Japan said it would scrap a punitive import tariff on computer memory chips made by South Korea's Hynix Semiconductor Inc (000660.KS: Quote, Profile, Research, Stock Buzz), ending a three-year trade spat between the Asian neighbours.

Japan originally slapped the tariff on Hynix in 2006 because it believed that state-led bailouts in 2001 and 2002 of the chipmaker hindered fair competition. Hynix competes with Japan's Elpida Memory Inc (6665.T: Quote, Profile, Research, Stock Buzz).

The decision may help loss-making Hynix, which along with its rivals has been battered over the last two years by the sector's toughest downturn ever amid steep price falls and weak demand.

Shares of Hynix, the world's No. 2 memory chip maker after Samsung Electronics Co Ltd (005930.KS: Quote, Profile, Research, Stock Buzz), reversed earlier losses and gained 0.7 percent after the news. Elpida shares were up 11.6 percent, little changed from their level in the morning.

Japan's Ministry of Economy, Trade and Industry said it would abolish a 9.1 percent tariff on Hynix's dynamic random access memory (DRAM) chips made by Hynix after an investigation concluded that the South Korean firm was no longer benefitting from government aid.

Hynix said it was hoping to post a profit by the end of the year as it aims to expand its market share in Japan to around 20 percent, or the level of its average global market share, from the current 15 percent.

Hynix expects $200 million more in revenue as it hopes to restore its market share in Japan ... and it is strongly committed to swinging into a profit by the end of the year, Hynix said in a statement.


But some analysts said the impact of the ruling might be limited.

The company is expected to post a profit in the second half anyway, thanks to improvements in DRAM contract prices, said Won Seo, an analyst at NH Securities in Seoul. This is good news, but what really matters for Hynix is price movements in DRAM.

Seo predicts the company will swing to a profit in the third quarter, which may represent the peak of DRAM pricing in 2009. DRAM chips are mostly used in personal computers.

Japan lowered its tariff on Hynix chips from 27.2 percent in September after the World Trade Organisation ordered it to do so, and it put the remaining 9.1 percent levy under review.

A ministry official in Japan suggested on Monday that Tokyo could reimpose duties if Hynix obtained new state-led financial support.

If Hynix were to receive new financial support, and if Japanese companies were to say that the support prevented fair competition, then we could reinstate countervailing duties, said ministry official Kenya Konno.

The move comes as indebted Hynix's shareholders and former creditors have agreed to let the chip maker raise up to $510 million in a rights offer. [ID:nSEO323625] (Additional reporting by Marie-France Han; Editing by Chris Gallagher and Jean Yoon)