Bloomberg News

SK Hynix Partly Resumes Operations After Fire at China Factory

September 08, 2013

SK Hynix Inc. (000660) resumed part operation yesterday on a production line damaged in the Sept. 4 fire at a Chinese plant that sent prices of memory chips soaring the most in three years on concern supplies might fall short.

The world’s second-biggest maker of memory chips is still inspecting the damaged section of the line, the company said today. The blaze occurred during the installation of equipment at the factory, which makes dynamic random-access memory chips used in smartphones and personal computers. Prices for the chips climbed 19 percent as SK Hynix, which supplies nearly a third of the world’s DRAM chips, suspended operations at the Wuxi plant.

“It is one of the two parts of the line that was damaged and we’re inspecting the line and the clean room thoroughly to resume normal operations in the shortest time possible,” Park Seong Ae, an SK Hynix spokeswoman, said by phone. It is not known when the company can resume full production or how much the delay will affect supplies, Park said.

The price of benchmark DDR3 2-gigabit DRAM jumped 30 cents, the biggest increase since September 2010, to $1.90 on Sept. 5, according to DRAMeXchange, Asia’s largest market for the components. SK Hynix shares fell 3.7 percent to close at 27,100 won in Seoul on Sept. 6. Competitor Micron Technology Inc. (MU:US) gained 3.4 percent in New York trading in the two days through Sept. 6 before closing at $15.26.

‘Cause Disruption’

“It’s pretty impactful,” said Betsy Van Hees, an analyst for Wedbush Securities in San Francisco. “When you’re taking 15 percent of capacity offline you are going to cause disruption. We were concerned that pricing was going to go down. We think that’s off the table now.”

Chinese mobile phone makers may suffer the most from any shortages because they have been aggressive in price negotiations with chipmakers and have avoided long-term contracts, said Van Hees, who recommends buying Micron shares. Larger companies such as Apple Inc. (AAPL:US) and Samsung Electronics Co. will get the chips they need, she said.

To contact the reporters on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net; Yewon Kang in Seoul at ykang51@bloomberg.net

To contact the editor responsible for this story: Jim McDonald at jmcdonald8@bloomberg.net


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