Prices for memory chips used in smartphones and personal computers surged 19% as SK Hynix Fire Sparks Supply-Crunch Woes

Chip Prices Surge as SK Hynix Fire Sparks Supply-Crunch Woes

Prices for memory chips used in smartphones and personal computers surged 19 percent, the most in three years, as SK Hynix Inc. (000660) suspended operations in China after a factory fire. Shares of the Apple Inc. (AAPL) supplier fell. The blaze occurred Sept. 4 during the installation of equipment at a factory in Wuxi, China, that makes dynamic random-access memory chips. The fire burned for about 90 minutes before being extinguished without causing major damage, the Icheon, South Korea-based chipmaker said. One person suffered minor injuries.The price of the benchmark DDR3 2-gigabit DRAM jumped to $1.90 yesterday from $1.60 a day before, according to the DRAMeXchange, Asia’s largest market for the components. The surge underscores growing concerns that technology firms will suffer from rising component costs due to potential supply shortages at the Korean chipmaker, which makes nearly one-third of the world’s DRAM chips.

“It will take at least half a year before SK Hynix’s damaged clean room is fully rebuilt,” market research firm TrendForce said in a Sept. 5 report. “This is expected to affect the Korean company’s production procedures considerably in the near future. Such an event is likely to cause the price uptrend of PC DRAM and mobile DRAM to continue throughout 4Q13.”

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

SK Hynix shares fell 1.6 percent to 27,700 won in Seoul as of 10:27 a.m. today, while the benchmark Kospi index is unchanged.

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

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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