KIHEUNG, South Korea (Reuters) - Samsung Electronics Co. Ltd. said on Monday it would crank up production to meet its monthly targets after a chip plant power outage last week as it moved to calm fears over chip supplies.
Samsung’s sprawling Kiheung complex was hit by a power shortage on Friday afternoon that shut down six of its chip production lines, raising the prospect of price increases and boosting shares of rival memory chip makers.
Shares in Samsung, the world’s top memory chip maker, fell 1.5 percent on Monday amid a broader weaker market, while rival Hynix Semiconductor Inc., the second biggest, rose 1.1 percent as the company is expected to benefit from Samsung’s troubles.
Samsung said over the weekend its chip lines had resumed full operation by midday on Saturday and expected total losses to be about 40 billion won ($43 million), after an earlier estimate of not more than 50 billion won.
“Some of the wafers that were being processed when the outage hit can be salvaged, and the potential yield from the recovered wafers was at a good level,” said Choi Chang-sik, executive vice president at Samsung’s semiconductor division, at a news conference in Kiheung.
Analysts said Samsung could shift the plant’s dynamic random access memory (DRAM) chip production lines to make NAND flash chips, widely used in portable gadget such as digital cameras and music players. The plant makes DRAM, commonly used in personal computers, NAND and non-memory chips.
Some analysts had initially said the incident could wipe out as much as a month’s worth of Samsung’s total output of NAND flash memory chips, but several later said the impact on earnings would be limited if the company managed to increase productivity.
CW Chung, an analyst at Lehman Brothers, wrote that the accident should only cut Samsung’s third-quarter chip production by 4 percent and NAND flash output by 9 percent.
“The DRAM market could potentially benefit as Samsung may shift capacity from DRAM to flash... to make up for lost production,” Chung said in a research report.
Samsung shares closed flat on Friday after giving up earlier gains of as much as 2.9 percent.
“This is a good opportunity to buy Samsung Electronic shares,” said Kim Yung-min, fund manager at Jeil Mutual Savings Bank.
“The impact on earnings from the power outage is not as bad as it first looked, and Samsung’s earnings in the third quarter should still surge from the prior quarter due to higher chip prices.”
Hynix shares gained 3.63 percent on Friday, while shares of Japan’s Toshiba, the world’s second-biggest NAND maker, added 1.4 percent after advancing 3.2 percent on Friday on the Samsung news.
ISUPPLI SEES UPSIDE
Market research firm iSuppli said the production outage might deliver an upside for the global NAND flash memory market by causing the current shortage of such parts to linger through the first half of August -- potentially boosting prices.
A problem at the switchboard at a transformer substation led to the power shortage at Kiheung on Friday afternoon.
Samsung said six chip production lines were affected by the outage, including Line 14, an advanced NAND flash line.
“Regarding any concerns about the lingering impact of this accident, our third-quarter results will show...we’ll do our best to outperform the market’s expectation,” said Hwang Chang-gyu, the president of Samsung’s semiconductor business.
“We have assured our key flash chip clients that there would be no supply problem.”
Additional reporting by Rafael Nam and Marie-France Han
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