Tue, Aug 07, 2007 - Page 11 News List

Samsung Electronics says power outage won't hurt it

IMPACT ON TAIWAN Shares of local flash memory makers were boosted yesterday on anticipation they may pick up some orders from Samsung customers

AP AND DPA , SEOUL

Samsung Electronics Co, the world's largest chip maker, said yesterday that it expects to meet production targets and quarterly earnings estimates despite a power outage at a chip manufacturing plant last week.

All six chip production lines at a factory near Seoul resumed normal operations on Saturday after an electrical blow out a day earlier caused an estimated 40 billion won (US$43 million) in losses, Samsung said in a statement.

"We plan to compensate for the production losses," Choi Chang-sik, senior vice president of the company, told reporters without providing specific figures.

"The company was able to resume normal operations quickly ... and its third quarter result will speak for itself," said Hwang Chang-gyu, president of Samsung Electronics' semiconductor business.

The cause of the outage is still being looked into, he said.

The production loss for flash memory could drive up prices in the NAND-flash market and help competitors, analysts in South Korea said yesterday.

NAND flash are used for making cellphones, portal media, iPOD and iPhones and other devices.

The actual loss could be much bigger than it appears, as analysts estimate the opportunity cost could be as high as US$108 million to US$217 million, depending on how quickly the company can get back to full production.

The affected lines represent more than half of the Samsung's total NAND-flash output.

The production cut is forecast to tip the scale in favor of suppliers by removing some of the Samsung's NAND-producing capacity.

"The accident would lead Samsung to produce around 80 percent of what it had previously planned in the quarter ahead," said Kim Byung-gi, a semiconductor analyst with Kium Securities in Seoul.

"This will certainly be a good news for its peers Hynix and Toshiba," he said.

Samsung accounts for 43.9 percent of the NAND-flash memory market share with Toshiba Corp and Hynix ranking second and third, according to second-quarter data from Taipei-based DRAM clearinghouse DRAMeXchange (集邦科技).

Meanwhile, Taiwanese flash memory makers soared yesterday, defying the TAIEX's 1.3 percent dive, on anticipation of more orders in the wake of the Samsung Electronics production blip.

Shares of Adata Technology Inc (威剛科技) rose 2.8 percent to NT$128.5 (US$3.91). Power Quotient International Co (PQI, 勁永國際) shares rallied 5.73 percent to close at NT$39.65. Transcend Information Inc (創見) shares surged by the daily-limit 7 percent to NT$150.5.

Separately, PQI said in a filing to the Taiwan Stock Exchange yesterday that it had signed an agreement with Japan-based TDK Corp to build a joint-venture in Taiwan in developing NAND flash-related storage products and sales.

PQI will hold a 40 percent stake in the new company, while the remaining 60 percent will be held by TDK, it said.

With TDK's strength in technology and patents and PQI's edge in research and development and sales channels, the pact will enable the two companies to tap into commercial computer application business, especially the solid state disk sector, the statement said.

Additional reporting by Jessie Ho

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