SK Hynix needs to generate sufficient revenue from its existing Chinese operations to help finance the American expansion. The company wants to upgrade its Dalian manufacturing facilities and increase production of advanced NAND flash memory, but doing so requires equipment subject to US export controls.
The US Commerce Department has yet to approve the necessary licences, leaving the company’s expansion plans in limbo. Officials have apparently found that blocking semiconductor investment in China can make it much harder for the same companies to finance new factories in America.
Solidigm executives have reportedly met with Commerce Department officials nearly 10 times since late August to resolve the problem. Discussions have involved Commerce Secretary Howard Lutnick and Under Secretary Jeffrey Kessler, although the meetings have produced little evidence of an imminent breakthrough.
According to Reuters’ sources, Kessler has maintained his opposition to allowing additional American semiconductor manufacturing equipment into China for production upgrades or capacity expansion. The department has not formally rejected the licence applications, leaving SK Hynix facing the familiar bureaucratic arrangement in which nobody says no but nothing gets approved.
The negotiations expose a contradiction in Washington’s semiconductor policy. The administration wants foreign manufacturers to spend enormous sums building factories in the US while restricting the overseas operations that help finance those investments. Apparently, the assumption is that semiconductor companies can simply discover another $45 billion behind the office furniture.
SK Hynix argues that expanding its Dalian operations would allow it to remain competitive in NAND manufacturing while providing the financial resources needed for its American investment. The company is seeking permission to install equipment in unused cleanroom space and is negotiating a separate licence covering equipment needed to maintain the Chinese facility during 2027.
The situation is particularly awkward because NAND flash memory is becoming increasingly important to data centre operators, which require enormous storage capacity. Expanding production in the US would strengthen domestic semiconductor manufacturing and potentially reduce dependence on Asian facilities, objectives that the administration has repeatedly championed.
The dispute concerns restrictions intended to prevent advanced American semiconductor technology from strengthening China’s technological and military capabilities. Relaxing those controls would create political difficulties for Washington, although refusing to do so could jeopardise one of the largest proposed foreign investments in American chip manufacturing.
Reuters reported that Solidigm representatives initially received an enthusiastic reception when they presented the investment plans to administration officials in August. Since then, progress has slowed as the Commerce Department attempts to reconcile its enthusiasm for American factories with its determination to restrict semiconductor technology reaching China.
Negotiations are continuing, and the proposed New York investment has yet to receive the necessary approvals. The administration must now decide whether the prospect of tens of billions of dollars in American manufacturing investment justifies allowing SK Hynix to expand its Chinese operations, a decision complicated by industrial and trade policies pulling in opposite directions.
