Hynix (Finally) Cuts Back Flash Production

This better not be an April Fool joke. DigiTimes reports that Hynix Semiconductor has decided to cut production of NAND flash in an attempt to reduce the insane glut of memory that has resulted in massive oversupply and erosion of prices and therefore profits.

Hynix is a big player in the memory sector, a $9.1 billion company in 2007 that grew by 13.7 percent, according to Gartner. Its output reduction will account for about 5% of worldwide capacity and should take about two months for the effects to be felt by the industry, according to the report.

NAND flash is used in a variety of products, from iPods to solid state drives. It has been a high growth market, but even as demand for flash products skyrockets, vendors still can’t make any money because supply has outstripped incredible demand.

One of the reasons for the high supply has been that many of the memory vendors in Asia receive government subsidies to open new fabrication lines, and who turns down a government handout? So more fabs were coming online even as average selling prices (ASPs) were collapsing and one vendor after another warned about it.

The reduction in production is not seen as an indicator of softness in the U.S. economy, since the product is sold around the world in markets not feeling the U.S.’s pain.