SK Hynix has taken on the task of devising alternative financing options to avoid missing the optimal investment window, after halting its review of an initial public offering (IPO) for its U.S. subsidiary, Solidigm.
This comes at a time when expanding production capacity is essential amid rising NAND flash (hereinafter referred to as NAND) prices, and Chinese rival YMTC (Yangtze Memory Technologies Corp.) is intensifying its pursuit. However, the suspension of the IPO review has narrowed the options for attracting external capital.
According to semiconductor industry sources on Friday, SK Hynix continues to review the timing, scale, and funding methods for investments aimed at expanding production capacity, even after halting reviews of Solidigm's IPO and pre-IPO fundraising. Options such as deploying internal funds, borrowing from financial institutional investors, and issuing corporate bonds are cited as alternative financing measures.
SK Hynix is already undertaking large-scale capital investment. The projected total investment scale for this year alone is in the high 40 trillion won range.
It is also advancing medium- to long-term investments, including the Cheongju M15X and Yongin semiconductor clusters, the advanced packaging plant P&T7, and the new NAND production base M17. With Solidigm's U.S. expansion added to HBM (high-bandwidth memory) and DRAM, the burden of allocating funds is also increasing.
In this situation, the key lies in an appropriate combination of internal funds and external borrowing. Internal funds allow investments to be executed without interest burdens, but they must account for R&D (research and development) and facility investment costs in other business areas.
On the other hand, issuing corporate bonds or borrowing from financial institutional investors preserves cash but increases interest expenses and debt burdens. Industry sources say a method of using internal funds for initial investments and executing borrowings when introducing equipment later is being discussed as a likely alternative.
However, Solidigm's improving performance is a positive factor. Solidigm's revenue in the first half of this year was 12.2507 trillion won, and net profit was 5.8396 trillion won, representing increases of 3.7 times and 44.2 times, respectively, compared to the same period last year. With improved cash generation capability, it is assessed that there is greater room to utilize internal resources.
The need for NAND expansion is increasing due to market growth trends and the accelerating pursuit by Chinese companies.
NAND prices are on an upward trend as demand for enterprise solid-state drives (eSSD) grows with expanded investments in AI (artificial intelligence) data centers. Market research firm TrendForce forecasts that NAND contract prices in the fourth quarter of this year will rise 15% to 20% compared to the previous quarter.
The pursuit by China's YMTC is also heightening the need for expansion. According to Counterpoint Research, YMTC ranked third globally with a 14% share of NAND shipment volume in the second quarter of this year, following Samsung Electronics (25%) and SK Hynix (22%). YMTC is also pushing forward with plans to raise 33 billion yuan (approximately 6.8 trillion won) through an IPO.
The gap with YMTC is also narrowing in terms of wafer production scale. According to market research firm Omdia, SK Hynix's annual NAND wafer production volume, including Solidigm, is projected to increase from 2.79 million units this year to 2.865 million units next year. Over the same period, YMTC is projected to increase from 2.01 million units to 2.496 million units.
Looking at Solidigm alone, production volume will increase from 930,000 units in 2024 to 990,000 units this year, a limited growth rate. SK Hynix has determined that it is difficult to meet demand with existing facilities alone and is reviewing the necessity of new U.S. production facilities for Solidigm. Since it takes time from factory construction to Yangsan, delays in securing funds could also delay future capacity expansion.
An industry official said, "To proceed with future investments without disruption, the timing of NAND expansion and the borrowing ratio must be finely tuned," adding, "It is a point where meticulous financial management calculations are needed to appropriately mix internal cash generation capability and external borrowing."
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