SK hynix weighs $3 billion Chongqing stake sale as AI demand grows

SK hynix, Nvidia's main high-bandwidth memory supplier, is weighing a roughly $3 billion stake sale in its Chongqing packaging plant as it pours $38.3 billion into domestic AI memory fabs.

"We are reviewing various options for the Chongqing plant to strengthen its competitiveness, but nothing has been decided yet," an SK hynix official said.

The Chongqing facility, which began mass production in July 2014, handles packaging and testing for NAND flash memory. Bloomberg reported that potential buyers include Chinese investment funds and local semiconductor companies, with SK hynix possibly retaining a minority stake. The discussions remain preliminary and may not result in a transaction.

The review comes as SK hynix doubles down on domestic capacity to meet AI demand. On Friday it approved 54.3 trillion won ($38.3 billion) in additional investment across two Korean fabs — 35.2 trillion won for the Y2 DRAM facility in Yongin and 19.1 trillion won for the M17 NAND plant in Cheongju — following a record $26.5 billion Nasdaq listing in July.

Chongqing Restructuring Reflects Supply Chain Realignment

The Chongqing plant is one of SK hynix's key back-end bases in China, part of a footprint that also includes NAND production in Dalian and DRAM manufacturing in Wuxi, where the company built its first major overseas wafer fab in 2004. Back-end operations such as packaging are more flexible than front-end wafer production, allowing manufacturers to bring in outside partners without relinquishing control over their most advanced manufacturing technologies, according to industry officials.

The stake sale review is widely read as a response to tightening U.S. export controls on semiconductor equipment to China, which have raised uncertainty over operating production bases in the country. Analysts see a partial divestiture or a shift to a joint venture with a local partner as more likely than a full exit, given the plant's role in SK hynix's global back-end network.

Record Earnings Miss Consensus, Stock Slides

The restructuring comes days after SK hynix posted record quarterly results that still fell short of investor expectations. Second-quarter revenue rose 257 percent year over year to 79.3 trillion won (about $550 billion), with operating profit up 557 percent to 60.5 trillion won at a 76 percent operating margin. Net profit jumped 1,242 percent to 93.9 trillion won.

The figures missed consensus estimates of roughly 84 trillion won in revenue and 64 trillion won in operating profit, according to LSEG SmartEstimates. SK hynix shares fell 9.6 percent in Seoul, dragging the KOSPI down about 6 percent alongside Samsung Electronics. The stock remains up about 138 percent this year even after retreating from its June high.

Management attributed the shortfall to product mix timing and conservative long-term supply agreement pricing rather than weakening demand. Song Hyun-jong, president of SK hynix's corporate center, said AI memory demand remains strong and major customers keep asking for more supply. The company has completed about 10 long-term supply agreements, typically five-year deals with margin guarantees, and recently expanded a multiyear partnership with Nvidia valued at more than $500 billion.

SK hynix has begun mass production of fourth-generation HBM4 memory and is shifting NAND output toward 321-layer products, which now account for the largest share of total output. Omdia expects the global DRAM and NAND markets to expand at an average annual rate of about 19 percent through 2030. The Chongqing stake sale, if completed, would let SK hynix monetize a China asset at a time of geopolitical risk while concentrating capital in the domestic fabs that serve its most profitable AI customers.

This article is for informational purposes only and does not constitute investment advice.