Hynix and STMicro builds fab in China

The new fab, which will manufacture both DRAM and NAND Flash memories, is a logical extension of the existing successful manufacturing relationship between Hynix and ST and will provide both companies with front-row access to the rapidly growing Chinese market. The new semiconductor fab will also provide another global manufacturing facility to Hynix that will resolve trade issues including countervailing duties imposed on the Company’s products in the U.S. and Europe. At the new fab site, an 8-in. wafer line is scheduled to begin production by the end of this year, initially with a stable manufacturing process transferred from Hynix’ existing fabs in Korea. Shortly thereafter, a 12-in. wafer line will begin production in late 2006. The China market is currently about 15% of the worldwide semiconductor market and is projected to grow at an annual rate of more than 20% through 2008. The total investment planned for the project is US$2 billion. It will be financed with equity from both partners (Hynix 67%, ST 33%), US$250M of long-term debt from ST, as well as a financing package from Chinese local financial institutions, which will involve debt and a long leasehold.