SK hynix makes first NAND expansion decision in a decade, eyes 2029 output

SK hynix's latest investment in the Chungcheong region centers on its existing production hub in Cheongju. The company plans to invest 100 trillion won ($64.3 billion) to build additional NAND flash production facilities and strengthen its advanced packaging capabilities for semiconductor back-end processes.

The NAND scale-up draws particular attention as the first such decision in roughly a decade since 2016. NAND flash, one of the two pillars of the memory chip industry alongside DRAM, had long been a source of pain for chipmakers due to chronic oversupply and bloated inventories that discouraged any expansion.

That calculus has now shifted. With the AI inference era driving a surge in NAND demand, signs of a supply shortage — similar to what the DRAM market has already experienced — have prompted the company to move ahead with a new fab.

SK hynix CEO Kwak Noh-jung said at the national briefing held Thursday at Samsung Display's facility in Asan, South Chungcheong Province, that "as AI services go mainstream, demand for enterprise SSDs and NAND is growing explosively alongside HBM and server DRAM."

Kwak went on to say that "with agentic AI giving way to physical AI, the range of applications and demand for NAND will continue to expand," adding that "supply of NAND is falling short, making it necessary to scale up NAND as well as DRAM."

SK hynix will invest 80 trillion won in Cheongju to build M17, a new NAND production facility. The company plans to break ground next year and begin operations in the first half of 2029.

The last time SK hynix announced a NAND fab investment was in December 2016, when it committed to M15. Construction on M15 began in earnest in April 2017, and the facility has been in full operation since early 2019.

The rapid shift in market dynamics triggered by AI is widely cited as the force behind the company's decision to invest in additional NAND capacity for the first time in a decade. For years, NAND had been a drag on memory chipmakers, saddled with excess inventory from persistent oversupply.

The rise of AI has opened a new chapter. As big tech companies race to build large-scale AI data centers, demand for high-capacity enterprise solid-state drives — capable of storing vast amounts of data — has soared.

High-capacity NAND is essential for storing the enormous volumes of data required for AI computation. As data volumes continue to explode, big tech's scramble to secure memory has spread from DRAM into NAND. The memory industry's sustained production cuts for NAND have also contributed to the supply shortfall.

Nvidia has also emerged this year as a new source of demand, adding further pressure to an already tight supply picture. The chipmaker announced it would store the growing volumes of key-value (KV) cache data in high-capacity SSDs rather than HBM, setting off a fresh supply crunch.

KV cache is a mechanism used by generative AI systems — such as ChatGPT and Google Gemini — to retain information gathered during conversations with users. By storing values computed in previous exchanges, it allows the AI to quickly resume context in subsequent interactions, boosting inference speed.

The semiconductor industry estimates that the volume of SSDs Nvidia will consume could reach 35 million terabytes in 2026 and 120 million terabytes in 2027. Nvidia's share of the global NAND market is projected to climb from 4 percent in 2026 to 9 percent in 2027, a trajectory that is pressing memory chipmakers to respond swiftly.

SK hynix's decision to again choose Cheongju as the site for its new NAND facility reflects a judgment that construction can proceed at speed.

The company already operates multiple fabs in Cheongju — M11, M12, M15 and M15X — which means the time needed to secure land, power and water infrastructure can be significantly reduced. Connecting M17 to the existing Cheongju fabs is also expected to improve production efficiency.

M17 will become SK hynix's sixth production facility in Cheongju, following M11, M12, M15, M15X and the advanced packaging fab P&T7, which broke ground in April.