SK hynix cancels Solidigm IPO to self-fund U.S. factory

SK hynix will no longer sell shares of its U.S. storage division, Solidigm, to the public. The company announced the decision on October 23, stating that current market conditions make a stock listing unattractive. Instead, the parent company will fund the subsidiary's expansion using its own resources.

SK hynix confirmed it will build a new fabrication plant in the United States to produce enterprise solid-state drives. The company has not yet disclosed the facility's size, total cost, or construction timeline. The new plant aims to meet rising demand for high-capacity storage driven by artificial infrastructure rollouts.

Solidigm manufactures data center drives using floating gate 3D QLC NAND memory. Its current capacity is nearly maxed out against projected demand. A new American facility would also expand SK hynix's domestic manufacturing footprint, a factor that carries weight in the current push for U.S. chip production.

The company previously considered several funding routes, including direct investment and a pre-listing funding round. An offering would have provided outside capital without increasing debt. It would also have allowed the company to demonstrate the subsidiary's value, which SK hynix believes is not fully reflected in its own market capitalization.

Market volatility and a correction in semiconductor stocks reduced the appeal of an initial public offering. SK hynix concluded that present conditions would prevent Solidigm from achieving a valuation that matches its growth outlook. The company has ended its review of both a financing round and a full listing but will continue exploring other funding options.

The decision to keep the unit private raises questions about balance sheet strain, as modern 3D NAND plants can cost tens of billions of dollars. However, Solidigm operates with high profitability. Micron's enterprise storage division recently reported a non-GAAP gross margin of 90 percent, and Solidigm holds a 21.1 percent share of the enterprise SSD market.

If such margins persist, the unit could generate substantial cash flow for SK hynix. This would allow the parent company to fund the U.S. expansion through internal cash and debt without surrendering ownership. The company appears willing to retain full control of the profitable subsidiary rather than sell a stake at a valuation it considers too low.