As Demand Soars, SK Hynix to invest $2.7 Billion on Memory Chip Output

In order to boost memory chip production and seeking to capitalize on an industry-wide surge in demand, South Korea’s SK Hynix Inc said on Thursday it will invest 3.16 trillion won ($2.7 billion) in its home country and China.

Building a new plant to make NAND flash chips used for long-term data storage is the main purpose of the investment as most of the money by the world’s No. 2 memory maker will go toward establishing that objective.

On the other hand, rivals Samsung Electronics Co Ltd and Toshiba Corp have also been prompted and driven to boost spending on chip production by the booming demand for more firepower on mobile devices and the adoption of SSD storage in personal computers and data servers.

“In order to grow further, it is important to secure production facilities in advance to deal with NAND Flash market growth to be led by 3D NAND solutions,” SK Hynix said in a statement.

While a 950 billion won will be spent to boost DRAM capacity at its existing facilities at Wuxi, China, the statement said that some 2.2 trillion won will be spent on the new NAND chip plant which will be located in South Korea.

Earnings for the chipmakers are being lifted and strong gains in share prices are being noted by the robust demand for memory chips.

On pace for their biggest gain since 2009, SK Hynix shares are up about 49 percent this year. The shares climbed 2 percent to outperform a flat broader market in Thursday morning trade.

Helped by NAND sales, annual earnings at its chips and devices division are likely to beat forecasts, Toshiba has said this month as its shares are up more than 78 percent this year. Micron Technology Inc has forecast better-than-expected quarterly profit and its shares are up more than 45 percent.

Analysts say that since it will take several years for capacity spending announced by key players to yield meaningful production growth, strong demand for memory chips will likely continue in 2017.

And as chipmakers shift to new production methods, the supply of chips will also be constrained. Many manufacturers are converting existing production lines to high-end 3D NAND technology in the NAND market.

Up from 5.7 percent in 2016, NAND industry revenue to grow by 5.9 percent to $35.7 billion in 2017, expects research firm HIS.

(Adapted from Reuters)

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