South Korea's ailing chip maker Hynix has indicated that it still prefers Micron as a potential buyer even though Germany's Infineon is thought to have started a bidding race.

"We will place priority on the Micron talks as they started first," a Hynix spokesman said.

Hynix, badly hobbled by $6bn in debt, has for months been in on-again, off-again discussions with Micron, the US company and world number two in the memory chip market.

The two were thought to be deadlocked over price before Infineon also staged a bid.

Micron has now raised its offer to $3.8bn from $3.1bn, according to the Financial Times newspaper, but is still far off Hynix' goal of $5bn.

The semi-conductor industry is consolidating in order to help it battle the worst slump in demand in its history.

Future outlook

Infineon has also had problems. The sharp decline in memory chip prices in recent months has devastated profitability across the sector, and Infineon has recently admitted that things look unlikely to improve in the near future.

And its own talks with Toshiba about possible co-operation came to an inconclusive end in December, after Toshiba decided to sell up to Micron.

With semiconductor prices on the rise again, at least moderately, memory chipmakers are keen to stabilise that position and ward off the drastic fluctuations which have been the rule.

Despite the bidding war, Hynix shares slumped over 6% on Monday due to fears over the company's performance.

The urgency of Hynix's situation is likely to be underscored by its financial performance in the last three months of 2001, set to be unveiled in the next few weeks.

The South Korean company is expected to have lost more than $3bn, a far worse deficit than any of its peers.