SK hynix Keeps Solidigm Private to Build New US Storage Plant

SK hynix announced on Friday, October 23, that it will not take its U.S. enterprise solid-state drive subsidiary, Solidigm, public. The company stated that unfavorable stock market conditions and recent trends in semiconductor share prices made a listing unattractive at this time. This decision ends a review of both a pre-IPO financing round and a full stock listing.

Despite cancelling the offering, SK hynix confirmed it will proceed with building a new fabrication plant for Solidigm in the United States. The company aims to meet rising demand for enterprise SSDs with this new facility. It has not yet disclosed the size of the plant, the total cost, or the start date for construction.

SK hynix had previously considered several funding routes, including direct investment and a capital raise before an IPO. A public offering would have allowed the company to bring in outside capital without adding debt. The company also believed a listing would better reflect the true value of Solidigm, which it argued is not fully captured in SK hynix's own market capitalization. Proceeds from an offering were also earmarked for dividends, share buybacks, and share cancellations.

The chipmaker attributed the change in strategy to greater market volatility and an ongoing correction in chip stocks. It determined that present conditions would prevent Solidigm from earning a valuation that fairly reflects its growth outlook. The company will continue to look for other ways to fund the project.

Solidigm produces high-capacity data center SSDs using floating gate 3D QLC NAND memory. Demand for these products is climbing as AI infrastructure rollouts accelerate. The subsidiary's current manufacturing capacity is barely sufficient to cover expected needs. A new American plant would also broaden SK hynix's manufacturing presence in the U.S., a factor with weight amid the push toward domestic production.

Enterprise SSD demand is at a record level and is expected to rise over the next two years. Building a modern 3D NAND fab can cost tens of billions of dollars. Micron's enterprise storage division recently reported a non-GAAP gross margin of 90%. Solidigm holds a 21.1% share of the enterprise SSD market and may earn even higher margins by selling exclusive products.

If such margins hold, the unit could significantly lift SK hynix's consolidated profits and generate substantial cash. SK hynix may fund the U.S. expansion through a mix of internal cash and debt without giving up ownership. Paying for the entire project from cash alone is possible but less likely given the capital demands of advanced chip plants.