GO
Loading...

Samsung Electronics Shares Pare Losses Following Outage

Samsung Electronics shares were lower on Monday after a power outage at a major plant near Seoul on Friday affected some of its chip production lines, but the stock quickly pared back losses.

Samsung said it planned to keep its monthly chip production targets unchanged despite the power outage on Friday which hit six semiconductor production lines. The company will make up output lost from the accident by improving productivity, Samsung said, without specifying the size of lost output.

Samsung's Kiheung sprawling complex was hit by a power shortage on Friday afternoon that shut down six of its chip production lines, raising the prospect of price increases and boosting shares of rival memory chip makers.

It resumed full operation at the affected chip lines midday on Saturday and estimated total damage from the incident at around 40 billion won.

Some analysts on Friday said the incident could wipe out as much as a month's worth of Samsung's total output of NAND flash memory chips, but the firm later said damage from the accident would be smaller than expected.

Shares in the world's biggest maker of memory chips were down over 1% in the early morning session, beating the wider market's 2% drop. Samsung shares closed flat on Friday after giving up earlier gains of as much as 2.9%.

"This is a good opportunity to buy Samsung Electronic shares," said Kim Yung-min, fund manager at Jeil Mutual Savings Bank. "The impact on earnings from the power outage is not as bad as it first looked, and Samsung's earnings in the third quarter should still surge from the
prior quarter due to higher chip prices."

Shares of Hynix Semiconductor, the world's second-biggest memory chip maker, rose over 1% Monday morning after gaining 3.63% on Friday, while shares of Japan's Toshiba, the world's second-biggest NAND maker, added 1.4% after advancing 3.2% on Friday on the
Samsung news.

A problem at the switchboard at a transformer substation led to the power shortage at Kiheung on Friday afternoon. The plant makes dynamic random access memory (DRAM) chips, commonly used in personal computers, NAND flash chips, widely used in portable gadget such as digital cameras and music players, and non-memory chips.

Samsung said six chip production lines were affected by the outage, including Line 14, an advanced NAND flash line. Over the weekend its chip lines had resumed full operation by midday Saturday and expected total damage to be about 40 billion won ($43.36 million), after an earlier estimate of not more than 50 billion won.

CW Chung, an analyst at Lehman Brothers, wrote that the accident should only cut Samsung's third-quarter chip production by 4% and NAND flash output by 9%. "The DRAM market could potentially benefit as Samsung may shift capacity from DRAM to flash... to make up for lost production," Chung also wrote in a research report.

Featured

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video