Amid prices rises, stock market gains and signs of optimism in the semiconductor market, the world's second and third biggest memory chipmakers are inching closer to their long-mooted merger.

US firm Micron is expected to offer about $5bn to take over the core memory chip operations of South Korea's Hynix.

That, Hynix officials said, might be just about acceptable to the creditors who have kept it afloat as it struggles with debts of more than 8,600bn won ($6.6bn).

A debt write-off agreed late last year as part of a $7bn bailout which also included debt-for-equity swaps and rollovers is set to reduce that to 6,000bn won - or just under $5bn.

Hynix officials said as long as that exposure was covered by any offer from Micron, that should prove satisfactory.

Korean news reports say the deal will allow Micron to roll Hynix's DRAM operations, which provide about two thirds of revenues, into a new entity. The remainder of Hynix would then be practically debt free.

Price hikes

The developments come as early indications suggest that after a wretched 2001, the current year could see something of a revival in the chip market.

Growing demand allowed Hynix to put its prices up this week by 30%, following a 20% rise in December. That could see the prices of PCs begin to rise again after falling to new lows over the holiday season.

A massive boost in production last year coincided with the gloabl downturn, leaving chipmakers burdened with massive stockpiles and depressing prices in some cases to below cost.

But the prospect of consolidation, coupled with the shrinking of inventories and what many hope is the bottoming out of the chip market, is encouraging both the companies and their investors.

The Korean Commerce Ministry said it predicts an 18.9% rise in chip exports in 2002, to $17bn.

Long way to go

That is far from constituting a full recovery after the 45% slump in 2001. And as the pickup in demand sparked by the holiday season wears off, the current euphoria could fade rapidly.

In Taiwan, United Microelectronics Corp (UMC) is staying cautious, warning that it may delay opening a new $3.6bn plant in Singapore till next year, rather than the second half of 2002.

While the plant's fabric is built, the much more expensive process of fitting it out is now on hold until there is more clarity about the timing of any recovery.

UMC itself is still recovering from a heavy loss in 2001 as chip sales fell to record lows, and is operating at about half its full capacity.