Hynix Semiconductor Inc. said Monday that it plans to further increase its capital spending budget for this year, a sign that chip market conditions are improving as consumers and corporations begin to spend on personal computers and other hand-held devices such as smart phones.
The world's second-largest maker of computer memory chips by revenue said it has decided to raise its 2010 capital expenditure budget to up to 3.05 trillion Korean won ($2.5 billion) from the initially planned 2.3 trillion won. In 2009, Hynix's capital spending was 1 trillion won.
Hynix said it has decided to boost its investment plan for this year to accelerate its technology migration and to exploit the recent strong demand for value-added memory chips.
Hynix's move comes just two weeks after hometown rival, and the world's largest memory chip maker, Samsung Electronics Co. said it will spend a record 26 trillion won on manufacturing facilities and research and development this year. Of that total, it has set aside around 11 trillion won for its chip business alone, which will be partly used for the construction of a new line for dynamic random access memory, NAND flash memory and next-generation memory products.
Separately, Hynix said it will buy out the 21% stake held by Numonyx Holdings B.V. in Hynix's majority-owned Chinese production facility. The widely expected move follows the acquisition of Numonyx in February by U.S. chip maker Micron Technology Inc.—a competitor of Hynix in computer memory chips.
Hynix will spend $423 million to buy out Numonyx, bringing to an end a partnership, which began in August 2008 and which was due to last five years, to jointly develop NAND flash memory chips.
"It's true that the Numonyx's technology had helped us to safely enter the NAND flash memory market, but we now have secured a competitiveness in the NAND flash segment, so ending our partnership with Numonyx won't hurt our business at all," said Hynix spokeswoman Park Seong-ae. NAND flash memory chips are used to store data in music players and digital cameras, while DRAM chips are most widely used in personal computers.
Shares in Hynix were down by 2.3% at 25,100 won at 0439 GMT, underperforming the Kospi's 0.5% rise, but analysts said the market was reacting to lower DRAM prices rather than the Numonyx development.
"I don't think this news is bad for the firm," said Won Seo at NH Investment & Securities. "If Hynix has to end the relationship with Numonyx after Micron Technology's acquisition of Numonyx, it's better for Hynix to end it now when the chip cycle is upbeat. And Hynix is now equipped with its own competitive NAND flash memory chip technology, so it can sustain its NAND chip business without Numonyx's help."
Mr. Seo also said that the size of investment increase "looks appropriate, and I don't think that Hynix's capex increase following Samsung's hike will create an oversupply issue in the chip industry as the chip industry cycle is expected to remain brisk for a while."