Hynix says chip supply requests jump on Elpida troubles

SEOUL Tue Mar 13, 2012 8:45am GMT

Kwon Oh-Chul, CEO of South Korean chipmaker Hynix Semiconductor, speaks during a news conference in Seoul March 13, 2012. Hynix Semiconductor Inc , the world's No.2 memory chipmaker, said on Tuesday that it has seen marked growth in customer enquiries for increased chip supplies following financial troubles at Japanese rival Elpida Memory Inc. REUTERS/Kim Hong-Ji

Kwon Oh-Chul, CEO of South Korean chipmaker Hynix Semiconductor, speaks during a news conference in Seoul March 13, 2012. Hynix Semiconductor Inc , the world's No.2 memory chipmaker, said on Tuesday that it has seen marked growth in customer enquiries for increased chip supplies following financial troubles at Japanese rival Elpida Memory Inc.

Credit: Reuters/Kim Hong-Ji

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SEOUL (Reuters) - Hynix Semiconductor Inc (000660.KS), the world's No.2 memory chipmaker, said on Tuesday that it has seen marked growth in customer enquiries for increased chip supplies following financial troubles at Japanese rival Elpida Memory Inc 6665.T.

Elpida, the world's No.3 maker of dynamic random access memory (DRAM), filed for bankruptcy in late February with $5.6 billion in debt after failing to secure a rescue from other chipmakers.

"We're receiving lots of inquiries from clients concerned about securing a stable supply following Elpida's bankruptcy filing," Hynix Chief Executive Kwon Oh-chul told reporters.

"It'll take a lot of time and effort for Elpida to fully normalize or restructure its business, and uncertainty over its future creates a positive business outlook for us," Kwon said, adding that Hynix did not plan to add capacity from Elpida.

In Late February, the Japanese chipmaker said it planned to draw up a rehabilitation plan in six weeks as it struggled to find investors prepared to finance its restructuring.

Elpida, Japan's only DRAM chipmaker, has been grappling with a slump in chip prices as more consumers bypass PCs for devices such as Apple Inc's (AAPL.O) iPad, which primarily uses flash memory rather than DRAM. Heavy capital spending to keep pace with market leaders Samsung Electronics Co Ltd (005930.KS) and Hynix has also taken a toll, while a strong yen has undercut its global competitiveness.

Hynix, which produces chips for computer makers and Apple's iPad, had a 22 percent share of the DRAM market in the third quarter of last year, trailing sector leader Samsung Electronics with 45 percent, according to research firm IHS iSuppli.

Average DRAM prices could rise 15 percent by the end of the year if more than 25 percent of Elpida's capacity is taken offline, according to iSuppli estimates. Spot DRAM prices had fallen about 60 percent last month from a year earlier to below $1.0, squeezing Elpida and second-tier producers in Taiwan.

"Market conditions have started improving, with some products showing price rebounds ... we expect a broader-based recovery in the latter half of this year as supply growth eases from Elpida and other squeezed chipmakers," said Kwon.

Hynix, in which cash-rich SK Telecom Co Ltd (017670.KS) took a majority stake this year, said it expected to narrow the gap with market leader Samsung through steady investment and increased production of NAND chips, widely used in laptops, tablets and smartphones.

(Reporting by Miyoung Kim; Editing by Chris Lewis)

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