Abstract:
South Korean memory chip giant SK Hynix plans to invest approximately US$45 billion to build two NAND flash memory factories in New York State, USA, but this huge investment plan has now encountered new obstacles. Reuters quoted people familiar with the matter as saying on November 3 that the U.S. Department of Commerce has not yet approved a license for SK Hynix to export more U.S.-made semiconductor equipment to its Dalian factory in China, and SK Hynix hopes to gain additional revenue by expanding the production scale of its Chinese factory to provide financial support for the construction of new U.S. factories.
This negotiation around chip equipment export licenses is putting Korean companies into a complex policy dilemma: on the one hand, the U.S. government requires overseas semiconductor companies to increase investment in the United States, and on the other hand, it restricts these companies from providing advanced manufacturing equipment to Chinese factories. SK Hynix hopes to use the Chinese market and existing production facilities to create funds and then invest part of the proceeds into U.S. manufacturing, but U.S. export control policies are affecting this funding arrangement.
This U.S. investment plan is mainly promoted by Solidigm, a U.S. subsidiary of SK hynix. Solidigm plans to build two NAND flash memory factories in Marcy, New York, with an initial investment of approximately US$45 billion. If subsequent projects are further expanded, the total long-term investment may reach US$100 billion.
NAND flash memory is a non-volatile memory chip that can retain data even after a power outage. It is widely used in solid-state drives, servers and data centers. As the construction of artificial intelligence infrastructure continues to expand, the demand for high-capacity solid-state storage equipment in data centers continues to grow, and the global NAND market is also facing a tight supply situation. For SK Hynix, expanding NAND production capacity is not only related to the company's market share, but also related to its competitive position in the AI data center supply chain.
However, to advance the New York factory project, SK Hynix hopes to first expand the production capacity of its Dalian factory. According to people familiar with the matter, the company has applied for relevant export licenses from the U.S. government and hopes to ship more U.S.-made chip production equipment to Dalian to fill the clean factory space that has been built before but has not yet fully installed the equipment.
This Dalian factory has a production area called Mod B. The relevant factory buildings were completed as early as 2023. However, because the global memory chip market was in a downturn at that time, SK Hynix did not complete the installation of all equipment. Now that the NAND market demand is booming again, the company hopes to use this idle space to expand production.
SK Hynix’s reason is that expanding the production capacity of the Dalian factory can increase revenue, provide a source of funds for the new New York factory, and help the company maintain global market competitiveness. The U.S. Department of Commerce has not formally rejected an export application for equipment needed to fill vacant clean factories in Dalian, but approval has been delayed, people familiar with the matter said.
The problem is that the U.S. government’s policy on exporting semiconductor manufacturing equipment to China has been significantly tightened. The U.S. Department of Commerce has previously revoked some of the facilitative arrangements for SK Hynix and Samsung Electronics to use U.S. equipment in Chinese factories, requiring the companies to apply for export licenses year by year instead. The U.S. government has stated that it can maintain normal operations of existing Chinese factories through licenses, but it does not expect these companies to use this to expand China's chip manufacturing capacity or upgrade technology.
Informed sources revealed that executives of SK Hynix’s U.S. subsidiary Solidigm have held nearly 10 meetings with officials from the U.S. Department of Commerce since the end of August this year. In the latest talks, US Deputy Secretary of Commerce Jeffrey Kessler still insisted on not allowing new US equipment to be used to upgrade or expand the production capacity of Chinese factories. However, the equipment application for the vacant clean space of the Dalian factory has not yet been officially rejected.
The two parties are also discussing another export license for 2027 to ensure that the Dalian factory can continue to obtain the equipment needed to maintain existing production. This means that SK Hynix faces not only the issue of production expansion, but also the issue of how to continue to maintain the normal operation of Chinese factories in the next few years.
This negotiation also poses a policy dilemma for the Trump administration. On the one hand, Washington hopes to rebuild U.S. domestic semiconductor manufacturing capabilities and create jobs by attracting overseas chip manufacturers to invest in the U.S.; on the other hand, the U.S. hopes to strictly restrict the flow of advanced chip manufacturing technology to China to prevent related technologies from being used in China's military and artificial intelligence industries.
Leland Miller, a member of the U.S. China Economic and Security Review Commission, said that ultimately whether these projects can be advanced depends on the approval of the White House. The U.S. government must balance national security restrictions with attracting foreign investment.
For New York State, there is also time pressure on project approval. Local officials hope the U.S. government will provide clarity on licensing issues in the coming weeks as a federal investment tax credit is set to expire at the end of 2026. If the project cannot be advanced in time, the company may miss out on some tax benefits, which will affect investment arrangements.
Solidigm previously stated in response to media inquiries that the company has been evaluating different strategic options to enhance long-term competitiveness and is currently studying the possibility of building NAND factories in different locations around the world, but has not yet made a final decision on any specific location or construction plan. SK Hynix did not immediately respond to Reuters’ latest report.
It is worth noting that SK Hynix is not just considering New York for an American investment project. The company has previously discussed with Intel about renting part of the Ohio chip factory facilities, and is also building an advanced packaging factory in Indiana, USA, focusing on serving the high-bandwidth memory (HBM) business.
If the two NAND factories in New York are finally completed, they will become one of the largest semiconductor investment projects in the United States in recent years. But at present, whether the project can be advanced depends not only on funds, market demand and factory construction, but also is directly affected by the U.S. semiconductor equipment export policy to China.
This incident reflects that the global semiconductor industry chain is facing a new reality: it is increasingly difficult for multinational chip companies to completely separate Chinese production bases from U.S. investment plans. For SK Hynix, the Dalian factory is not only an important part of its existing NAND business, but may also become a key source for it to raise U.S. investment funds; whether the U.S. government allows this arrangement will directly affect its future global production capacity layout.
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