SK hynix in talks with US government to allow more equipment into China factory in exchange for US plant

SK hynix has reportedly asked the US government to allow additional American semiconductor equipment into its factory in Dalian, China, in exchange for building a new chip plant in the United States. The move is seen as an effort to link investment in US production facilities with expanded operations at its Chinese factory, letting the company secure manufacturing capacity and funding amid tightening US-China semiconductor regulations.

Reuters reported Thursday, citing two sources familiar with the matter, that SK hynix is in discussions with the US government on the arrangement. The talks come as the Donald Trump administration has been pressing foreign chipmakers, including SK hynix and Samsung Electronics, to build factories in the United States, and the company has tied deregulation of equipment imports at its Chinese plant to that investment.

At the center of the negotiations is Solidigm, SK hynix's US subsidiary. Solidigm is said to be seeking to install additional American semiconductor equipment in an unused space at the Dalian factory known as "Mode B" to produce NAND flash memory chips. The facility was built in 2023 but equipment installation was never completed due to a downturn in the memory chip market at the time.

The Dalian factory uses equipment from major US semiconductor equipment makers including Lam Research, Applied Materials and KLA. Solidigm has also reportedly applied to the US government for an export license to bring additional equipment into Mode B.

One source said expanded production at the Chinese factory would help fund Solidigm's construction of a NAND factory in the United States — generating revenue from the Chinese facility first before scaling up domestic production. Another source said Solidigm is also considering an initial public offering as early as next year to raise funds for the US factory investment.

SK hynix, however, drew a line at reports that it is pursuing expanded production capacity at its Chinese factory. The company told Reuters that "equipment installation in Mode B is proceeding in close consultation with and with the approval of the US government," and that it "is not pursuing an expansion of production capacity at Dalian Mode B."

The US government last year revoked the blanket licenses that had allowed SK hynix and Samsung Electronics to bring American semiconductor equipment into their Chinese factories. It subsequently said it would approve equipment needed to maintain existing factory operations on a case-by-case basis, but would not permit imports of equipment for capacity expansion or technology upgrades.

The US Commerce Department issued an export license for the SK hynix Dalian factory in December last year, limiting the quantity of equipment that could be used this year. A license covering additional American equipment and technology imports from 2027 onward has not yet been issued, sources said.

SK hynix's US investment plans are also taking shape. Reuters reported last month that Solidigm is considering building a new NAND factory in upstate New York as its top candidate site. Separately, SK hynix is said to be in talks to lease part of Intel's semiconductor factory site in Ohio. The company is also pursuing construction of an advanced HBM packaging facility in Indiana.

A recent recovery in the NAND market has also been cited as a factor behind the push to expand investment. According to Walt Coon, a memory chip analyst at market research firm TechInsights, NAND prices have risen sevenfold since mid-2023, driven in part by growing demand from AI data centers. NAND flash is a key component of solid-state drives used in AI and cloud data centers.