U.S. Imposes Big Tariffs On Korean Chipmakers 827
dipfan writes "This is serious - the U.S. government has decided to levy steep import tariffs on South Korean computer chips (and Vietnamese catfish). The result is a 44 percent tariff on DRAM semiconductors made by Hynix. The case was brought by Micron Technology on the grounds that the South Koreans were receiving unfair subsidies. Hynix says the tariff is 'outrageous', and the South Koreans plan to appeal to the World Trade Organisation."
FIXED LINKS (Score:5, Informative)
ft [ft.com]
eetuk [eetuk.com]
ZDNET [zdnet.co.uk]
e-insite [e-insite.net]
MTF (Score:3, Informative)
Took a while to arrive (Score:5, Informative)
This tariff has been in the air for Hynix for a few months now. They're getting it easier than originally proposed: the tariff was originally 57%. [theregister.co.uk] Also, the US is not the only one sticking it to the Koreans: the European Commission smacked them with a 37% duty [theregister.co.uk] too.
Mostly good (Score:5, Informative)
Re:Yeah, this is Bush's version of "free trade" (Score:1, Informative)
Steel Tarrifs declared Illegal by the WTO [opus1.com]
OJ Tarrifs, though they seem to be being phased out [usda.gov]
Re:Yeah, this is Bush's version of "free trade" (Score:5, Informative)
Here's a couple links to Hynix's most recent multi-billion dollar bailout.
http://www.news.com.au/common/story_page/0,4057,5
http://www.geek.com/news/geeknews/2002Dec/wbc2002
Re:Mostly good (Score:3, Informative)
This is another example of freedom and democracy (Score:5, Informative)
Did you know that the US thinks the Canadian Wheat Board subsidized farmers off the books, to sink American farmers, and so Canadian farmers are being unfairly abused by the American market.
Or how about the illegal [as the WTO ruled] tarrif on Softwood lumber?
Or how about the Mad Cow related Canadian beef ban, when the cow has ties to Montana, USA?
Double standard? You bet.
Re:North Korea? (Score:5, Informative)
Re:Just like Canadian Softwood. (Score:3, Informative)
Ironically, as a result, the forest companies had to ramp up production to get the costs down. This caused even more Canadian wood to flood into the US marketplace.
BTW, The WTO made their preliminary ruling a couple weeks ago. The US actions violated WTO treaties...
Re:Coincidence? (Score:5, Informative)
Re:This is bad... (Score:3, Informative)
Actually, it doesn't. Maybe prices will go up, maybe they won't, but because memory is a commodity, Micron doesn't simply set a price and everybody pays...the prices are negotiated just like any other commodity. Also bear in mind that the duty is applied to chips and chips alone. If the chips come into the US on a module or as part of an electronic device, then no duty. If the chips are made in Hynix's Oregon fab, no duty. Hynix can pretty easily focus their Korean chip output in Asia, an extraordinarily rapidly developing market.
So maybe prices go up a little, but not 44%. On the other hand, if they go up 44% or 50% or even 100%, that's still reasonably cheap. Right now the prices are artificially low because manufacturers are selling below cost. At some point, something will give...the problem is, if the South Korean government is propping up Hynix (and with the number of jobs that Hynix provides South Korea, you can damn well bet that the government will not let the company fall), then it makes it a little more difficult for companies like Micron and Infineon to compete on the market. Competing against another company is one thing...competing against another government is something else!
-h-
Re:Correct me if i'm wrong ... (Score:3, Informative)
I'm not sure if you're right or you're wrong...I don't think that your analogy fits the situation because no monopoly exists. Right now, Samsung holds about 25% of the market, Micron around 20% and Hynix and Infineon both have something like 12% or so. Maybe what you're referring to is that Micron is the only US manufacturer of DRAM, but that doesn't make a monopoly.
The Boston Tea Party was a response to the British government requiring their colonies to pay a tax (payment of which was indicated by a stamp) on tea from Britain. The problem was, of course, that the only place that you could buy tea from was a British-approved company. Now, supposedly the participants didn't have a problem with the tax, per se, but with the fact that they were paying taxes to a government in which they had no voice. They felt (and rightly so!) that if they were paying taxes to the Crown, then they should have some right of input in how the government spent the money (among other things). Thus, the Boston Tea Party - if there's no tea to tax, then no taxes get paid!
