SK Hynix, the world’s No. 2 memory chip maker, appears to be enjoying its heyday on the back of a legal battle between Samsung Electronics and Apple Inc., as the U.S.-based company attempts to diversify its suppliers.

Along with Samsung and LG Display, SK Hynix ranks as one of Korea’s biggest parts suppliers to Apple.

SK Hynix supplies mobile dynamic random access memory (DRAM) and NAND flash memory chips for Apple’s wireless devices such as the iPhone 5 and iPad Mini. 

Under pressure in its patent dispute with Samsung, Apple is said to be tapping new suppliers for key components such as the DRAM and flash memory chips.

To take advantage of the situation, the chipmaker reportedly raised the price of its NAND flash memory for Apple by up to 20 percent in October. SK Hynix declined to confirm the report.

But it’s certain that DRAM sales have been good for SK Hynix in recent months: For the first time in the company’s history, the chips accounted for over 30 percent of its total memory revenue in the third quarter this year.

Close on Samsung’s heels

SK Hynix’s global mobile DRAM market share also rose to almost 22 percent in terms of shipments in the second quarter of this year, according to market research firm iSuppli.

The company also has been rapidly increasing the supply of its 29-nano DRAM chips, which it started to mass produce in July this year.

By the end of this year, these advanced chips are expected to account for one-fifth of the total DRAM supplies manufactured by SK Hynix, according to company officials.

“SK Hynix’s technology for manufacturing NAND flash is almost on par with Samsung Electronics, and it lags only three to six months behind for DRAM,” said Kang Jung-won, an analyst for Daishin Securities.

Money is another reason why SK Hynix is assuming a more confident attitude in interacting with Apple, industry sources say.

Since SK Group acquired Hynix Semiconductor earlier this year, it has reportedly poured 4 trillion won ($3.7 billion) into tech advancement. The money was like rain in a drought, as high-tech firms such as Hynix are often overwhelmed by capital expenses necessary for developing and honing technologies.

For the third quarter of this year, SK Hynix logged a net profit of 2 billion won, which compares with the 563 billion won net loss the company reported for the same period a year earlier.

M&As and limitations

To further strengthen its competitiveness in NAND flash technology SK Hynix has been trying to access ready-made technology from abroad, such as through M&As.

As part of this policy, the company recently acquired Italian NAND Flash developer Ideaflash and U.S. controller firm Link_A_Media in June for next-generation memory chips.

On top of acquisitions, the firm opened a NAND flash design center called “Flash Solution Design Center” in Bundang, Gyeonggi Province, in September.

However, there are limitations as to how high SK Hynix can fly.

A case in point is the field of high-quality application processors. Apple had reportedly contacted Taiwanese TSMC for making mobile processors for the iPhone 5, but could not finalize the deal due to technological requirements.

The situation is the same for SK Hynix, which, despite the advancements achieved, will not be able to overtake Samsung in manufacturing applied processors, core components for making the iPhone and called the “brain” for all wireless gadgets.

“It will take at least five years for SK Hynix to catch up with Samsung, and even then, a gap is inevitable because Samsung will have achieved new levels,” said one industry watcher who declined to be identified.

With Samsung being the only option for the time being, Apple is working to design the key chips as a replica of the processors. Samsung, meanwhile, recently raised the prices of their applied processors sold to the Cupertino company, which was reportedly forced to shoulder the increase for a lack of alternatives.

Supply contracts for the processors between Samsung and Apple are set to expire in 2014.

By Kim Ji-hyun and Cho Ji-hyun
(jemmie@heraldcorp.com)(sharon@heraldcorp.com">jemmie@heraldcorp.com)(sharon@heraldcorp.com)