SK hynix Revises Outlook on Fire Damage – Objective Analysis

This article has been written by Jim Handy, semiconductor market research, Objective Analysis

Last Saturday SK Hynix offered an update to its earlier statement on the operation of its Wuxi, China, facility, which was closed after a fire on former Wednesday afternoon. 

The fab that was damaged by fire is still being evaluated, but the second Wuxi fab has been re-opened.

In a statement the company said: "Our plan is to resume normal operations with full production capacity in the shortest time by ramping up operations in stages as soon as the damaged facilities are replaced."

This appears to contradict the company’s earlier statement that operations will be resumed quickly so that production volume should not be materially impacted, as we reported in our second Wednesday Alert.

The company does imply that it has inventory in Korea by saying: "We will continue to make every effort to minimize the impact on supply with our inventories of finished products and completely processed wafers as well as production support from our HQs."

By "processed wafers" we assume that Hynix is saying that the company has ample inventory of pre-packaged product to carry it through the closure. This is unusual for a DRAM firm, most of which keep inventories to a bare minimum.

It is unclear which of the two Wuxi lines is still closed. We understand that one fab has been producing 300mm wafers for some time. The other line previously processed 200mm wafers, but was shut for conversion to 300mm in 2012. It is unlikely that this line was running at full capacity at the time of the fire. There could be a significant reduction in SK hynix’ volume if the higher-volume plant was struck by the fire, but this is not clear from the company’s statement.

Objective Analysis awaits more definitive information from SK hynix about the condition of the affected fabs, an estimation of when they will be back to production, and the company’s expected impact on their sales.