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SK Hynix's DRAM supply threatened by fire damage

Posted: 09 Sep 2013 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM? wafer production? m?

SK Hynix's manufacturing plant in Wuxi, China was hit by a fire Wednesday last week. The blaze reportedly originated from the installation of one of the CVD machineries inside the wafer facility. Looking back at similar accidents experienced by UMC (1998) and Winbond (1996) and the kinds of insurance payments involved in such events, research firm TrendForce believes it will take at least half a year before SK Hynix's damaged clean room is fully rebuilt, which will greatly affect the company's production capacity.

The specific damages suffered by SK Hynix, as of this moment, are still being investigated. However, given that the company's Wuxi plant (its main DRAM production facility) produces nearly half of its monthly 260K wafers, the potential damages imparted on the supply end should not be underestimated. The Wuxi plant is responsible for making 100K of SK Hynix's PC DRAM and 30K of its mobile DRAM (including MCP). In the event that the main production procedures are halted, the shipment of nearly 11 million notebooks and 10 million smartphone units will be affected within the span of a month. Such an event is likely to cause the price uptrend of PC DRAM and mobile DRAM to continue throughout 4Q13.

The Wuxi plant accounts for more than 10 per cent of the world's DRAM wafer production. A considerable shortage in PC DRAM supply can be expected should SK Hynix's clean room take considerable time to recover. This shortage is projected to give rise to a further price increase as well as restrict the growth in the content per box for PCs. As many of the module manufacturers have already stopped giving their shipping and pricing quotes, the spot market prices have risen by nearly 20 per cent. In the subsequent periods, a major rebound can also be expected for the contract prices. The impact of the fire accident on the spot prices is predicted to become more noticeable following the clarification of the damage details.

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