Arik Hesseldahl

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Fire in China Memory Chip Plant Could Slow PC and Phone Shipments

SK_Hynix_logoIf you were planning on maybe upgrading the memory on your desktop or notebook PC, or servers, you might want to get it done quickly or wait for a while.

A fire at a plant in China owned by Korea’s SK Hynix is likely to cause a disruption in the world’s supply of memory chips. The plant in Wuxi, China, is said to be responsible for as much as 10 percent of the world’s supply of DRAM chips, and about half of SK Hynix’s production capability.

DRAMexchange, a research firm that tracks the ebb and flow of the memory chip market, estimated that SK Hynix accounted for about 30 percent of the world’s share in the second quarter of the year. The other two major suppliers are South Korea’s Samsung and Micron in the U.S.

The chips are used not only in PCs and notebooks, but in smartphones and tablets, too. If production at the plant is halted for long, the firm estimates that it could delay the shipment of as many as 11 million notebooks and 10 million smartphones within a month.

Naturally, prices are rising. The spot price on the industry’s main benchmark, the two-gigabit DDR3 chip, has risen by more than three percent since the fire. It is said to be the biggest increase in about three years.

SK Hynix is a big supplier to Apple, and its chips have been seen in the iPhone. Last year, it was seen as benefiting from the ongoing legal battles between Apple and Samsung.

It wasn’t so long ago — just last year in fact — that a unique combination of factors caused a huge glut of memory chips. At least part of the effect back then was a spillover from the flooding in Thailand that hammered the supply of hard drives. Without an ample supply of hard drives, fewer PCs and serves shipped overall, meaning fewer memory chips were needed and so inventories stacked up.

That was bad for memory chip makers who saw prices fall — memory chips are a commodity after all — but was good for consumers who could in theory easily upgrade their machines inexpensively. For now it seems, those days may be over.

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