Solidigm, the NAND flash subsidiary of SK Hynix, posted first-half net profit of ₩5.84 trillion (approximately $4.1 billion), a 44-fold surge from the same period last year. Revenue came in at ₩12.25 trillion (approximately $8.7 billion). Compared with revenue of ₩3.36 trillion (approximately $2.4 billion) and net profit of ₩132 billion (approximately $93.3 million) in the first half of last year, revenue grew 3.7-fold while net profit jumped more than 44-fold.

Net margin also climbed sharply. After standing at just 3.9% in the first half of last year, it jumped to 21.6% in the second half and soared to 47.7% in the first half of this year. Solidigm posted net losses of ₩3.3 trillion (approximately $2.3 billion) in 2022 and ₩4 trillion (approximately $2.8 billion) in 2023, leaving total equity at negative ₩765.5 billion (approximately $541 million) and complete capital impairment at the end of 2023. However, the company returned to profitability in 2024 and has been on a full-fledged recovery trajectory since last year.

The results, disclosed by SK Hynix through its semi-annual report, reflect the performance of Solidigm, the NAND business division of SK Hynix NAND Product Solutions (NPS). Solidigm is currently pursuing a Nasdaq listing. With first-half net profit surging, observers say the pre-IPO valuation is increasingly likely to exceed the market expectation of ₩50 trillion (approximately $35.3 billion).

After deciding to acquire Intel’s NAND business in 2020, SK Hynix invested $8.844 billion (approximately ₩12.8 trillion) in acquisition payments from 2021 through 2025. Losses continued for some time after the acquisition, but the business structure centered on enterprise SSDs has secured a long-term customer base, driving a sharp rebound in performance. Given that Micron and SanDisk trade at price-to-earnings ratios of around 22x on the Nasdaq market where Solidigm plans to list, the company could potentially command a higher valuation than SK Hynix itself.

Disparities in NPS Stake Acquisition Prices Among Affiliates

With Solidigm’s earnings surging, attention is turning to the prices at which SK affiliates acquired their NPS stakes. Acquisition timing and pricing vary significantly across affiliates, which is expected to result in substantial differences in investment returns.

AffiliateAcquisition TimingShares AcquiredAcquisition AmountPer-Share PriceImplied ValuationSK Inc.May 181,295 shares₩199.7 billion (approximately $141.1 million)₩154.24 million (approximately $109,000)approximately ₩15.71 trillion (approximately $11.1 billion)SK InnovationDuring Q20.6% stake₩92.44 billion (approximately $65.3 million)-approximately ₩17.4 trillion (approximately $12.3 billion)SK TelecomJuly 31642 shares₩397.1 billion (approximately $280.7 million)₩618.58 million (approximately $437,000)approximately ₩63.42 trillion (approximately $44.8 billion)

SK Inc. and SK Innovation secured NPS stakes at relatively low prices. In contrast, SK Telecom acquired its stake at ₩618.58 million per share, roughly four times the price paid by SK Inc. The NPS valuation implied by SK Telecom’s purchase stands at ₩63.42 trillion (approximately $44.8 billion), more than four times the ₩15.71 trillion (approximately $11.1 billion) implied by SK Inc.’s acquisition.

It is difficult to argue that the price differences reflect Solidigm’s first-half results. SK Telecom’s board approved the NPS investment on June 29, before the first-half books were closed. SK Innovation made an additional capital contribution of $143.4 million through its U.S. subsidiary on July 23 but did not disclose the price or terms.

The prices at which SK affiliates purchased NPS stakes could serve as an important benchmark when Solidigm recruits pre-IPO investors. The wider the gap in acquisition prices among affiliates, the greater the potential for confusion in determining pre-IPO valuation.

Prospects for Revaluation of SK Holding Company

Solidigm’s earnings surge is likely to lead to a revaluation of SK Inc., the group’s holding company. Hana Securities analyst Choi Jung-wook noted, “In the case of SK Hynix and SK Innovation, the potential for future increases in equity value based on expectations of continued earnings improvement is being reflected.”

SK Inc.’s second-quarter consolidated revenue reached ₩42.1 trillion (approximately $29.8 billion), up 39.9% year-on-year, while operating profit surged 2,205% to ₩4.8 trillion (approximately $3.4 billion). SK Square, which reflects SK Hynix’s performance, posted second-quarter operating profit of ₩19.2 trillion (approximately $13.6 billion), up 1,274% from a year earlier. SK Innovation also returned to profitability with second-quarter operating profit of ₩3.5 trillion (approximately $2.5 billion). SK Telecom’s operating profit rose 67.6% to ₩600 billion (approximately $424.1 million), driven by growth in its AI data center business.

Reflecting the earnings recovery across affiliates, Choi forecasts SK Inc.’s full-year operating profit at ₩10.54 trillion (approximately $7.4 billion), a significant increase from last year’s ₩1.82 trillion (approximately $1.3 billion).

Overhang concerns surrounding SK Inc.’s stock are also expected to ease. SK Inc. has agreed to sell its 47.32 million shares in SK Siltron to Doosan for ₩2.3 trillion (approximately $1.6 billion). Based on this transaction, the value of SK Group Chairman Chey Tae-won’s personal 29.4% stake in SK Siltron is estimated at approximately ₩950 billion (approximately $671.4 million). This is similar in scale to the ₩944 billion (approximately $667.2 million) property division amount determined in the appellate remand ruling of his divorce case, suggesting that a substantial portion of the funds can be raised without disposing of SK Inc.’s stake.

However, SK Ecoplant was flagged as a variable. Its second-quarter operating profit of ₩534 billion (approximately $377.4 million) fell short of expectations. Losses of more than ₩200 billion related to unsold domestic development projects were reflected, and observers note the possibility of additional losses in the second half.

Listing Controversy and Upcoming Timeline

Solidigm’s surprise earnings could further intensify the listing controversy. The company generates sufficient cash flow from operations, raising questions about whether it truly needs to raise external capital. If its financial structure continues to improve, debt financing could also become a viable option.

SK Hynix is expected to make related disclosures as early as the 4th or 5th of next month. To quell the controversy, SK’s most likely justification is “recovering investment through secondary share sales.” The logic would be to use the recovered funds to pursue new investment opportunities in the AI ecosystem through NPS. Under this rationale, the NPS capital contributions from SK Inc., SK Innovation, and SK Telecom could also be framed as providing opportunities in exchange for risk diversification.