SK hynix to invest W15tr for new chip plant
[THE INVESTOR] SK hynix said on July 27 it will pour a whopping 15 trillion won (US$13.40 trillion) into building a new chip plant that will be operational by 2020.
The mega plan comes as its crosstown rival Samsung Electronics is beefing up chip production amid China’s big semiconductor push recently.
“Supply shortages continue as demand for memory chips is soaring recently. Without facility expansion, we cannot meet the demand,” the firm said in a statement.
SK hynix’s new plant, called M16, will be located on a 35,000 square-meter site within the firm’s headquarters in Icheon, Gyeonggi Province.
About 3.5 trillion won is expected to be poured into the facility construction alone and considering new equipment purchases, including the next-generation extreme ultraviolet systems, the total spending will reach 15 trillion won in the next two years.
The product type and production volume have not yet been decided, the firm said, citing market uncertainties. Industry sources say the firm is likely to push for the more profitable 10-nanometer technology with the new plant.
On July 26, SK hynix announced quarterly record earnings that were ahead of earlier analyst consensus. In the April-June period, the firm reported 5.5 trillion won in operating profit and 10.37 trillion won revenue, up 83 percent and 55 percent from a year ago, respectively.
Despite the firm’s upbeat earnings in recent months, the share price has seen fluctuations largely due to the mixed outlook for the semiconductor industry, coupled with China’s pending entry.
Analysts agree the firm would post record earnings in the third quarter but after that its earnings momentum could slow down depending on market conditions.
Song Hyung-sub, an analyst at Hi Investment and Securities, lowered his target price from 96,000 won to 94,000 won, showing concerns about the price decline of DRAM later in the year.
“DRAM prices will continue to decline in the latter half of this year. The buyers have started demanding price cuts for their purchases,” he said.
In the meantime, Kim Kyung-min, an analyst at Daishin Securities, downplayed the price concerns on oversupply. He raised the target price to 109,000 won from 101,000 won, adding the firm’s current price-to-earnings ratio of 3.7 times is still “overly” undervalued.
“Some price cuts of DRAM would have a limited impact on SK hynix as it has already increased its production capacity to offset the slowing chip price,” he said.
SK hynix also admitted some price cuts would be unavoidable in the third quarter. The firm said it plans to increase production of more profitable, value-added products like the 10-nanometer DRAM and the 72-layer 3D NAND.
By Lee Ji-yoon (email@example.com)