SK hynix faces dilemma between Solidigm investment, Chinese plant expansion
Solidigm's enterprise solid-state drives / Courtesy of Solidigm
SK hynix is facing a growing dilemma over U.S. export controls on advanced semiconductor equipment for its NAND flash plant in China, as Washington's reluctance to approve equipment shipments slows the chipmaker's plans to generate revenue from the Chinese plant to finance new production facilities for its NAND flash unit Solidigm in the United States.
Reuters reported on Wednesday that U.S. officials have held up approval for American chipmaking equipment needed by SK hynix to expand production in its NAND plant in Dalian, China.
The Dalian plant is a key production hub for Solidigm, manufacturing NAND flash memory and enterprise solid-state drives used in smartphones and data centers. SK hynix is seeking to resume investment in its second Dalian plant to expand NAND production capacity.
SK hynix had its Validated End User status expanded by the U.S. Commerce Department in 2023, effectively allowing it to bring American chipmaking equipment into its Chinese plants indefinitely. However, Washington revoked the status at the end of 2025 and replaced it with annual export licenses that allow certain equipment with quantity limits, but not for upgrading technology or expanding capacity.
The company received approval to bring in such equipment this year, and negotiations over next year's permits are still ongoing under the new licensing system.
That approval, however, does not extend to SK hynix's planned investment in its second Dalian plant. Washington appears to view the plan as an expansion or upgrade, though it has not formally denied it.
According to Reuters, Commerce Under Secretary Jeffrey Kessler maintained his position during a meeting last week that the U.S. did not want to allow additional American chipmaking equipment into China for capacity upgrades or expansion, though SK hynix argues that the investment should be permitted because it would involve installing equipment in an existing empty cleanroom rather than constructing a new facility.
SK hynix headquarters in Icheon, Gyeonggi Province / Yonhap
SK hynix declined to confirm or comment on matters related to equipment export licenses, but industry officials believe the issue is closely tied to Solidigm's investment plans in the United States.
Solidigm is reportedly considering investing $45 billion to build two NAND flash memory plants in New York, with some estimates suggesting that the investment could eventually reach $100 billion.
In a regulatory filing on Oct. 29, SK hynix said it was “reviewing various options to strengthen Solidigm's competitiveness and expand its production capacity, but that no decisions had been finalized.”
To finance this, SK hynix had been reviewing listing Solidigm, but announced on Oct. 23 that it had suspended plans, citing capital market conditions. With SK hynix also facing significant investment needs in Korea, securing sufficient funding remains a challenge despite its record-breaking earnings.
Against this backdrop, industry observers had speculated that SK hynix could use profits generated by improving productivity at its Dalian plant to help finance Solidigm's planned U.S. factories. However, delays in securing approval to bring in equipment needed to expand the Chinese plant's production capacity are now complicating that strategy.
“The current situation seems to be a dilemma for SK hynix,” an industry official said. “The company wants to expand its production capacity while the supply shortage continues, but the issue is complicated by U.S.-China tensions over semiconductor manufacturing equipment, making it difficult to resolve as a single company.”