Hynix-Micron deal expected soon.

Byline: From Register-Guard and news service reports

SEOUL, South Korea - South Korea's troubled Hynix Semiconductor Inc. is expected to sign a preliminary deal in January to form an alliance with U.S. chip maker Micron Technology Inc., a government official said Wednesday.

``Talks between the two sides are going smoothly,'' said Lee Keun-young, chairman of the government's Financial Supervisory Committee. Lee said he expects Micron officials to sign a preliminary agreement when they visit Korea in January.

Hynix President Park Chong-sup made similar remarks Tuesday after returning from a weeklong visit to Micron's headquarters in Boise, Idaho. Micron officials visited Seoul for a week earlier this month for the first round of talks on forming a possible alliance. Micron officials have also visited the Hynix chip plant in Eugene.

Micron and Hynix have remained tight-lipped about what their alliance might look like, but some industry analysts believe the two firms could eventually merge.

Park is briefing Hynix's creditors this week on his U.S. trip, said Shin Kook Whan, who heads a panel of creditors who are overseeing Hynix's attempt to stay in business.

Hynix, the world's third-largest memory chip maker, has been struggling to survive in the face of tumbling global chip prices. Hynix has $6.7 billion in debts and lost nearly $3 billion in the first nine months of this year.

Micron announced last week that it was buying Toshiba Corp.'s U.S. chip manufacturing operation in Virginia, a move that analysts said might disrupt talks with Hynix.

But officials and industry sources insist that Micron and Hynix are still interested in a match-up. For weeks, analysts and others have said Micron may be interested in buying Hynix's idled chip factory in west Eugene.

Hynix in July closed the factory for an upgrade. The company says it is now making test batches of new chips at the plant, and plans to reopen the facility for regular production next month.

Citing unnamed industry sources, the Chosun Ilbo newspaper reported Wednesday that Micron is interested in buying the Eugene plant and forming an alliance with Hynix by swapping shares.

Hynix's woes, caused by reckless expansion on borrowed money, have been a burden on South Korean President Kim Dae-jung's government, which has been trying to reform its inefficient financial system by cleaning up bad loans - a result of big businesses' rapid growth in the 1980s and early '90s.

South Korea's Samsung Electronics Co., the world's largest memory chip maker, lost $292 million in its semiconductor business in the third quarter this year - the first quarterly loss in 14 years.