SK hynix pays cash for U.S. SSD plant after canceling Solidigm listing

SK hynix canceled plans to take Solidigm, its U.S. enterprise SSD subsidiary, public on Friday, October 23. The company stated that unfavorable stock market conditions and recent declines in semiconductor share prices made a listing unattractive. Instead, SK hynix will use internal funds to build a new manufacturing facility in the United States.

The new fab is designed to meet rising demand for high-capacity data center SSDs. SK hynix has not yet announced the facility's size, total cost, or construction timeline. The subsidiary currently produces storage drives based on floating gate 3D QLC NAND memory. Its existing manufacturing capacity is currently insufficient to cover projected demand, particularly as AI infrastructure rollouts accelerate.

SK hynix had previously considered three funding routes for the expansion: direct investment, a pre-IPO funding round, or a full listing. A public offering would have allowed the company to raise capital without increasing debt. It would also have separated Solidigm from SK hynix's main market capitalization, which the parent company believes does not fully reflect the subsidiary's value. Proceeds from a sale could have also funded dividends, share buybacks, or share cancellations.

The company determined that current market volatility and an ongoing correction in chip stocks prevented Solidigm from achieving a fair valuation. SK hynix ended its review of both the pre-IPO financing and the listing. It will continue to evaluate other funding methods for the project. The decision keeps the subsidiary privately held within the parent company.

Enterprise SSD demand is at a record high and is expected to grow over the next two years. Building a modern 3D NAND fab typically costs tens of billions of dollars. Outside funding could have reduced the financial strain on SK hynix's balance sheet. However, the company opted to retain full ownership of the unit.

Solidigm holds a 21.1% share of the enterprise SSD market. Micron's enterprise storage division recently reported a non-GAAP gross margin of 90%. Solidigm may earn higher margins by selling exclusive products. If these margins remain strong, the subsidiary will generate substantial cash for SK hynix's consolidated profits. This internal cash flow may help fund the U.S. expansion without diluting ownership.