Samsung power cut may trigger flash crisis

Samsung may face a major supply issue with flash memory in the wake of an accidental power cut, the company told the press on Friday. An interruption in power near one of the company's Seoul, Korea plants has forced the company to halt production at six of the factories that produce the NAND flash used by cellphones, portable media players, and other devices. The company estimates that its losses could tally over $54 million, while the immediate (non-contract) price of a standard chip has already climbed 9 percent as a result of the event.

The accident could also trigger a cascade effect that may affect supplies in a crucial period, according to analyst Lee Min-hee of Dongbu Securities. Samsung's production queues at the affected factories may be set back by up to a month as the company not only has to restart the manufacturing process but discard or recycle chips on the halted lines. The nature of flash memory dictates that many of the flash memory chips will fail outright if left unfinished, the analyst said. Dropping these supplies could result in a particularly dangerous shortfall of flash memory as consumer electronics firms ramp up for holiday product launches.

Apple may be particularly hit by the sudden cut in production as the company's iPods and iPhones reportedly use one quarter of all memory produced by flash makers. Companies who need short-term production of flash may also be impacted as the firms will not have the security of a long-term contract.

Some of the 11 factories at the Seoul plant had limited capacity and so the extent of the problem could not be determined until it was clear which assembly lines had shut down, according to reports. However, the sudden drop has encouraged a burst of investment in rivals such as Hynix and Toshiba, who also produce similar flash memory and may step in for those who can switch to an alternate supplier.