The US Department of Commerce ruled Tuesday that South Korea is selling unfairly subsidized semiconductors in the United States, provoking a furious denial from major manufacturer Hynix Semiconductor.

The department ruled that imports of DRAMs (Dynamic Random Access Memory semiconductors) from South Korea during the period of investigation -- January 1, 2001 through June 30, 2002 -- were unfairly subsidized.

The ruling opens the way to countervailing duties of 44.71 percent against Hynix Semiconductor, 0.04 percent against Samsung Electronics and 44.71 percent against all other South Korean DRAM exporters.

These duties will be imposed on South Korean DRAM manufacturers if the quasi-judicial US International Trade Commission (ITC) decides the imports do harm or threaten US industry.

An ITC decision is expected July 31, leading to a possible order for duties August 7.

Officials of South Korea's Ministry of Commerce, Industry and Energy said the government would bring the case to the WTO before the ITC decision.

"Even if the ITC rules in our favor, we will go through the WTO procedures for resolving trade disputes against the ruling by the Department of Commerce," said Kim Jong-Kap, Deputy Minister of Commerce, Industry and Energy.

Hynix chief executive E.J. Woo said in a statement that the US decision to set punitive tariffs on DRAM imports from South Korea was an "outrageous act aimed at a hidden agenda.

"It was absolutely clear from the facts of this case that (they) ... are unjustified and illegal," he said.

Woo said that the US Department of Commerce wrongly concluded that the South Korean government had been secretly involved in the financial restructuring of Hynix because Seoul owned shares in some South Korean banks, who were creditors of the company.

The decision ignored the leading role of Citibank in the Hynix restructuring, he said.

Woo accused the department of seeking to pressure the South Korean government over economic restructuring.

"Freed from political pressure and hidden agendas, the (Department of Commerce's) determination cannot survive court or World Trade Organization scrutiny," he said.

"More importantly, we are confident that the independent and objective market evaluation of the US International Trade Commission will put an end to this case without the need for more wasteful legal conflict."

The European Union imposed a 33 percent tariff on memory chips from Hynix over the alleged state subsidies in April.

The South Korean government also intends to take action against the EU at the WTO, depending on a final ruling by the EU in August.

Hynix has racked up net losses of 9.5 trillion won (eight billion US dollars) over the past three years, including a 1.95 trillion won loss in 2002. It has been kept alive by a series of bailouts and bank loans since the trouble began in December 2000.

In February, Hynix went through with a massive capital write-down, part of a 1.6 billion dollar rescue package proposed by creditors to ensure the company's survival until 2006.

The package also included a three-year extension of the maturity of three trillion won in debt. In return, Hynix promised to reduce debt by selling non-core assets.

The bailouts for Hynix sparked disputes with the United States and the European Union who claimed that the South Korean authorities were effectively subsidising the company's chip exports.

Hynix accounts for some 30 percent of South Korea's total DRAM exports, shipping 553 million dollars worth to the United States and 271 million dollars to the EU last year.

The United States and the European Union are crucial memory chip markets for South Korea with Hynix taking up some 30 percent of the country's total DRAM exports, according to foreign ministry statistics.

SPACE.WIRE