July 27, 2018 / 1:44 AM / 4 months ago

UPDATE 1-SK Hynix plans $1.6 bln share buyback, new chip plant

* Chipmaker SK Hynix to spend $3.1 bln for a new plant in S.Korea

* New production line to meet growing memory demand

* Plans $1.6 bln worth share buyback (Adds context, shares)

SEOUL, July 27 (Reuters) - SK Hynix Inc announced a $1.6 billion share buyback and said it would invest $3.1 billion to build a new semiconductor plant in South Korea, sending shares in the world's No.2 DRAM memory chipmaker up as much as 3.5 percent.

The investment plan comes even as prices of some memory chips are falling rapidly due to oversupply and slower sales to the smartphone industry.

The $121 billion global memory chip industry has enjoyed an unprecedented boom since late 2016, with profits surging to record highs and margins rising above 70 percent thanks to disciplined production after years of consolidation.

But the industry's shift to a newer technology of 3D NAND flash stacks - which are cheaper to assemble than two-dimensional chips - has seen output grow faster than demand this year and forced smaller players to aggressively cut prices to keep market share.

SK Hynix said the types of chips produced at the new plant, which will be completed in October 2020, will be decided later depending on future market conditions.

"It is essential to make additional investments in order to meet growing memory chip demand," the company said in a statement.

The 1.8 trillion won ($1.6 billion) share buyback plan comes a day after SK Hynix reported a record quarterly profit.

Its shares gained as much as 3.5 percent early on Friday, buoyed by the buyback plan.

$1 = 1,123.9000 won Reporting by Heekyong Yang; editing by Richard Pullin

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