SEOUL -(Dow Jones)- The arrest of several executives including one from Hynix Semiconductor Inc. (000660.SE) on suspicion of stealing chip-making technology from a bigger rival threatens to cast a cloud over creditors' efforts to sell down a stake in Hynix, analysts say.
On Thursday, South Korean prosecutors confirmed they arrested two executives from Applied Materials Inc. (AMAT) and an executive from Hynix Semiconductor Co. (000660.SE) for allegedly being involved in taking documents from Samsung about several process techniques and giving them to Hynix officials. Prosecutors said another 14 employees from Applied Materials and Hynix, and one from Samsung, are also under investigation.
The development comes as creditors of Hynix, the world's second largest maker of computer memory chips by revenue after Samsung, are looking to sell down their stake in the company to recoup their investments after several debt-for-equity swaps in recent years.
"It will make the stake sale in the overseas market ever more difficult," especially when creditors are already reluctant to sell their stake to foreign buyers due to concerns about a potential technology leak, said Greg Roh, an analyst at HMC Investment Securities.
Early this week, creditors of Hynix decided to extend the deadline to accept bids for their 28% stake in the chip maker by two more weeks after they received no bids in a second auction.
Hynix creditors sent out invitations in December to local investors to seek bids again after the first auction in November failed when South Korean conglomerate Hyosung Corp., which was the sole bidder for the stake, withdrew its bid on concerns about funding. After the second auction failed, creditors said they may even allow some foreign investors to take up part of the stake.
Hynix said in a statement it didn't use technology from a rival for its chip development. A Hynix representative in the U.S. didn't respond to requests for comment.
Samsung spokeswoman Lee Soo-jeong said Thursday that the company is "very concerned by this transgression as it is likely to damage the semiconductor market."
Lee said Samsung plans to take "appropriate measures," without elaborating.
Earlier, Applied Materials disclosed the arrests in a filing with the Securities & Exchange Commission. It said there are "meritorious defenses to the charges" and the company is taking appropriate measures. Applied Materials supplies semiconductor-making equipment to companies like Samsung and Hynix, which are rival makers of memory chips.
Shares in Samsung fell 0.1% to close at KRW776,000, while Hynix shares rose 2.1% at KRW21,750. The broader market closed up 0.1%.
-By In-Soo Nam and Jung-Ah Lee; Dow Jones Newswires; 822-3700-1907; jung-ah.lee@dowjones.com
(Evan Ramstad and Jerry A. DiColo contributed to this article.)
