SK Hynix Inc. (000660), the world’s second-largest maker of memory chips, plans to build a new factory in South Korea to meet the growing demand for mobile devices, according to two people familiar with the matter. The company plans to invest at least 4 trillion won ($3.8 billion) next year on the plant and on maintenance and technology upgrades at existing facilities, the people said, asking to not be identified because the matter is private. Construction of the new factory will begin next year, with mass production of dynamic random access memory, or DRAM, chips starting as early as 2015, one of the people said.

SK Hynix, a supplier to Apple Inc. and Sony Corp. (6758), is seeking to tap higher prices and surging semiconductor demand for smartphones and tablet computers with advanced features. The company had 28.5 percent of the market for DRAM chips in the third quarter, compared with Samsung Electronics Co. (005930)’s 37.1 percent, as demand for lower-cost smartphones increased in emerging markets.

“DRAM chips are still in shortage with limited supply,” said Lee Min Hee, a Seoul-based analyst at I’M Investment & Securities Co. “Hynix continues to benefit from increasing demand for more advanced memory from handset makers, especially from the Chinese.”

Shares of the SK Hynix fell 2.9 percent to 35,550 won at the close of trading in Seoul, the biggest decline since Oct. 29. The benchmark index Kospi gained 0.5 percent today.

The company is considering plans for a new DRAM factory, although no details have been decided, Park Hyun, a spokesman for Icheon, South Korea-based SK Hynix, said by phone today.

Prices for chips have risen since a fire at an SK Hynix factory in Wuxi, China, on Sept. 4. The benchmark DDR3 2-gigabit DRAM chip traded at $2.34 on Dec. 17, compared with $1.60 on Sept. 4, according to DRAMeXchange, Asia’s largest market for the components.

DRAM chips, along with NAND flash memory, help smartphones, tablets and game consoles perform multiple functions, including playing video.

Spending on maintenance and technology upgrades will be about 3 trillion won next year, the people familiar with the plan said.

SK Hynix also faces a challenge from Boise, Idaho-based Micron Technology Inc. (MU), which DRAMeXchange says controls 26.2 percent of the market.

By: DocMemory
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