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Micron shares surge as Hynix cuts offer relief

Hynix, one of the world's largest memory chipmakers, is slashing output. This may ease oversupply in the market.

Bad news for Hynix is translating into good news for the memory chip industry.

The world's second largest memory chipmaker will close its U.S. plant and slash production 30 percent, bringing relief to an industry plagued by glut.

This comes in the wake of a 30 percent cut in flash chip production at Toshiba and SanDisk announced Monday.

As part of this reduction in output, Hynix is expected to sell its U.S. production unit before the end of the year, according to a Reuters report citing a story in the Seoul Economic Daily on Thursday.

All of this is good news for Micron Technology. The U.S.-based manufacturer of DRAM and flash memory has seen its shares surge over the last few days. Shares traded around $2 at the start of trading Wednesday; as of 11:40 a.m. PST Friday they were trading as high as $2.99.

The news is boosting shares for Taiwan manufacturers too. Taipei Times is reporting that the news of Hynix's production cut plans has had a positive impact on the shares of domestic memory suppliers Powerchip Semiconductor and Nanya Technology.

"Every little bit helps and this is more than a little bit," said Avi Cohen, managing partner at Avian Securities, responding to an e-mail query about Hynix. "This is the kind of news we need to see for things to eventually get better."

In a research note, Cohen said the Hynix output cut should translate to about 5 percent of industry capacity.

In related news, Micron will announce its first-quarter financial results for 2009 on Tuesday. Avian Securities said it is cutting its November estimate ahead of the call to revenue of $1.18 billion (down 17 percent quarter to quarter) from $1.42 billion.