SK hynix to build new chip plant in Icheon

By Baek Byung-yeul

SK hynix will invest 3.5 trillion won ($3.12 billion) to build a new semiconductor fabrication plant called M16 at its headquarters in Icheon, Gyeonggi Province, the chipmaker said Friday.

The investment is aimed at responding to growing demand for memory chips.

The world's second-largest memory chip maker said the new chip plant, which is slated to be completed in October 2020, will be built on a 53,000-square-meter space at its headquarters. The construction will begin later this year.

SK hynix said it will spend 15 trillion won, including construction and equipment costs, to put the new factory in operation for the long term.

The company said this is in line with its 2015 plan to invest 46 trillion won in semiconductors. The company already invested 15 trillion won in its M14 semiconductor fabrication plant in Icheon, which was completed in 2015.

SK hynix's M15 plant in Cheongju, North Chungcheong Province, is slated to be completed in September.

The company said the average cost of one of its manufacturing plants is estimated at 15 trillion won.

SK hynix has continued to expand its production capacity with the M14 plant as well as the construction of the M15 and expansion of the cleanroom space at its Wuxi plant in China.

But the company decided to add the M16 plant to meet the growing demand for memory chips.

“It is essential to make additional investments in order to meet growing demand for memory chips,” the company said. “As the dimensions of semiconductor manufacturing equipment are getting larger, it is also important to secure enough cleanroom space in advance.”

SK hynix said the production portfolio of the M16 plant has not been decided yet, adding it depends on future market conditions and the company's technological capability.

The M16 plant is expected to generate a positive ripple effect on the economy.

According to the Institute of Economic Research at Seoul National University, the new plant is expected to create 348,000 additional jobs in the country and produce 26.2 trillion won worth of value-added effects until 2026.

Backed by growing memory chip demand from cloud computing, SK hynix reported a record second-quarter operating profit Thursday.

In the April-June earning report, SK hynix posted an operating profit of 5.57 trillion won, an 82.7 percent increase from 3.1 trillion won the previous year. Its sales also jumped 55 percent to 10.3 trillion won from the previous year.

Though there have been concerns that the memory chip market is likely to face an oversupply next year, the company seems to remain optimistic.

“DRAM supply in the second half will not be enough to ease the supply shortage,” Lee Myoung-young, the company's executive vice president, said during a conference call, Thursday.

“Despite suppliers' continued attempts to increase wafer capacity, production is not increasing fast enough due to the growing complexity in tech migration.”