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After Hynix plant fire, spot market DRAM prices jump 20%

Production might not resume for six months and could affect 10% of the worlds DRAM supply

September 5, 2013 02:30 PM ET

Computerworld - The fire at SK Hynix's fabrication plant in China could affect as much as 50% of its DRAM production, according to a new report from DRAMeXchange, a research division of TrendForce.

SK Hynix Semiconductor's memory fabrication plant in Wuxi, China was damaged by a fire yesterday that blazed for almost two hours. The Wuxi plant accounts for 10% of the world's DRAM production and almost half of the 260,000 memory wafers Hynix produces every month, according to TrendForce.

While the damage to the facility is still being investigated, "the potential damages imparted on the supply end should not be underestimated," TrendForce warned.

Memory Fab report
In the second quarter of this year, SK Hynix accounted for 30% of the world's branded DRAM (used in PCs) and 25.7% of mobile DRAM.

The Wuxi plant is currently responsible for making 100,000 of SK Hynix's PC DRAM wafers and 30,000 of its mobile DRAM wafers, TrendForce said.

"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," TrendForce wrote. "Such an event is likely to cause the price uptrend of PC DRAM and mobile DRAM to continue throughout 4Q13."

Hynix said the plant, FAB C2, was said to be in better condition after the fire than first reported. Images showed the building surrounded by smoke and engulfed in flames.

"The damage is not as severe as it seems as the smoke was created because the fire was concentrated in the air purification facilities that are linked to the rooftop of the fab," Hynix said in a statement.

The company also said in an email reply to Computerworld yesterday that there is no material damage to the fab equipment in the clean room. Hynix said it expects to resume operations shortly, so overall production and supply volume should not be "materially affected."

Hynix did not return a request for comment or offer any updates today on its website about the condition of the plant or when it might be back on line.

TrendForce said a "considerable shortage in PC DRAM supply" should be expected if Hynix's clean room takes a considerable time to be repaired.

Any DRAM shortages are expected to further raise DRAM prices and restrict the growth in the amount of memory for PCs, TrendForce said.

"As many of the module manufacturers have already stopped giving their shipping and pricing quotes, the spot market prices have risen by approximately 20%. In the subsequent periods, a major rebound can also be expected for the contract prices," TrendForce said. "The impact of the fire accident on the spot prices is predicted to become more noticeable following the clarification of the damage details."

TrendForce said the damage to the building originated from either major manufacturing equipment or one of the chemical vapor deposition (CVD) systems used to produce highly pure materials machineries inside the wafer facility.

Judging by similar accidents at United Microelectronics Corp. in 1998, and Winbond Electronics Corp. in 1996, "and the kinds of insurance payments involved in such events, TrendForce believes it will take at least half a year before SK Hynix's damaged clean room is fully rebuilt," the report stated. "This is expected to affect the Korean company's production procedures considerably in the near future."

covers storage, disaster recovery and business continuity, financial services infrastructure and health care IT for Computerworld. Follow Lucas on Twitter at Twitter @lucasmearian or subscribe to Lucas's RSS feed Mearian RSS. His e-mail address is lmearian@computerworld.com.

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