SK hynix keeps Solidigm private to pay for new U.S. chip plant

Global semiconductor markets have seen a recent correction, prompting SK hynix to abandon plans for a public listing of its subsidiary Solidigm. The company announced the decision on Friday, October 23, citing unfavorable stock market conditions that made an initial public offering unattractive.

SK hynix stated that current volatility prevents Solidigm from achieving a valuation that fairly reflects its growth outlook. As a result, the parent company ended its review of both a pre-IPO financing round and a full listing. The firm confirmed it will continue to explore other funding methods to support its expansion goals.

The decision does not alter the strategic direction for Solidigm, which focuses on high-capacity data center SSDs using floating gate 3D QLC NAND memory. SK hynix confirmed it intends to construct a new fab in the United States to meet rising demand driven by artificial intelligence infrastructure. The company has not disclosed the facility size, total cost, or construction timeline.

A new American plant would broaden SK hynix's manufacturing presence in the country, a move that carries weight amid the push toward domestic production. Solidigm currently holds 21.1% of the enterprise SSD market alongside its parent. Its current manufacturing capacity is insufficient to cover expected demand, necessitating new production lines.

Outside funding could have eased the strain on SK hynix's balance sheet, as a modern 3D NAND fab can cost tens of billions of dollars. However, the subsidiary's strong profitability may allow the parent to self-fund the expansion. Micron's enterprise storage division recently reported a non-GAAP gross margin of 90%, and Solidigm may earn comparable or higher margins by selling exclusive products.

If such margins hold for the next two or three years, the unit could generate substantial cash for future investment. SK hynix might fund the U.S. expansion through a mix of internal cash and debt without giving up any ownership. Keeping full ownership of a highly profitable subsidiary appears preferable to selling a stake at a valuation the company considers too low.

The reversal raises questions about capital allocation while enterprise SSD demand remains at record levels. A full listing would have allowed the company to bring in outside capital without adding debt and potentially fund dividends or share buybacks. With the listing now off the table, the focus shifts to how quickly the new U.S. plant can break ground.