Bloomberg News

Chip Prices Reach Two-Year High After SK Hynix Fire in China

September 23, 2013

SK Hynix Inc. DDR3 SDRAM DIMM Memory Chips

SK Hynix, the world’s second-largest producer of memory chips, has boosted production in South Korea to reduce the impact of the fire. Photographer: Jean Chung/Bloomberg

Smartphone and computer makers face higher costs for a key component as memory-chip prices surged 42 percent, reaching the highest in more than two years, following a fire at an SK Hynix Inc. (000660) plant in China.

The price of the benchmark DDR3 2-gigabit dynamic random-access memory chip reached $2.27 yesterday, compared with $1.60 on Sept. 4, when a fire forced the closing of SK Hynix’s factory in Wuxi, according to DRAMeXchange, Asia’s largest market for the components. Icheon, South Korea-based SK Hynix expects to resume production on the fire-hit line next month.

SK Hynix, the world’s second-largest producer of memory chips with customers including Apple Inc. (AAPL:US), Dell Inc. (DELL:US) and Sony Corp. (6758), has boosted production in South Korea to reduce the impact of the fire. The surge in prices may affect smartphone makers as International Data Corp. forecasts that China shipments alone will surge to 450 million units next year from 360 million units this year.

“Chip prices will continue to rise throughout the fourth quarter or at least there will be no drop until the operation gets into full swing,” Oh Sang Woo, a Seoul-based analyst at Leading Investment & Securities Co., said yesterday. “The market previously expected the price to peak out in the fourth quarter.”

Micron Technology Inc. (MU:US) may be the biggest beneficiary as an alternative supplier, Oh said. The Boise, Idaho-based company’s stock has risen 23 percent since the fire.

Samsung Electronics

SK Hynix shares rose 0.8 percent to 30,550 won at the close of trade in Seoul. The stock has gained 19 percent this year, compared with a 0.6 percent rise in the benchmark Kospi index.

Before the fire, memory-chips hadn’t crossed $2.20 since February 2011, when they reached $2.30.

The blaze, which occurred during the installation of equipment, burned for about 90 minutes before being extinguished. One person suffered minor injuries.

SK Hynix said Sept. 13 it will fully recover normal output levels in November after resuming part operation at an unaffected line on Sept. 8. The company yesterday declined to comment beyond its earlier statement.

SK Hynix makes half of its chips in Wuxi. The company held about 30 percent of the global DRAM market in the second quarter, following Samsung Electronics (005930) Co.’s 32.7 percent, TrendForce said in an Aug. 8 report.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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