South Korea's struggling chip maker Hynix Semiconductor has announced that it is in possible merger talks with the US company Micron Technology.

"Both companies are evaluating a broad array of strategic options," said Hynix chief executive Park Chong-sup and Steve Appleton, chief executive of Micron.

If a merger was to go ahead, the new company would overtake Samsung Electronics as the largest maker of memory chips.

Both Hynix and Micron have suffered from a sharp fall-off in demand for personal computers, which has hit sales of their main product, memory chips.

Losses

Hynix posted its largest ever loss - $1.24bn - in the three months to September and is estimated to owe 8.64 trillion won ($6.8bn).

In late October, it gained some breathing space, after its main creditors signed up to a multi-billion dollar rescue package.

The talks with Micron sent its shares up 7.2% to 2,300 won ($1.82).

Hynix's shares have almost doubled this month after the $7bn rescue by creditors.

They have also been lifted by market speculation about possible talks with Micron.

Output cut

Hynix's Mr Park also took the opportunity to call for a cut in output by major chip producers in order to boost the market.

This has been unpopular in the past because chip makers have been reluctant to risk losing market share.

Hynix and Micron will decide in a month whether their "exploratory" talks have come to anything, company officials said.