South Korea's Hynix Semiconductor Inc has held talks with Europe's biggest chip maker, ST-Microelectronics, to build a chip plant in China, Hynix said on Monday, for a reported cost of $1.73 billion.
Such a tie-up would give the companies access to a market growing at an average 20 percent a year and help Hynix escape hefty US and European tariffs on its products.
Hynix, the world's third-largest maker of memory chips, has long eyed an entry into China's $30 billion semiconductor market and analysts said an alliance appeared a good option for an indebted firm struggling to make profits.
"I view the alliance as a most likely deal following their agreement last year to jointly develop flash memory chips," said Chin Yeong-hoon, a Daishin Securities' analyst, referring to a tie-up between the two firms to co-operate in chip development.
"For Hynix, forming a joint venture must be better than going alone in terms of funding", added Chin.
The proposed plant would make DRAM (dynamic random access memory) chips used for computer memory and flash memory chips used in digital cameras and mobile phones, Hynix said.
"We are considering a variety of options and (partnership) with STMicroelectronics is one of them," said Park Hyun, a spokesman for Hynix. "We may team up with a foreign investor, but may push ahead with it on our own."