[Click eStock] "Micron Power Outage Shakes DRAM Supply... SK Hynix to Surpass 9 Trillion KRW Operating Profit Next Year"

Power Outage at Taiwan Factory Accounting for 9% of Global DRAM Supply
DRAM Price Increase Expected Sooner... SK Hynix May Benefit

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] A power outage at the Taiwan factory of U.S. semiconductor company Micron is expected to disrupt the supply of DRAM. Due to supply disruptions caused by power outages or fires, client companies are expected to secure inventory, and competitor SK Hynix is anticipated to benefit.

On the 4th, Daishin Securities maintained a 'Buy' rating on SK Hynix for this reason and raised the target price by 21% to 140,000 KRW. The closing price the previous day was 111,500 KRW.

Earlier, on the 3rd (local time) around 3 PM, a power outage occurred at Micron's DRAM fab (production plant) in Taoyuan, Taiwan. It was initially reported that power was restored after one hour, but Daishin Securities' own verification found that electricity was supplied only at 5:30 PM, 2 hours and 30 minutes later. This plant was acquired by Micron from Inotera in 2016 and accounts for 30% of Micron's total DRAM production and 9% of global DRAM production. Researcher Soobin Lee of Daishin Securities stated, "If a power outage occurs during semiconductor production, all DRAM wafers in production must be reproduced from the first process," adding, "The impact on supply will be more severe than initially expected."

Against this backdrop, analysis suggests that the timing of DRAM price increases will be accelerated. Previously, Daishin Securities expected DRAM sales price increases to begin from the second quarter of next year, citing that the first quarter is typically an off-season and client inventory exceeds past averages. However, due to this power outage, demand to secure safety stock is expected to arise, hastening the timing of price increases.

In the past, when power outages or fires occurred, concerns over rising memory prices led client companies to urgently secure inventory, directly affecting DRAM prices. The fact that Samsung Electronics and SK Hynix's DRAM inventory is at a normal level of two weeks or less is also a burden for client companies. The researcher predicted, "The average DRAM selling price in the first quarter of 2021 is revised upward from a 3% decrease quarter-on-quarter to no change," and "With the acceleration of the DRAM price increase period, SK Hynix's annual operating profit next year is expected to reach 9.1 trillion KRW."