Before you react to reports that Samsung and SK Hynix memory fabs are in jeopardy, pause for a little common sense and take a look at the messenger.
It was a clear case of economic sabre rattling and propaganda.
Last Friday (April 12) I got a call from a chip investor in Ohio claiming North Korea’s new leader is targeting major memory fabs of Samsung and SK Hynix as part of a plan to deal an economic blow to South Korea and the West. When asked, he told me he is buying shares in Micron Technology.
“Sixty-five percent of the world’s DRAM and 55 percent of its flash memory is made within 85 miles of Korea’s demilitarized zone,” said Larry Chlebina, president of Chlebina Capital (Akron, Ohio). He added that he is boosting his holdings of rival Micron stock.
Nano City, Samsung’s largest fab complex, which makes as much as 40 percent of the world’s DRAM and flash, is just 65 miles from Korea’s DMZ. It is adding a facility capable of 75,000 wafer starts/months, said Chlebina in an online analysis.
“No one thinks North Korea can hit the U.S., but they have thousands of short range missiles that could hit those Korean fabs,” Chlebina said, noting Samsung represents as much as 17 percent of South Korea’s GDP, much of it dependent on the memory chips.
Kim Jong-un reportedly reviewing attack plans that included Austin, Texas.
Given the new political tensions, Chlebina speculates Samsung will shift its plans from ramping the new Nano City fab to facilitating a new plant in China on which it broke ground last year. I asked Samsung about this but haven’t heard back yet.
Chelbina claimed pricing for memory on the spot market is already being affected by fears about the vulnerability of the Korean fabs. His thesis about North Korea’s intentions developed while pondering recent reports that North Korea wanted to target among other US cities Austin, Texas--where Samsung has a large logic fab.
In my eyes this is fascinating—and self-serving—hogwash. The experts in the field, such as one recently interviewed by the New York Times, say Kim Jong-un continues a 20-year old tradition of threatening statements, but has not turned up the heat on the rhetoric in any significant way.
So don’t hold your breath over the destruction of the world’s memory supply—unless it is at the hand of U.S. investors trying to move the market in ways that make them more money. We’ve seen these kinds of shenanigans several times in the past. If you really want a juicy rumor, perhaps we should speculate that North Korea’s leaders may be in cahoots with certain U.S. investors.
Yes, it is interesting so much of the world’s memory capacity is concentrated in South Korea. But I note much of the world’s non-captive logic capacity lives on the tiny island of Taiwan. It’s true, it’s interesting, but it’s not a sign of impending doom or a reason to start shorting stocks. Related stories: