SK hynix pays cash for U.S. storage plant

SK hynix has canceled its plans to take Solidigm public and will instead use internal funds to build a new factory in the United States. The company announced the decision on Friday, October 23, citing unfavorable stock market conditions and a recent decline in semiconductor share prices. This shift means the profitable storage subsidiary will remain wholly owned by its parent company rather than entering the public markets.

The new facility is designed to meet rising demand for high-capacity data center solid-state drives. SK hynix has not yet disclosed the size of the plant, its total cost, or a timeline for construction. The unit produces enterprise SSDs using floating gate 3D QLC NAND memory. As artificial intelligence infrastructure expands, demand for this specific type of storage is climbing. Solidigm’s current manufacturing capacity is insufficient to cover expected future needs.

The company considered several financing options before making its final choice. These included direct investment, a pre-IPO funding round, and a full stock market listing. A public offering would have allowed SK hynix to raise outside capital without increasing its debt. It could also have established a separate market valuation for the subsidiary. SK hynix believes the unit’s true value is not currently reflected in its own market capitalization.

However, increased market volatility and an ongoing correction in chip stocks reduced the appeal of a listing. The company determined that current conditions would prevent Solidigm from earning a valuation that fairly reflects its growth outlook. Consequently, SK hynix ended its review of both a pre-IPO financing round and a full listing. It will continue to explore other methods to fund the project.

Enterprise SSD demand is at a record high and is expected to grow over the next two years. A modern 3D NAND fabrication facility can cost tens of billions of dollars. Outside funding could have reduced the strain on SK hynix’s balance sheet. It could have freed up capital for other projects. The decision to self-fund raises questions about the company's capital allocation strategy.

Solidigm’s strong financial performance may explain the reversal. Micron’s enterprise storage division recently reported a non-GAAP gross margin of 90%. Solidigm, which holds a 21.1% share of the enterprise SSD market alongside its parent, may earn even higher margins through exclusive products. If such profitability persists, the unit could significantly boost SK hynix’s consolidated profits.

SK hynix may fund the U.S. expansion through a mix of internal cash and debt. It could retain full ownership of the subsidiary without selling a stake. Paying for the entire project with cash alone is possible but less likely given the high capital costs of advanced chip plants. Keeping full ownership of a highly profitable unit avoids selling a stake at a valuation the company considers too low.