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iPhone chip power cut hits Apple shares

iPod chip production continues, investors wobble

Six Samsung chip production lines were hit by a power outage on Friday. But before the supply of NAND flash memory chips to iPhones, iPods and other devices could be disrupted, the Samsung processor production lines were back up and running - by noon on Saturday.

Samsung is the world's largest maker of two important memory chips, DRAM (dynamic RAM) used mainly in PCs, and NAND flash memory chips, which store songs, photos and other data in digital music players and other devices. Some analysts had feared the power outage on Friday might cause a sizeable disruption in the supply of NAND chips.

A spark in a transformer caused power to shut down near Samsung's main chip manufacturing complex in South Korea. The company originally estimated damage from the accident at 50bn Korean won (around £27m), and analysts had said the supply of NAND flash memory chips could be severely affected.

But on Saturday, Samsung said all six production lines were back in action, and reduced its damage estimate to 40bn won. Operations resumed earlier than expected, Samsung said in a statement.

Immediately after the power outage, some people feared the worst for Samsung and the global IT industry. For example, Macquarie Securities predicted the global supply of NAND memory chips could drop 10 percent to 15 percent in the near term, and Apple stock fell.

Apple shares fell 3.4 percent Friday on the Nasdaq to $131.85 each over concern iPhone or iPod production might be hurt by the Samsung issue, while shares of SanDisk, which manufactures NAND flash in partnership with Toshiba, rose 1.35 percent to US$53.43 on hopes it might benefit from the trouble.

Most of the affected production lines are used to produce NAND, and even though production was resumed promptly, many chips in production at the time of the power outage were damaged beyond repair by the sudden halt, according to Do Hoon Lee, semiconductor analyst at Macquarie Securities in Seoul.

Analysts still expect prices of NAND flash memory chips to rise in the near term.

"The production interruption by Samsung, the world's largest maker of NAND-type flash memory, could extend the current market shortage through at least the first half of August," said market researcher iSuppli Corp.

Samsung nabbed a 48.5 percent share of the global NAND flash market last year, iSuppli said, nearly double the share of second place Toshiba, 24.5 percent, while Hynix Semiconductor Inc. was third with 14.7 percent.


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