The EC’s finding that the alleged subsidies to hynix caused EC producers to suffer material injury ignores market competitive realities Every available independent market analysis contradicts the Commission’s allegations that the worldwide downturn in DRAM prices was caused by the subsidisation of hynix. Rather, all knowledgeable DRAM market observers understand that 2001 was the worst market for DRAM suppliers in more than a decade. Demand in 2001, the time period at issue, was far below the long-term average, and every DRAM producer suffered.
EU chip-maker Infineon, which brought the case to the Commission, was particularly hard-hit due to its investment choices and decision to shift to certain products before the market was ready for those product. Under the law, a company’s own business decisions are not supposed to justify imposing import duties. Indeed, the Commission’s “finding” that hynix shipments caused harm to EU producers ignores the fact that over the past few years, hynix has lost share in the EC market, not gained it.
hynix’s market share declined by 2.7 percentage points between 2000 and 2001. It is hard to see how declining market share by hynix could be the causes of any difficulties for Infineon. In contrast, Samsung gained 7.3 percentage points and Micron 3.3 percentage points over this same period. It is clear from these figures that shipments from Samsung and Micron, rather than hynix, caused volume difficulties for Infineon. – The Only Conclusion Possible Is That The EC Decision Was Politically Motivated The EU authorities haven’t even been able to show that there was improper subsidisation. They certainly haven’t shown a causal link to the problems suffered by EU industry or demonstrated that the Community interest will be served by imposing duties.
Having reviewed the weak argumentation put forward by the Commission, we cannot see that it could be anything but politically motivated. The possibility of this scenario clearly raises the question of whether this is an appropriate use of EU law. – hynix Will Continue To Press Its Arguments To The Member States The EC case is not yet over. The EC Commission has only made a preliminary determination. Under law, the EC Member States have the final say on whether to impose the extra duties. hynix believes that, when properly advised of all the facts, the Member States will reverse the Commission’s preliminary decision.
