SK Hynix fire leads to jump in memory chip prices

Prices for memory chips used in smartphones and personal computers surged 19 percent, the most in three years, as SK Hynix suspended operations in China after a factory fire. Shares of the Apple supplier fell.

The blaze occurred Wednesday during the installation of equipment at a factory in Wuxi, China, manufacturing dynamic random-access memory chips for SK Hynix, the world’s second-largest maker. The fire burned for about 90 minutes before being extinguished. One person suffered minor injuries.

The price of the benchmark DDR3 2-gigabit DRAM jumped 30 cents, the biggest increase since September 2010, to $1.90 Thursday, according to DRAMeXchange, Asia’s largest market for the components. The surge underscores growing concerns that makers of mobile devices and PCs will suffer rising component costs due to potential supply shortages, as SK Hynix makes almost 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 report yesterday. “Such an event is likely to cause the price uptrend of PC DRAM and mobile DRAM to continue throughout” the fourth quarter.

SK Hynix, which makes half of its chips in Wuxi, held a 30 percent share of the global DRAM market in the second quarter, following Samsung Electronics’ 32.7 percent, TrendForce said. 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, according to Sanford C. Bernstein & Co. report.

The Korean company’s customers include Apple, Samsung, Lenovo Group, Dell and Sony. Apple, Samsung, Lenovo and Sony all are releasing new flagship smartphones this year as they compete in a market estimated to be worth $280 billion. Apple will debut a new iPhone on Tuesday, a person familiar with the matter has said.

“We are still investigating the extent of damage,” SK Hynix said in an e-mailed statement Wednesday “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.”

Bloomberg