SK Hynix to invest $2.7 billion on memory chip output as demand soars

SEOUL (Reuters) - 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 to boost memory chip production, seeking to capitalize on an industry-wide surge in demand.

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Most of the investment by the world’s No. 2 memory maker will go toward building a new plant to make NAND flash chips used for long-term data storage.

Booming demand for more firepower on mobile devices and the adoption of SSD storage in personal computers and data servers has also prompted rivals Samsung Electronics Co Ltd and Toshiba Corp to boost spending on chip production.

“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.

Some 2.2 trillion won will be spent on the new NAND chip plant which will be located in South Korea, and another 950 billion won will be spent to boost DRAM capacity at its existing facilities at Wuxi, China.

The robust demand for memory chips has also driven strong gains in share prices and lifted earnings for chipmakers.

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

Toshiba’s shares are up more than 78 percent this year and it said this month that annual earnings at its chips and devices division are likely to beat forecasts, helped by NAND sales.

Shares in Micron Technology Inc are up more than 45 percent and it has forecast better-than-expected quarterly profit.

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

Supply will also be constrained as chipmakers shift to new production methods. In the NAND market, many manufacturers are converting existing production lines to high-end 3D NAND technology.

Research firm IHS expects NAND industry revenue to grow by 5.9 percent to $35.7 billion in 2017, up from 5.7 percent in 2016.

($1 = 1,193.2100 won)

Reporting by Se Young Lee; Editing by Lisa Shumaker and Edwina Gibbs