China factory blaze sends memory chip prices soaring

Chip costs jump to a three-year high after a factory belonging to the world's second largest supplier catches fire

Topics: The Guardian, memory chips, China, Fire, Factory fire, Hynix, mobile phones, , ,

The price of memory chips for mobile phones and computers has soared by 19%, a three-year record, following a fire at a factory in China belonging to Apple supplier SK Hynix.

The world’s second-largest chip maker after Samsung, Hynix supplies a third of the dynamic random access memory (DRAM) chips sold globally. The company has halted production at its factory in Wuxi near Shanghai after the blaze tore through the foundry for 90 minutes.

The impact on prices at the DRAMeXchange, the largest Asian market for components, highlights how device makers face rising costs. Booming smartphone sales mean demand for specialist materials is so high that it can quickly outstrip supply.

The cost of the benchmarck DDR3 2-gigabit chip jumped by 30 cents to $1.90 on Thursday, the biggest increase since September 2010, Bloomberg reported.

Hynix is said to supply Apple, Samsung, Lenovo, Dell and Sony, which use its components in a range of devices from phones to tablets and laptops.

The fire on 4 September during installation of equipment at Wuxi damaged the clean room, which one industry expert said could take half a year to fully rebuild.

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“We are still investigating the extent of damage,” SK Hynix stated. “Currently, there is no material damage to the fab equipment in the clean room, thus we expect to resume operations in a short time period so that overall production and supply volume would not be materially affected.”

The clean room is the heart of the foundry, where chip wafers are produced in an environment controlled to eliminate dust and dampen vibration. Temperature and humidity are also programmed in order to minimise static.

“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 report. “Such an event is likely to cause the price uptrend of PC DRAM and mobile DRAM to continue throughout” the fourth quarter.

Hynix, which is headquartered in South Korea and has an estimated 30% of the global DRAM market, saw its shares fall nearly 4% in Seoul on Friday. Samsung, which is the largest supplier of these components with a near 33% share, according to TrendForce, saw a slight lift in its share price.

If the Wuxi factory’s production is halted for more than a week, substantial shortages could lead to higher prices, benefiting all memory-chip manufacturers, analysts at Sanford C Bernstein said in a report.

This article originally appeared on guardian.co.uk

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