The board of Hynix Semiconductor, the South Korean chipmaker, has thrown out a deal that was meant to rescue its most valuable operations by merging them into US rival Micron Technologies.

Instead, the troubled company said, it will hang on to its memory chip (DRAM) making business and try to go it alone.

Investors, who were worried that they were being bought out on the cheap, welcomed the news and Hynix shares shot up 6%.

But hopes of an end to the turmoil in the industry which led to Hynix's problems - oversupply and wildly fluctuating prices - now seem remote.

One in, one out

The rejection comes just as another major Korean manufacturer has sealed its absorption into a bigger US firm.

General Motors has picked up the healthier parts of Daewoo Motor for what observers see as a knock-down price.

But Hynix decided against selling its six DRAM plants to Micron.

The restructuring plan drawn up by Hynix's creditors for the rest of the company was unrealistic and over-optimistic, the board said in a statement.

The plan over-valued the stock Micron would give Hynix as part of the deal.

"We are confident that with the upturn in the semiconductor industry and new developments in our technology, our business competitiveness has improved," the board said.

"Therefore, we have concluded that it is possible for Hynix to successfully exist as an independent entity."

Trouble in store

But the decision to reject the $3bn (�2.06bn) offer not only leaves the DRAM market racked by oversupply.

It also means that creditors who had to bail out Hynix twice last year are left out of pocket. They may well now force the company into court protection rather than continue to pay out money to keep it going.

"I don't think there is a lot of appetite from banks, and the non-banks as well, to lend to Hynix as is," said Nomura Securities banking analyst Brian Hunsaker.

"So Hynix's long-term survival is still very much in doubt."