SK hynix cancels Solidigm IPO to build US storage plant

SK hynix canceled its plans to take Solidigm public. The company announced the move on Friday, October 23. It cited unfavorable stock market conditions and recent trends in semiconductor share prices as the primary reasons. The decision affects the unit’s U.S.-based enterprise solid-state drive subsidiary.

SK hynix confirmed it will still build a new manufacturing facility in the United States. The plant aims to meet rising demand for enterprise storage. The company has not disclosed the size of the facility, the total cost, or the start date for construction. Solidigm specializes in high-capacity data center drives using floating gate 3D QLC NAND memory.

Demand for this type of storage is increasing as artificial intelligence infrastructure expands. Current manufacturing capacity is barely sufficient for projected needs. A new American plant would also strengthen SK hynix’s production presence in the country. This aligns with the current push for domestic chip manufacturing.

The company previously considered several funding options. These included direct investment and a financing round before a potential listing. An initial public offering would have provided outside capital without adding debt. It could also have established a market value for the subsidiary that SK hynix believes is currently understated. The company had also considered using proceeds for dividends or share buybacks.

SK hynix determined that market volatility made a listing less attractive. The company stated that current conditions would prevent Solidigm from achieving a valuation that fairly reflects its growth. It ended its review of both a pre-IPO financing round and a full listing. The company will continue to explore other funding methods for the project.

The decision comes at a time when enterprise SSD demand is at record levels. Analysts expect this trend to continue for the next two years. Building a modern 3D NAND facility can cost tens of billions of dollars. Outside funding could have reduced the financial pressure on SK hynix’s balance sheet. This would have preserved capital for other projects.

Solidigm’s financial performance may influence the funding strategy. Micron’s enterprise storage division reported a non-GAAP gross margin of 90% recently. Solidigm and its parent company hold 21.1% of the enterprise SSD market. The unit may earn higher margins by selling exclusive products. If these margins persist, the subsidiary could significantly boost SK hynix’s consolidated profits. This would generate cash for future investment.

SK hynix might fund the U.S. expansion using internal cash and debt. This approach would allow the company to retain full ownership of the subsidiary. Paying for the project entirely with cash is possible but less likely given the high capital requirements. The company prefers to keep ownership of a profitable unit rather than sell a stake at a low valuation.