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Hynix says fire did not cripple China chip-making plant

By Miyoung Kim

SEOUL (Reuters) - SK Hynix Inc <000600.KS> expects to resume production of memory chips at its Wuxi, China, plant shortly, the South Korean chipmaker said on Wednesday, adding that a fire at the facility caused one minor injury but did not cripple critical equipment.

Hynix said the fire raged for more than an hour. After an initial assessment, the world's No. 2 maker of dynamic random access memory (DRAM) chips said it found no "material" damage to fabrication gear in its clean room at the plant, which produces around 12 to 15 percent of global computer memory chips.

With global supplies of DRAM chips already tight, shares in rivals Micron Technology Inc and SanDisk Corp rallied after early reports of the fire. But the rivals' shares pared gains after Hynix's update.

Micron shares were up 4 percent at $14.615 at midday, after surging almost 9 percent at one point. Sandisk was up 2.3 percent at $56.60, after climbing 6 percent at its peak.

"Currently, there is no material damage to the fab equipment in the clean room, thus we expect to resume operations in a short time period so that overall production and supply volume would not be materially affected," company representative Seongae Park said in a statement.

"In addition, we expect that the majority of damage will be covered through insurance."

The fire started at around 0750 GMT during chip equipment installation and was extinguished in less than two hours, the company said. The incident caused one minor injury, it said, adding that it is still assessing exact damages.

Park said photographs showing towering clouds of black, billowing smoke that circulated among blogs and news websites made the fire appear worse than it actually was.

"While there are some pictures of the fab surrounded by large dark smoke being circulated, please be informed that the damage is not as severe as it seems," Park said.

"The smoke was created because the fire was concentrated in the air purification facilities that are linked to the rooftop of the fab."

Hynix, which commanded 30 percent of the memory chip market in the second quarter, said the plant it has suspended produces around 40 percent to 50 percent of its total DRAM output.

Any prolonged suspension could tighten the global supply of DRAM chips, widely used in computers and mobile devices. DRAM chip prices nearly doubled in the first six months of this year due to tight supply.

Hynix competes with bigger rival Samsung Electronics Co <005930.KS> and the third-ranked Micron. Samsung had 32.7 percent of the global DRAM market in the second quarter and Micron owned 12.9 percent, according to data tracker DrameXchange.

(Additional reporting by Supantha Mukherjee in Bangalore, writing by Edwin Chan in San Francisco, editing by Louise Heavens and David Gregorio)

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