Power Loss At Samsung Plant Halts Production

A power outage at Samsung Electronics’s manufacturing plant near Seoul forced a shutdown of several production lines, which may result in a short-term squeeze in the supply of memory.

Initial rumors said there was a fire at the plant, which would have been far more severe. The company later said its Kiheung complex lost power after a malfunction at a transformer substation.

Samsung is the world’s largest maker of memory chips, with 44 percent of the market, according to market researcher iSuppli. Samsung’s loss was its competitors’ gain, with Hynix and Toshiba gaining in the Asian market and Sandisk and Micron gaining in the American stock market on what was otherwise a horrible day for investors.

The plant makes DRAM  and NAND  flash chips, which are widely used in many portable devices. A Samsung spokesperson told the Associated Press that six of 11 lines were shut down, including one that made advanced NAND flash, and that some of those lines were halted.

Samsung said it would take about two days to get its factory back up to production, but declined to discuss the impact of the lost production. Dean McCarron, president of semiconductor analysis firm Mercury Research, said the complexity of chip manufacturing is a factor.

“A lot of people don’t realize there’s hundreds or even thousands of steps to manufacture a chip,” he told internetnews.com. “Every layer is a step and there’s hundreds of layers in a chip.”

Also, the manufacturing process for memory is an all-or-nothing affair. If there is substantial power disruption during production, you lose any work in process. So anything in the process of being manufactured by Samsung is going to be scrap, he said. Samsung is putting its estimated loss at 15 percent for the third quarter.

Given its market position, McCarron figures that could mean an eight to 10 percent shortfall in memory for the overall market, which could trigger some price increases. “It would make things a little tight. It wouldn’t be a total market crisis but it would be enough to have its impact felt market-wide,” he said.

Analyst Jim McGregor of In-Stat was even less concerned. “It won’t be that bad,” he said. “If it was a major natural disaster then I would be worried. With memory prices in the tank anyway, if anything else it may stabilize things. It’ll put a crimp on them this quarter, but it’s a short-term thing.”

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