US export restrictions on China threaten SK Hynix's plans to build $45 billion worth of chip plants in New York

The US Commerce Department is currently blocking export licenses that SK Hynix needs to ship American chipmaking equipment to its NAND memory plant in Dalian, China, according to sources familiar with the situation. This delay is complicating SK Hynix's plans to build a $45 billion worth of chip plants in New York. SK Hynix maintains that increased production in Dalian would help finance the US project, but Commerce has stated it will not license equipment that would expand or upgrade chip plants in China.

Solidigm, SK Hynix's US subsidiary, plans to invest $45 billion on two NAND fabs in Marcy, New York, with the total possibly rising to $100 billion over time. The dispute hinges on what constitutes expansion. SK Hynix argues that adding tools to empty floor space in Dalian would not increase capacity since the cleanroom was built in 2023.

Commerce officials, however, steadfastly insist on upgrades and expansions, as Under Secretary Jeffrey Kessler reiterated this stance during a meeting last week. Despite not formally denying the license to fill the empty space, Commerce has not moved forward. Solidigm executives have held nearly 10 meetings with Commerce officials since late August, seeking a resolution.

Following a late-August meeting with Commerce Secretary Howard Lutnick and Under Secretary Kessler, the officials expressed enthusiasm about a US NAND facility and their eagerness to find a solution. Since then, Solidigm has revised its license applications multiple times in collaboration with the department. A separate license for 2027, covering equipment to maintain the Dalian plant, is also under negotiation.

The Treasury Department is also involved, as it would need to waive outbound investment restrictions before SK Hynix could purchase tools for China. Company representatives have met with Treasury officials, who said they would await Commerce's decision. These discussions reveal the extent to which the Trump administration may diverge from national security rules intended to prevent US technology from aiding China's military in order to bring chip investment back to the US.

Ultimately, none of this will proceed without a green light from the White House. New York officials are eagerly awaiting a decision, with Oneida County Executive Anthony Picente noting that a federal investment tax credit expires at year's end, adding pressure to the timeline. Solidigm has also explored alternatives to fund the project, including an initial public offering to finance US production and stay competitive amid growing memory demand.

In October, SK Hynix announced it had suspended its review of this option due to market conditions and share price trends. Despite this, the company remains committed to expanding its production capacity and strengthening its competitiveness. Solidigm, based in Rancho Cordova, California, has not yet chosen a site for its US chip manufacturing facility.

It has maintained a statement made last week, expressing its ongoing exploration of strategic alternatives to serve its customers and enhance its long-term competitiveness. The company is currently considering options for building a NAND memory fab at potential locations worldwide, but no specific decision has been made. The root of the Dalian issue dates back to 2020, when SK Hynix agreed to purchase Intel's NAND factory in Dalian for $9 billion.

Following the control of the plant and Intel's solid-state drive business, just before the US imposed broad export controls on American chipmaking equipment destined for advanced fabs in China, foreign-owned plants in China were initially exempt. However, last year, Commerce revoked those authorizations, classifying them as a "Biden-era loophole."

They were subsequently replaced with annual licenses permitting the shipment of specific equipment and technology to the fabs, with quantity limits.