Hynix asset sales to Citigroup fund drag

SEOUL: Despite more than a year of trying, efforts to sell assets worth some $450 million at South Korea's Hynix Semiconductor Inc. an investment fund run by Citigroup have stalled, according to sources.

"There is no deadline after negotiating partners had missed several times before and they are still trying to reduce gaps over minor things such as intellectual property transfer," the source told Reuters.

Hynix, the world's third-largest maker of memory chips, has struggled to sign a final deal worth around 520 billion won ($451 million) with the fund run by Citigroup to sell non-core operations, which generate one fifth of its annual revenues.

If the deal went through, the source said Hynix was expected to receive less than half of the sale proceeds as cash because the asset value includes hefty debts that the investment fund would assume.

Cash-strapped Hynix has been trying to shed non-core assets to finance technology investment and concentrate on its bread-and-butter DRAM (dynamic random access memory) chips used in computers and games consoles.

It is also talking to Europe's biggest chip maker, STMicroelectronics, to build a DRAM chip plant in China, which Hynix aims to complete by the end of 2005.

Such a tie-up would give the two companies access to China's $30 billion semiconductor market, which is growing at an average 20 percent a year, and will help Hynix escape hefty U.S. and European tariffs on its products.

Last year, the United States and the European Union slapped tariffs on imports of Hynix chips made in South Korea, alleging the company received government subsidies. The U.S. International Trade Commission levied a 44 percent duty on DRAM imports from Hynix last July. The EU took similar action the following month.

Hynix and Geneva-based STMicroelectronics, the world's fourth-largest chip maker, are already in a strategic alliance to jointly develop flash memory chips, whose demand is soaring to support digital gadgets such as mobile phones, digital cameras and MP3 music players. Hynix began shipping flash chips to its partner in February.

© Reuters