Intel (NASDAQ: INTC) and SK Hynix (NASDAQ: SKHY; KRX: 000660) moved higher Wednesday following reports that the two chipmakers are discussing a U.S. production deal. Intel gained 5.2% before the market opened, while SK Hynix closed 4.1% higher in Seoul and was up around 3% on Nasdaq before Wall Street trading began.
According to the reports, SK Hynix could begin making memory chips in the United States for the first time. Possible arrangements under discussion include SK Hynix using part of Intel's Ohio manufacturing facility, or a joint venture involving Intel, SK Hynix, and major cloud companies.
The discussions remain in early stages with no agreements finalized. SK Hynix is also considering other possible structures for U.S. production.
Unclear Chip Types and Government Sensitivities
The specific types of memory chips SK Hynix would manufacture in Ohio have not been determined. SK Hynix produces DRAM used in servers, PCs, and phones; NAND flash for long-term storage; and HBM, a high-speed memory used with AI processors.
Reports suggest the South Korean government may resist if a deal involves HBM or DRAM due to concerns about sensitive technology. South Korea's trade ministry stated that SK Hynix is free to decide where it invests, but any arrangement involving national core technology would require review under the Industrial Technology Protection Act.
Production Cost Considerations
Sources indicated that chipmaking in America costs significantly more than in South Korea due to higher labor and construction expenses, as well as the concentration of semiconductor supply chains in Asia.
Despite higher costs, SK Hynix has incentives to consider U.S. production. The company completed a secondary Nasdaq listing in July and is building a chip-packaging facility in Indiana, though it currently has no U.S. chip fabrication plant. SK Group chairman Chey Tae-won stated in July that customers and governments were applying pressure to increase supply, saying the company should build a factory in the United States if possible.
Regulatory and Geopolitical Pressures
A U.S. partnership could also reduce pressure on Intel's Ohio investment timeline. Intel announced in 2022 a potential $100 billion investment in the project, with production originally planned to begin in 2025. The two factories are now expected to begin operations in 2030 and 2031.
SK Hynix faces competing demands from two governments. South Korea has directed SK Hynix and Samsung Electronics to accelerate work on a new chip cluster in southwestern South Korea, while Washington seeks increased semiconductor production domestically.
U.S. Commerce Secretary Howard Lutnick has told South Korean and Taiwanese firms that duties could reach 100% if they do not commit to increasing U.S. production. Reports indicate Seoul wants to leverage any U.S. investment by SK Hynix as part of broader trade negotiations, while Washington presses for a quick commitment to domestic expansion.
SK Hynix said it is reviewing various measures, including establishing additional production bases, to strengthen the competitiveness of its memory business, but noted that no matters have been determined at this stage. Intel did not comment on the talks, describing the reports as speculation while confirming that work on the Ohio project continues.
