Memory chip prices reach two-year high, aiding Micron

BLOOMBERG NEWSSeptember 25, 2013 

Smartphone and computer makers face higher costs now for a key component: Chip prices have surged 42 percent after a fire at an SK Hynix Inc. plant in China.

The price of the benchmark DDR3 2-gigabit dynamic random-access memory chip reached $2.27 Monday, compared with $1.60 on Sept. 4.

South Korea-based SK Hynix expects to resume production on its fire-hit line next month. The world's second-largest producer of memory chips has customers including Apple, Dell and Sony.

The surge in prices might affect smartphone makers, as International Data Corp. forecasts that China shipments alone will surge to 450 million units next year from 360 million units this year.

"Chip prices will continue to rise throughout the fourth quarter or at least there will be no drop until the (Hynix) operation gets into full swing," said Oh Sang-woo, a Seoul-based analyst at Leading Investment & Securities Co. "The market previously expected the price to peak out in the fourth quarter."

Boise's Micron Technology, an alternative supplier, stands to be the biggest beneficiary, Oh said. The company's stock has risen 23 percent since the fire.

Before the fire, memory chips hadn't crossed $2.20 since February 2011, when they reached $2.30.

The blaze, which occurred during the installation of equipment, burned for about 90 minutes before being extinguished.

SK Hynix said Sept. 13 that it expects to fully recover normal output levels sometime in November.

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