Hynix to build China chip plants.

Byline: From Register-Guard and news service reports

Hynix Semiconductor Inc., the world's second-largest computer memory chip maker, has won creditor approval to build two plants in China, paving the way for the company to expand and keep up with rivals.

Lenders representing more than 75 percent of the South Korean chip maker's debt approved plans for Hynix to jointly build the plants with Europe's STMicroelectronics, main creditor Korea Exchange Bank said in a statement that didn't specify the investment amount. Internet news provider Edaily earlier reported the plants would cost $2 billion.

Hynix has long said that it wanted to boost capacity by building another plant somewhere in the world. Analysts speculated that it would occur in South Korea, but Hynix also has room to expand next to its plant in west Eugene.

The decision to build in China, however, makes it unlikely that Hynix will launch an expansion any time soon in Eugene, said Bill McClean, president of IC Insights, a market research firm in Scottsdale, Ariz.

Although the market for dynamic random access memory chips is doing well, McClean said, Hynix will be concentrating on bringing up the factory in China, and it might expand some of its older facilities in Korea before it would expand in Eugene.

Hynix spokesman Jerry Olson said he didn't know if the expansion in China would reduce the need for future additions at the Eugene plant. "We just continue to invest in the infrastructure and processes here," he said.

Hynix has a 1,000-employee computer chip plant in Eugene and six plants in South Korea.

Hynix, which forecast its first annual profit since 1999 this year, needs new plants to drive down costs and compete in a market forecast to grow 49 percent to $26 billion in 2004. The Icheon-based chip maker has fallen behind rivals such as Micron Technology Inc. in building the most advanced plants that make chips out of 12-inch wafers.

``It's a must for Hynix to hasten investments, especially for the 12-inch plant, because it can't stay competitive by standing still,'' said Koh Jun, a chip analyst at Daewoo Securities Co. in Seoul. ``It's good for Hynix that creditors finally approved this.''

Industry leader Samsung Electronics Co. of Suwon, Korea, and Boise-based Micron Technology Inc., which lost its rank as the second-largest producer during the second quarter to Hynix, have 12-inch manufacturing facilities.

Building the 12-inch plant would follow construction of a 8-inch plant, the statement said. Creditors own more than 80 percent of Hynix after bailing out the company in 2002.

Hynix and STMicroelectronics each will spend $500 million on the plants and borrow a combined $1 billion from China, Edaily said Monday.

To fund the plant, Hynix has agreed to sell its nonmemory chip business to a Citigroup Inc. unit for 954 billion won in cash and assumed debt.

``We welcome the decision,'' Hynix spokesman Bang Min Ho said. ``This helps Hynix and its strategic plans,'' he said.

Hynix also has said it needs to boost overseas production because it would help the company, subject to punitive trade tariffs from the United States and Europe and possible extra duties from Japan, dodge extra taxes.

Building plants in China also helps better position the company in the world's fastest-growing major economy, Daewoo's Koh said.

``China's own demand is expected to be explosive, so if you're going to build a plant overseas, China makes the best sense,'' Koh said.