Besides, the harbor was effectively blockaded until the tea was offloaded, but since the Sons of Liberty were preventing the offloading, the ships coudn't leave. No tea on board? Then the ships could leave. Of course, that's not quite how it worked out.
-h-
Turnabout... (Score:5, Informative)
- "In 2000, Korea was the United Statesâ(TM) sixth largest export market. In 2000, two-way merchandise trade between the United States and Korea reached record levels, totaling $68.2 billion, compared with $54.3 billion for 1999."
- 8% tariff on US automobile imports into Korea
- 317% import tariff on US potato products
From the ZDNet article, "Semiconductors are South Korea's biggest export and generated $16.6 bn in overseas sales in 2002. DRAM exports represent 35 percent of total semiconductor exports."
From a CIA report [cia.gov], South Korea's total exports for 2002 was $159.2 billion.
This implies that ~10% of the Korean economy is in semiconductor sales alone. Recall that recently South Korea is warming up [csmonitor.com] to North Korea, and if we add that Pres. Bush has already put North Korea on notice regarding their weapon exports, we should not be surpised that the government would penalize the friend of your enemy.
My personal beliefs are that that tariffs are bad on both imports and exports, but after reading the report on how much Korea taxes US exports, I don't pity them.
Interestingly enough, "In spring 2000, Korea was elevated to the Special 301 "priority watch list" as a result of continuing concerns regarding inadequate IPR enforcement, lack of protection for clinical drug test data, lack of full retroactive protection for pre-existing copyrighted works and pharmaceutical patents, problematic amendments to Koreaâ(TM)s Copyright Act and Computer Program Protection Act, lack of coordination between Korean health and IPR authorities on drug product approvals for marketing, and continued counterfeiting of consumer products."
Re:Club stomped upon (Score:2, Informative)
background to the dispute (Score:5, Informative)
Hynix, for the last few years, has been losing a LOT of money, mostly due to the commoditization of DRAM and general Asian economic malaise. A couple years ago, Micron offered to buy Hynix. Hynix refused and instead kept taking out loans and otherwise attempted to stay afloat. (Hynix was bailed out a couple times after the first proposal. Some of these loans were from government owned banks; also, apparently, Hynix received some direct subsidies from the Korean government.)
Last year, though, Hynix's bad fortune came to a head, and the company was on the verge of collapse. Micron again offered to buy Hynix, and after extensive negotiations, it seemed like the merger would go through. But for some inexplicable reason, at the last minute Hynix refused the offer, claiming it wasn't high enough. (I say inexplicable because there were no other buyers or potential buyers and Hynix was ridiculously deeply indebted -- in this situation (i.e., close to bankruptcy with a viable way out), refusing to merge was almost probably (at least in America) not in the best interests of its shareholders.) Some creditors tried to band together and force Hynix to sell itself (after the two bailouts, creditors were the biggest shareholders) but that didn't pan out.
As Hynix's debt grew and grew and its financial state deteriorated (even after two huge bailouts) everyone knew that Hynix needed to get acquired -- even the government encouraged it. However, Korean politicians, civic groups and industry leaders outwardly opposed Hynix's acquisition by a foreign company; they wanted to figure out a way to keep Hynix Korean. From what I remember, a few months ago Hynix went through a restructuring/recapitalization and got some debt relief, but its financial prospects haven't improved.
Hynix's survival is very, very strange given its circumstances, except when you realize that its survival is only due to tremendous political pressure to keep the company alive for a Korean acquirer. Otherwise, I think that financial analysts have uniformly agreed that Hynix needs to get acquired by somebody.
For better or for worse, Micron had a strong argument. Hynix should probably not be independent right now, and is only so because of the direct (and indirect) help of the Korean government. Also, the overall effect has been really bad: Hynix's non-creditor shareholders have been screwed repeatedly in the bailouts (convertible debt is great for creditors, horrible for current shareholders); Korean government-owned banks have arguably wasted insane amounts of money by riskily throwing it Hynix; and now, prices for DRAM will artificially go up because of the tariffs.
