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SK Hynix plans to spend $107 billion building four memory chip plants

SEOUL (Reuters) – South Korea’s SK Hynix Inc on Thursday said it would spend $107 billion building four factories, such as the memory chip maker seeks to maintain its competitiveness in the face of Chinese efforts to be a leading chipmaking nation.

The logos of SK Hynix is seen at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji

The chip fabrication plants will be built on a 4.5 million square meter site south of Seoul in early 2022, in addition to the two existing domestic factories who get a separate 55 trillion won ($49 billion) investment for the next ten years.

The plans for the factories, the production of DRAM and the next generation of chips, as chipmakers to prepare for an increase in the demand for the power of new technology, such as the fifth-generation (5G) communication networks and artificial intelligence, even as a slowdown in smartphone sales kills from a two-year chip tree.

“But there is not enough chip demand for autonomous cars now, I believe that there is much more demand for the self-driving vehicles in the next 10 years, or as early as 2023 or 2024,” said analyst Kim Young-gun at Mirae Asset, Daewoo.

“That will lead to increased chip demand for SK Hynix,” so will the commercialization of 5G networks in the coming years, Kim said.

The plan also strengthens an arms race between South Korea, the world’s largest exporter of memory chips, and China, which is aggressively promoting chipmaking investment to curb the import dependence in the middle of a trade fight with the United States.

China is the world’s largest chip consumer, importing $270 billion in 2017, more than the total imports of crude oil.

SK Hynix said the investment plan, subject to the approval of the local authorities, you will see that more than 50 domestic and foreign suppliers to connect on the site in Yongin, 40 km from the capital.

The chipmaker, which has a third factory in the Chinese city of Wuxi, said that it has not yet determined the increase of the production capacity.

“It is indeed a long term investment plan and our strategy may change depending on the market conditions,” spokeswoman Olivia Lee told Reuters.

Shares in SK Hynix were up 1.5 percent, while that of the domestic peer Samsung Electronics Co Ltd, which announced a new smartphone at the end of the Wednesday – were almost flat.

SK Hynix was a member of a consortium led by U.S. private equity company Bain Capital bought the majority of the Toshiba Corp. memory chip business last year. On Wednesday, people familiar with the matter told Reuters Bain had selected banks to manage an initial public offering of the Toshiba Memory at the beginning of September.

Reporting by Heekyong and Yang Ju-min Park; Editing by Subhranshu Sahu Cushing and Christopher

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