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Last updated: May 31, 2010 8:07 pm

South Korea’s Hynix raises 2010 spending

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Hynix Semiconductor, the world’s second-largest memory chipmaker, on Monday said it would raise its capital expenditure by a third to Won3,050bn ($2.5bn) this year to take advantage of a strong recovery in the global technology sector.

Global chipmakers are rushing to expand production facilities on the back of robust sales of new mobile gadgets such as smartphones and tablet personal computers.

The move by Hynix to increase spending this year comes two weeks after industry leader Samsung Electronics doubled its investment for semiconductors to Won11,000bn in an effort to cement its technology lead over rivals.

This month, Japan’s Toshiba said it would boost capital spending, mainly in its chip and infrastructure business.

Hynix had previously earmarked an initial budget of Won2,300bn for this year. Its capital spending amounted to Won1,000bn last year.

The South Korean group said the move was needed to accelerate technology migration and focus on developing next-generation products.

Hynix plans to increase the portion of more advanced 40-nano chips from 15 per cent of its output to 50 per cent by the end of this year to improve productivity and cost competitiveness.

The aggressive investments by chipmakers underline the industry’s confidence in future demand. However, there are fears it could lead to oversupply, as happened a few years ago. The memory chip industry suffered net losses due to a glut of chips for more than two years before returning to profits last year.

“The industry is likely to peak in the third quarter but the upcycle will continue throughout next year although it may not be as strong as this year,” said Koo Ja-woo, an analyst at Kyobo Securities.

“The market conditions after 2011 depend on whether rivals join in expanding capacity although there are not many chipmakers which can finance big capacity expansion.”

Hynix reported its biggest quarterly profit in more than three years in the January-March period as strong demand for personal computers and a shortage of chips helped push up prices. Samsung, meanwhile, reported a sevenfold rise in first-quarter operating profit to Won4,405bn.

Hynix also confirmed on Monday that it would end its partnership with Numonyx, which was acquired by Micron Technology of the US. Hynix said it would acquire shares of its Chinese unit from Numonyx for Won522bn.

Samsung and Hynix were among the nine chipmakers that agreed to pay a total of €331m ($406m) in fines early in May, in the first settlement deal over cartel offences with the European competition authorities.

Hynix shares closed down 2.14 per cent at Won25,150 on Monday.

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