Daily Management Review

SK Hynix to Spend $ 26 billion on Two New Plants


08/25/2015


South Korean chipmaker SK Hynix, the second largest manufacturer of DRAM-memory, is going to spend 31 trillion won, or $ 26 billion, to build two new plants at home.



SK Hynix to Spend $ 26 billion on Two New Plants
Construction is expected to be completed by 2024. The company did not specify what kind of production the plants will produce. It is also not known anything about the launch of the enterprises. The new factory will be built in the framework of the investment program in the amount of 46 trillion won, or $ 39 billion, which SK Group holding, including SK Hynix, has previously announced.

Some of this money has been allocated to the plant for the production of M14 DRAM-chips in the South Korean city of Icheon, 80 kilometers from Seoul. The line start is expected in the current quarter. At the initial stage, production volume will amount to 3 thousand wafers per month, and the maximum capacity will reach 200 thousand wafers per month, says Yonhap agency.

SK Hynix plans will not worsen the situation in the industry and will not lead to price competition, experts say, because the investments are designed for a long period of time. They also note that the cost of the South Korean vendor is unlikely to exceed the normal volume of capital investments of the company.

SK Hynix will act cautiously. The company promised to carefully study the market situation before approving the competitive production plans for the new plants.
 
- Industry of memory chips is under tight control of a few companies, so that it simply does not make sense to start the knockout game for the market participants " - said an analyst at HMC Investment Securities Co. Greg Roh. According to him, in terms of investment, SK Hynix operates according to competitors, such as Samsung.

Recall that SK Hynix's net profit in April-June amounted to 1.1 trillion won, or $ 954 million against 673.5 billion won a year earlier. This revenue has increased year on year by 18.2% to 4.63 trillion won, or $ 4 billion, while operating profit rose by nearly 27% to 1.37 trillion won ($ 1.2 trillion).

Both figures were slightly below analysts' forecasts.

The SK Hynix also reported that the total supply of DRAM-products in the last quarter increased by 4% compared to the previous quarter, and shipments NAND flash - 8%. However, due to falling prices for chips, operating profit in April-June 2015 was 13.4% lower than in January-March.

During 2014 SK Hynix posted a net profit of 4.1 trillion won (about $ 3.87 billion), up 46% more than the year before. 2013 became a record for the chipmaker, but the company managed to reach new heights.