By Kim Yoo-chul
SK hynix, the world's second-biggest supplier of memory chips, plans to invest "billions of dollars" to build new chip plants in Icheon, Gyeeonggi Province, in the years to come, the company said, Wednesday.
"SK hynix plans to construct new lines in Icheon where one of our key technology compounds are located, as existing chip lines there called ‘M10' are obsolete and unprofitable," said company spokesman Son Kyung-bae.
Son said "billions of dollars" will be spent for the construction of new plants over the next few years; however, he stressed the SK Group's semiconductor unit will be flexible in terms of the timing of the investments and the operation of new lines based on market conditions.
SK operates DRAM lines in Icheon, flash-type NAND chips in Cheongju and mobile DRAMs in Wuxi, China.
Market analysts expect the total amount of investment will reach up to 13.5 trillion won as technology complexity continues to increase as the global chip market is going through an economies of scale amid the industry's new paradigm of bankruptcies, exits and decades of value destruction.
The M10 line was constructed in 1994 with the goal of producing 200-millimeter or eight-inch wafers. But the line was shifted to the spot for a better 12-inch or 300-millimeter wafers in 2005.
Since 2006, SK hynix has persistently been seeking to persuade authorities at the national and regional city of Icheon to approve the construction of new lines to replace the M10 line.
But the government was reluctant to authorize the plan by the chip supplier due to fears that the new lines will adversely impact the local environment. "The authorization was because of SK hynix' commitment to strictly limit the emission of toxic chemicals and to protect the environment," the spokesman said.
The investment plan comes after SK hynix confirmed that its factory in Wuxi, China, has resumed full operations following a fire outbreak there. Damages from the Sept. 4 fire in Wuxi caused more than a month-long production halt, which caused global DRAM supplies to decrease by 10 percent in a single month.
"Our factory in Wuxi has fully recovered since November in terms of wafer inputs. The factory will also be fully operational within sometime next month to the output level before the fire," said the spokesman Son.
"SK hynix is one of the winners in the market. DRAM scaling is coming close to the end and each node is becoming progressively more difficult. As shrinkage slows, more wafer capacity is required to keep up with demand growth. This complexity further discourages new entrants as cost to enter is higher than ever," said Mark C. Newman, a senior analyst at Sanford C. Bernstein in Hong Kong.
The firm plans to invest as much as 3.8 trillion won on facilities next year, though the spokesman declined to confirm this.