Hynix considers Chinese sale

Lay-offs at Hyundai led to unrest in Korea

South Korean semiconductor giant Hynix is still struggling to sort out its debts.

Foreign creditors of South Korea's Hynix semiconductor unit are now set to meet on 8 November to decide whether to declare it in default on loans owed by its US unit.

Speculation that it is to sell a chip plant to a Chinese consortium may provide it with some $600m (£420m) extra cash, but is likely to renew government fears about competition from China.

News of a possible sale underlines the longer-term "strategic challenge South Korea faces from China," HSBC economist Jonathan Harris told the BBC's World Business Report.

Competition fears

Hynix - the world's third-largest chip company - has said it is talking to a Chinese consortium for a sale of one or more production lines.

Chinese steel giant Shougang Group has denied reports it has put in a bid.

Huge domestic demand for chips has prompted China to announce a series of high-profile semiconductor plant projects.

This has renewed existing fears in South Korea about the sector's future competitiveness.

"I think the government is going to be torn. It wants to be supportive of anything Hynix does to raise money... there will be a group that feels they are giving away the crown jewels in allowing the Chinese to come in to gain access to this FAB," Mr Harris said.

"We have seen the success Taiwanese companies have had in outsourcing production into China. It is going to focus a few minds in the Korean government as to what that then means for Korea's competitiveness," he added.