Samsung Electronics Co. Ltd. said on Friday it shut down six of its chip production lines after a power cut at a plant near Seoul, prompting expectations of tighter supply and a rise in prices.
The world's top maker of memory chips said in a statement it hoped to restore electricity to its lines within the day and a spokesman added that it could take up to two days for the lines to resume normal operations.
It is difficult to estimate the overall cost of the stoppage and therefore we will not release it, the statement said.
Shares in rival memory chip makers, such as Toshiba and Hynix Semiconductor Inc., rose as investors expected them to benefit from higher prices. But shares in Samsung, the world's top maker of memory chips, shed earlier gains of just under 3 percent to end the session flat.
Rumors that one of Samsung Electronics' flash memory chip plants had caught fire had initially weighed on the shares. The company later said its Kiheung complex had been hit by a power outage after a malfunction at a transformer substation.
The plant makes dynamic random access memory (DRAM) chips, commonly used in personal computers, NAND flash chips, widely used in portable gadget such as digital cameras and music players, and non-memory chips.
When a line is stopped it has to be stabilized and returned to normal. The NAND flash market is small, and any supply disruption will be reflected in the prices, said Song Myung-sup, an analyst at CJ Investment & Securities.
A Samsung spokeswoman said earlier six chip production lines were affected by the outage, including Line 14, an advanced NAND flash line, and added that some of those lines were halted. She declined to comment on the exact number of lines damaged.
A problem at the switchboard at a transformer substation led to a power shortage at 2:30 p.m. local time (1:30 a.m. EDT), the company said.
Analysts said that any unplanned stoppage at a chip plant was bad news.
When the power goes down, some of the wafers die in the process and they ... become obsolete, said Jae H. Lee, an analyst at Daiwa Institute of Research.
Everything is going to depend how long the power situation continues. Even if the power is turned back on though, it would take some additional time for the production line to resume.
The Kiheung has a total of 11 chip lines, but some of the older lines produce smaller volumes of chips so the impact of the stoppages is difficult to assess.
Several analysts estimated that Samsung's third-quarter shipments could be cut by as much as 15 percent following the outage.
Any supply shortfall from Samsung, which had 44 pct share of the world flash market in the first quarter, could have a ripple effect on the industry as the NAND flash market enters a traditionally high-demand period when makers of electronics gadgets gear up for the holiday gift-giving season.
A week ago, Hynix Semiconductor Inc., the world's second-biggest memory chip maker, predicted NAND flash shipments would surge by more than 100 percent in the third quarter.
Samsung declined to comment on the potential impact of the power cut on future earnings.
Samsung Electronics closed flat at 590,000 won, having fallen from the day's peak of 607,000 won.
CW Chung, an analyst at Lehman Brothers, said that the outage, while hurting Samsung Electronics, could be positive for the rest of the memory industry.
We believe that it will take at least one month to begin production again at these lines as the company will have to clean out damaged equipment and it is likely to take at least one month to complete wafer production, he said.
Hynix shares closed 3.6 percent higher at 37,100 won.
Shares in Japanese rival Elpida Memory, which had been trading down 1.9 percent on the company president's comments to the Nikkei business daily that DRAM price recovery would be limited, reversed that loss, to snatch a small gain at one point.
Shares in Toshiba, the world's second-biggest NAND maker, closed up 3.2 percent.