SK Hynix in talks with Intel about deal to make memory chips in US for the first time

Seoul/Washington: South Korea's SK Hynix is in talks with Intel about a deal that would see it manufacture memory chips on U.S. soil for the first time, three people familiar with the discussions said.

Under one potential scenario, SK Hynix would lease part of Intel's long-planned chipmaking facility in Ohio, they said. Under another scenario, it could form a venture with Intel and major cloud firms that are keen to lock in memory chip supplies, two of the people said.

A deal would relieve pressure on Intel, which has been struggling, and mark a big win for the Trump administration, which has been ramping up pressure on chipmakers to build in the United States as relentless investment in AI and data centres fuels an acute shortage of memory chips.

But potential opposition from Seoul could be a major hurdle, the sources said.

One of the sources described the talks as exploratory and stressed that no decisions have been made, adding that SK Hynix might also consider other ways to structure the deal.

Intel shares surged 5.2% in pre-market trading on Wednesday, while SK Hynix's stock finished 4.1% higher in Seoul.

Details about how a SK Hynix-Intel deal might be structured are being reported for the first time. Reuters was, however, not able to learn what types of chips SK Hynix may manufacture in Ohio if an agreement is struck.

Its product lineup includes DRAM (dynamic random-access memory) chips used in servers, PCs and smartphones and NAND flash memory chips that provide long-term storage memory. It is also the leading supplier of high-bandwidth memory (HBM) used in AI processing units.

Any agreement to produce advanced memory such as HBM or even DRAM could run into opposition from the South Korean government as those technologies are considered sensitive, said the three sources who declined to be identified as the information is not public.

SK Hynix said in a statement to Reuters that it is "reviewing various measures, including establishing additional production bases, to strengthen the competitiveness of its memory business," but "no matters have been determined at this stage."

Intel declined to comment on what it called speculation, but added that it was continuing with investments in Ohio to ready the site.

Asked about a potential SK Hynix plan to produce chips in the U.S., South Korea's trade ministry said any decision would be at the company's discretion but if it involved a "national core technology," it would be subject to a review under the Industrial Technology Protection Act.

The U.S. Commerce Department did not respond to a request for comment.

Manufacturing semiconductors in the U.S. costs much more than in South Korea, according to two of the sources. Building in the United States entails significantly higher labour and construction costs, and much of the semiconductor industry's supply chain is located within Asia, which also increases U.S. costs, one of them said.

Even so, SK Hynix, which recently completed a secondary listing on the Nasdaq in July and currently only has a chip packaging facility under construction in Indiana, has good reasons to pursue fabricating chips in the United States.

Chey Tae-won, chairman of the SK Group conglomerate that SK Hynix is part of, said in July that the company faces enormous pressure and lobbying from customers and countries to supply more chips.

"I think we need to build a factory in the United States. If possible, I believe we should build it," he told reporters.

A deal with SK Hynix would also ease some of the financial strain on Intel, which is part-owned by the U.S. government.

Intel announced in 2022 that it would invest up to $100 billion to build potentially the world's largest chipmaking complex in Ohio, with production scheduled to begin in 2025. But completion of the site's two plants has since been delayed to 2030 and 2031.

Pleasing both Washington and Seoul could be tough, however, particularly as SK Hynix and rival Samsung Electronics have been urged by the Seoul to accelerate plans to build a new cluster of chipmaking facilities in South Korea's southwest.

U.S. Commerce Secretary Howard Lutnick has threatened to impose up to 100% tariffs on South Korean and Taiwanese companies unless they commit to increased production on American soil.

Both countries have also been wrangling over the execution of a huge investment commitment that South Korea made to the U.S. last year in return for lower U.S. tariffs. Some $150 billion of a proposed $350 billion has been earmarked for shipbuilding but the remaining $200 billion is undecided.

Two of the sources said this has left SK Hynix in a difficult position, with the South Korean government seeking to use any U.S. investment by SK Hynix as leverage in the talks, and Washington heaping pressure on the firm to quickly commit to a U.S. expansion.