Re:The Broken Window Fallacy (Score:4, Informative)
This is a flawed argument. The idea isn't to keep the money internal; the idea is to maintain the stability of the businesses involved.
In a typical free market situation, you have different companies vying against eachother for a slice of the same pie. Their products may not be completely identical, but the idea is that the best ideas, the best products, the best business plans, will eventually win out.
Now in this instance, we have a business which is close to collapse. So what happens if, on the way out, Hynix temporarily becomes the primary seller of DRAM chips on the market? Let's say that the products of this company and Micron are similar enough, and everyone switches to Hynix chips. Assume Hynix really is going to collapse; what happens to Micron?
First, they reduce costs, trying to compete. Then, when they find they can't attract the demand, they shut down production lines, sell plants. If things get far enough along, they may have to start pulling funding for R&D, which will hurt them even more later on. It could take them years to retool, to recover, to refinance their R&D divisions, after such problems.
Now what happens to everyone else, if Hynix collapses? Companies that rely on a steady flow of parts could be ruined by this, as they suddenly have nowhere to turn to for the pieces they need. They may find parts at a higher price, but that will still raise their costs, making it difficult to compete. Possibly even against themselves, if a large quantity of a previous version of their product is already out there, and was cheaper prior.
Now I'm not saying they're at this stage right now, and I'm not saying they're necessarily even headed for this stage. Micron seems like they're a pretty popular, thriving company at the moment. But depending on how long South Korea keeps Hynix on life support, they could last just long enough to really screw things up for several companies. With Hynix hanging on, newcomers will have a hard time getting a foothold in the market, as Hynix's chips stay at an artificially low price.
Getting back to your statement, I don't think that the government being involved in something necessitates that it become inefficient. In fact, I think it's rather important to have the government involved in all major business decisions, especially those involving monopolies or companies in near-monopoly positions. Without the government, companies would become "too" efficient, and I'm convinced that most would just start sucking money directly out of our bank accounts, given the opportunity. It is, after all, the most efficient business model you'll ever see.
Re:Well (Score:1, Informative)
Re:Well (Score:1, Informative)
1) is the korean chip maker dumping
2) does the current US administration have
credibility regarding trade issues.
In anwser to question 1:
WTO rulings take a long time to produce
and it is doubtful that the US position
can be considered as a neuteral and
impartial position.
In anwser to question 2:
They have about as much credibility on
trade as they do on WMD. They blew any
claim to being a free trade administration
during the congressional mid term elections.
Re:Yeah, this is Bush's version of "free trade" (Score:5, Informative)
What's that? You didn't murder Jimmy Hoffa? Well, I don't need proof. I think you did. Tell you what, duffbeer703, I'm going to arrest you and execute you anyway. I know you did it, I just need a little more time to find the evidence. Would you prefer death by bunker buster, or M-16?
What's that? You'd rather I had proof before I convicted you?
That's just crazy talk.
p.s. The CIA helped the Iraqis gas the Kurds. Not to mention the U.S. sold them the helicopters. See this report [ithaca.edu] by a professor at Cornell, if your memory of history is a bit foggy.
Blatantly wrong... (Score:5, Informative)
This is totally and utterly wrong. Don't believe everything you read on the internet, son...
When I did my military service we were trained in destroying chemical weapons.
They are pretty reactive (otherwise they would be lousy weapons), and can easily be neutralized by ordinary household cleaning products, or gasoline (Iraq certainly had no shortage of that one...).
I have personally tried this with both sarin (a nerve-agent) and mustard-gas, and were told it would work on other substances, like Fosgen or VX too.
Most chemical weapons also decay with time (very reactive, remember) and thus proving that Iraq had working nerv-agents a decade ago doesn't prove they had it now since their proven 1993 weapons would be unsable by now.
Chemical weapons are horrible, but you don't have to believe all the FUD and propaganda surrounding them.
Re:Coincidence? (Score:5, Informative)
There are very few examples of companies that lobby for a temporary import restriction, and actually use that timeframe to revamp their operations and compete successfully in the open market after the restrictions are lifted. The best example I can recall is Harley Davidson.