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Hynix sets up chip JV with Wuxi company

HYNIX Semiconductor Inc plans to set up a back-end chip joint venture in Wuxi, Jiangsu Province, with a local firm in the third quarter of this year and also sell US$300 million worth of its packaging and testing equipment to the new company, the South Korea-based firm said yesterday.

The deal will help the world's second-biggest memory chip maker, whose business was hit by the global financial crisis, to improve capital flow and focus on its core business such as chip making and development, industry insiders said.

The equipment will be sold to the joint venture with state-owned Wuxi Industrial Development Group Co, which will hold 55 percent of the venture. Hynix will own the remainder. The transaction will help the South Korean chip maker save about 2 trillion won (US$1.6 billion) over five years, Hynix said in a statement.

Morgan Stanley reiterated its "underperform" rating on Hynix and set its target price more than 40 percent lower than the current share price.

"We continue to worry about (Hynix's) large second quarter losses, a weak second-half recovery and downside risks to chip prices," said the United States investment bank in a note on Hynix yesterday.

By establishing a back-end joint venture, the portion of Hynix's outsourcing of back-end manufacturing will rise to 50 percent from 30 percent now, the company said.

Chip makers, such as Hynix, Intel and Samsung, have been suffering from a slump in demand for chips in electronic devices such as iPods, TVs and mobile phones, which forces them to cut capital investment and output, industry insiders said.

In 2005, Hynix formed a joint venture in Wuxi with ST Microelectronics. Last year, ST Microelectronics sold its stake in the joint venture to US-based Numonyx.



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