Chip maker slapped with tariffs.

Byline: Christian Wihtol The Register-Guard

The U.S. International Trade Commission on Wednesday pressed ahead with imposing heavy tariffs on Hynix computer chip imports into the United States, but the impact on the Eugene Hynix factory remained uncertain.

The tariffs of up to 45 percent don't apply to chips that Hynix makes in Eugene, so the firm plans to increase production at the 850-employee Eugene factory, Hynix said in a release.

"Our existing customers in the U.S. will not be affected at all by today's decision," the company said.

Hynix in September will complete a $100 million equipment upgrade at the Eugene factory that will allow the factory to boost chip production, spokesman Jerold Olson said.

However, Hynix said it may appeal the tariffs to the Court of International Trade, or ask the Korean government to appeal to the World Trade Organization, the global arbiter of commerce.

In addition to the plant in west Eugene, Hynix has a cluster of computer chip plants in Korea. The firm has fought the tariff because it limits Hynix's production flexibility and could hurt sales by making it far more expensive to ship chips to the United States.

It is not clear how many chips the company currently ships into the United States from its Korean factories. The company declines to disclose that, but has said that the Eugene factory satisfies much of its U.S. demand.

Hynix doesn't have firm plans to expand the Eugene plant beyond the current equipment upgrade, Olson said.

The U.S. ruling may erode confidence among institutional investors in the ability of Hynix to raise the billions of dollars it needs in order to continue to upgrade chip manufacturing equipment.

Hynix's rivals are investing in production lines that use bigger discs of silicon, or wafers, and narrow the distance between circuit lines to get more chips per disc and more memory per chip.

``That's Hynix's biggest weakness right now,'' said J.J. Park, an analyst at JP Morgan Securities. ``Hynix is basically prevented from raising capital.''

In voting 3-0 to impose the tariffs, the ITC found that Hynix imports into the United States are hurting American rivals and that the Korean government had unfairly aided Hynix.

The ruling is a victory for Boise-based Micron Technology Inc., which last year unsuccessfully sought to buy Hynix and is now pursing the trade complaint against Hynix.

Korea says the chip dispute is its most important trade issue with the United States.

Acting on Micron's complaint, the Commerce Department last month determined that loan rollovers and other help for Hynix from banks that are partly owned by the Korean government amounted to illegal subsidies.

Without the help, Hynix "would have been potentially out of business," said Hans Mosesmann, managing director of SoundView Technology Group, an analyst who covers Micron.

Korea's government said it played no part in soliciting the loan restructuring terms for Hynix. Korea's banks said the rollovers simply amounted to prudent business measures. Hynix in December was saved by a bailout organized by its main lender, Korea Exchange Bank. The bank has said it arranged the emergency package to protect its loans to Hynix, not because it was ordered to do so by the Korean government. Hynix owes Korean banks at least $4 billion.

U.S. Sen. Ron Wyden, D-Ore., had asked the ITC to be lenient on Hynix, but that plea apparently fell on deaf ears.

Wyden has said he fears the tariffs' impact on Hynix's overall revenues and on the company's ability to fund further upgrades in Eugene.

"Not only does this vote endanger the jobs of ... Hynix workers in Eugene, it threatens to send a negative ripple effect throughout the economy of Oregon," Wyden said in a statement on Wednesday.

The ITC decision was the fourth and final step in the U.S. review process. The Commerce Department will receive the detailed ITC findings in early August.

Bloomberg News contributed to this report.