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

September 24, 2013 Leave a comment

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

Computer and smartphone makers face higher costs for a key component as memory-chip prices surged 42 percent to the highest in more than two years following a fire at an SK Hynix Inc. plant in China. The price of the benchmark DDR3 2-gigabit dynamic random-access memory chip reached $2.27 today, compared with $1.60 on Sept. 4, the day 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., Dell Inc. and Sony Corp., 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 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 today. “The market previously expected the price to peak out in the fourth quarter.”

Micron Technology Inc. may be the biggest beneficiary as an alternative supplier, Oh said.

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, the 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 today 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 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

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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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