Power outage forces Samsung to shut down 6 production lines in South Korea

By Colleen Taylor, Contributing Editor -- 8/3/2007

A power outage at a Samsung Electronics Co. Ltd. plant near Seoul, South Korea caused the company to shut down six of its chip production lines, the company announced today, in an event that analysts say could have significant effects on the memory market for the near-term.

Samsung said that the hour-long power cut, which was due to an overheated transformer unit at the company's chip factory in Giheung, in South Korea's Gyeonggi Province, caused the company to stop production on four memory chip lines and two non-memory chip lines.

Samsung said that the outage should cost the company some $54.1 million (50 billion Korean won.)

Analysts say that, although production is slated to resume this weekend, the shut-down could have a tactile impact on the industry for weeks because Samsung is such a giant player in the global memory market.

"The affected lines represent about 35 percent of global NAND production; they account for 90 percent of Samsung's NAND production," Nam Hyung Kim, director and chief analyst of memory ICs and storage systems for market research firm iSuppli Corp., told Electronic News. "A NAND production shortage could now extend through the first half of August."

Kim added that the outage's timing is "bad for the buyer," as the seasonal pricing for NAND flash was on track to decline.  However, Kim said, the shutdown will have a positive impact on other memory players, particularly Toshiba Corp. and Hynix Semiconductor Inc.

In the long term, Kim said he doesn't expect to see a "major impact" resulting from the shutdown; however, the pressure is certainly on now for Samsung to demonstrate a quick rebound. "It really depends on how quickly they recover this one," Kim said.

© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.