Its back to Micron for Hynix as Infineon pulls out

If there is a merger in Hynix's future, it will not be with Infineon Technologies as

the German company announced it had abandoned talks with Hynix Semiconductor about a

memory chip partnership.

The failure of the Infineon talks not only drives Hynix right back to Micron, but will

likely put Micron in position to dictate the merger terms. Until now, Hynix has been

negotiating under pressure from its lenders who wanted Micron to pay pack or assume a

substantial portion of Hynix's $7 billion in bank debt. Micron has also demanded that

Hynix's banks make $1 billion in new cash available to Hynix as a condition of the merger.

With Infineon out of the picture and no new suitors having stepped forward, Hynix and

its bankers have very few choices and bargaining position left. Likely they will quickly

accept a deal around the most recent Micron terms, including a $3.8 billion purchase

price.

Should a merger deal be signed, it will create the world's largest DRAM producer. Such

move is expected to help stabilize prizes in the memory marker. Currently spot market

prices for 128 mbit DRAMs are around $3.70 well up from $1 in November but still barely

above production costs.