SK hynix says it will weigh all options, including external capital

Global NAND firms trading at around 20x price-to-earnings

Annualizing first-half net profit points to market cap above 200 trillion won

CFO Kim Woo-hyun, who is leading the IPO push, spent months at Solidigm last year

A US listing could fund the newly restructured AI company

Hyundai Motor and LG Electronics have set precedents with overseas unit IPOs

Editor's note: "Chip Chip Fab Fab" is a series that explores the semiconductor industry powering the AI era — in depth and in plain language. The name links the "chip" at the heart of the AI revolution with the "fab" that makes it, and echoes the rhythmic chug of a train in motion, capturing the industry's relentless advance. The series breaks down complex technology, uncovers the stories behind the headlines, and tracks the trends shaping semiconductors today and tomorrow.

Solidigm's campus in Rancho Cordova, California. [Solidigm website]
Solidigm's campus in Rancho Cordova, California. [Solidigm website]

SK hynix said it will make a final decision on a possible US listing of its NAND subsidiary Solidigm with long-term shareholder value in mind, responding to reports that have gained traction in recent weeks. The speculation intensified in August when Solidigm launched a pre-IPO round to bring in outside investors ahead of a potential listing. With that round said to be nearing completion, attention is turning to why SK hynix is now open to outside capital in the first place.

As demand for high-capacity storage surges alongside the spread of AI inference, share prices of global NAND flash makers have soared. Japan's Kioxia, which listed in December 2024, briefly became the most valuable company on the Tokyo Stock Exchange by market cap, while US-based SanDisk has seen its share price climb 550 percent from the start of this year. Applying the valuations of those peers, a market cap in the mid-200 trillion won range for Solidigm would not be out of reach.

SK hynix Chief Financial Officer Kim Woo-hyun is understood to be leading the Solidigm initial public offering process. Kim spent several months working on-site at Solidigm during the first half of last year to prepare for the listing.

Reports of a potential Solidigm listing next year spread widely after Reuters covered the story Sunday. Reuters reported that Solidigm had begun selecting underwriters and that the company's valuation could reach as much as $150 billion.

SK hynix stopped short of confirming the reports, saying nothing has been decided. At the same time, the company said "how to use investment resources — whether internal funds or external capital — is a matter to be reviewed in light of market conditions, the timing of investment and the company's financial position," adding that it would "also review the impact on existing shareholders and any necessary shareholder-protection measures, and explain them fully."

Investment banking sources say the pre-IPO round that began in August is in its final stages, with investor commitments largely in place and only the transfer of funds remaining.

The $150 billion valuation target set for Solidigm is seen as achievable given the current appetite for semiconductor investment. While uncertainty has grown as OpenAI, Anthropic and other US generative AI companies have signaled a more measured pace of expansion, analysts say Solidigm is still well positioned to command a favorable valuation.

SK hynix agreed in 2020 to acquire Intel's NAND business for $9 billion and completed the full payment in two installments — in 2021 and last year. The recent spread of agentic AI has pushed the industry beyond the training era into one defined by inference, driving growing demand for enterprise solid-state drives, or eSSD, inside AI data centers.

During AI inference, the KV cache — which stores and reuses the results of earlier token computations — is expanding rapidly, and saving that cache to SSDs is becoming increasingly common. This is broadening the use case for high-capacity eSSD. Solidigm is aggressively targeting the AI data center market with its high-capacity quad-level cell, or QLC, technology, which stores four bits of data per cell to maximize storage density per unit area.

That backdrop has translated into favorable valuations for NAND companies on overseas stock markets. Kioxia, in which SK hynix is effectively the largest shareholder, carries a market cap of 30 trillion yen ($190 billion) and trades at a price-to-earnings ratio of 19 times based on past earnings. US NAND maker SanDisk is trading at a P/E of 24 times, driven by growing eSSD demand.

Applying those multiples to Solidigm's net profit gives a rough sense of what the company could be worth. Solidigm posted sales of 12.25 trillion won ($9.01 billion) and net profit of 5.84 trillion won in the first half of this year, compared with sales of 3.36 trillion won and net profit of 132.1 billion won in the same period a year earlier — a sharp jump on both lines.

Simply annualizing the first-half net profit, without factoring in any further improvement from rising NAND prices in the second half, puts full-year net profit at around 12 trillion won. Applying a P/E of around 20 times to that figure suggests a market cap above 200 trillion won is a realistic expectation. The actual offering price will ultimately depend on NAND market conditions and the sustainability of earnings.

SK hynix is understood to have begun laying the groundwork for a Solidigm listing as early as last year. Chief Financial Officer Kim Woo-hyun spent three to four months at Solidigm's US offices during the first half of last year working on the preparations. The SK hynix American depositary receipt listing completed in July was led by Song Hyun-jong, president of the Corporate Center overseeing finance and strategy, but Solidigm — as a subsidiary — is seen as Kim's responsibility.

The US listing is expected to give SK hynix a source of funding for its AI company investments. As of the end of the first half, SK hynix held a 98.16 percent stake in SK hynix NAND Product Solutions, which in turn held a 96.86 percent stake in Solidigm. Earlier this year, SK hynix transferred the NAND and SSD business from its existing US entity into the newly established Solidigm, and restructured the original entity into an AI company focused on investing in the AI ecosystem.

If the AI company sells down its Solidigm stake through the pre-IPO round or the listing itself, it could receive trillions of won directly. SK hynix has signaled strategic investments to build the AI company into a solutions provider combining hardware, software and services. Last month, it launched SK hynix Ventures, a corporate venture capital arm dedicated to investing in promising companies within the US AI ecosystem.

Precedents from other large South Korean conglomerates are plentiful. The structure — an IPO of an overseas subsidiary on its local stock market — is broadly similar to what SK hynix is considering. Hyundai Motor raised about 4.4 trillion won ($3.24 billion) in October 2024 by selling a 17.5 percent stake in its India unit through an IPO. LG Electronics similarly raised 1.8 trillion won when it sold a 15 percent stake in its India subsidiary to investors in an IPO last October.


jeongwan@heraldcorp.com