SK Hynix decides to abandon its storage business Solidigm Its plan for a initial public offering (IPO) in the United States IPO. Research firm LYNX Equity Strategies stated in a report released on October 23 that this decision may be beneficial to Micron Technology Micron and SanDisk Sandisk, as Solidigm losing this potential financing channel reduces the likelihood of future expansion of NAND flash memory production capacity, which could help alleviate market concerns about long-term oversupply and falling prices. Following the announcement, Micron Technology's stock price rose by about 3.6%, and SK Hynix' stock price rose by about 4.4%.
Giving up IPO means losing the funds for capacity expansion, but in the future, the supply pressure of NAND is expected to ease.
The team led by Analyst KC Rajkumar and LYNX Equity Strategies stated that Solidigm previously planned to raise funds through IPO in the United States to support the construction of new NAND flash memory manufacturing capacity in the US. If this plan is successfully implemented, the additional capacity could enter the market in three years or longer, increasing the global supply of NAND flash memory and putting pressure on product prices.
With SK Hynix deciding to cancel the US listing plan for Solidigm, this potential source of financing has disappeared. LYNX believes that the new production capacity plan, which could have been funded through IPO, now faces greater uncertainties, reducing the risk of future NAND market supply exceeding demand.
The institution pointed out that the additional global supply pressure on NAND flash memory brought about by the potential expansion project of Solidigm has been alleviated. For existing manufacturers, this means that the competition they may face in the future could be reduced, which is conducive to maintaining the balance between industry supply and demand as well as product prices.
However, canceling IPO does not directly affect the current production of NAND flash memory, nor does it mean that Solidigm will stop other expansion activities. Its main impact is on the potential capacity growth in the coming years, rather than short-term market supply.
Originally planned to cooperate with Intel to build a factory in the United States, cancellation of IPO or weakening of opportunities for the Ohio project
According to the analysis of LYNX, the American manufacturing project previously considered by Solidigm might take the form of a joint venture with Intel, and the location could potentially be Intel's campus in Ohio.
For Solidigm, building manufacturing bases in the United States can provide new production capacity and expand its local manufacturing footprint. LYNX believes that domestic manufacturing projects in the US may also enjoy trade conditions different from its existing overseas manufacturing facilities, which is conducive to future production expansion.
However, with the cancellation of the US IPO program, related projects have lost a potential source of substantial funding. For Intel, this also means that its campus in Ohio may miss out on a new manufacturing cooperation opportunity. Therefore, LYNX believes that this decision constitutes a minor negative for Intel.
At present, there is no information indicating that the joint manufacturing project has been officially launched. The cancellation of IPO does not mean that all potential cooperation arrangements have been terminated.
Micron and Sandisk are expected to benefit, but the positive effects are mainly reflected in the long-term supply and demand pattern.
LYNX pointed out that Micron Technology and SanDisk are both important suppliers in the NAND flash memory market. If Solidigm reduces future investment in new production capacity, it will help to slow down the potential supply growth rate of the industry, which in turn will support the prices of NAND products and the valuations of existing manufacturers.
The flash memory industry has a strong cyclical nature. When manufacturers concentrate on expanding production and the supply growth exceeds terminal demand, product prices are likely to come under pressure, and corporate profit margins may also be affected. Conversely, if new production capacity is limited while demand from data centers, enterprise storage, and other applications continues to grow, the market supply-demand situation may be more favorable for existing manufacturers.
However, LYNX also reminds that the current overall market environment may limit the upward momentum of related stocks. Even if Solidigm cancels IPO, which is considered positive news from a long-term supply perspective, it may not necessarily lead to a significant increase in the stock prices of Micron and Sandisk immediately.
The institution emphasized that the main significance of this event is to eliminate a potential future source of competition, and it does not change the existing supply of NAND flash memory. How much profit Micron and Sandisk will ultimately be able to earn still depends on the capital expenditure arrangements of other storage manufacturers, as well as the supply and demand changes in the global NAND flash memory market over the coming years.
