Why are Intel and SK Hynix rallying today?

Intel (NASDAQ: INTC) and SK Hynix (NASDAQ: SKHY; KRX: 000660) are moving higher Wednesday after reports said 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. Its Nasdaq shares were up around 3% before Wall Street trading began.

SK Hynix could start making memory chips in the United States for the first time. One route would have the company use part of Intel’s Ohio plant. Another could involve Intel, SK Hynix and big cloud companies setting up a joint venture.

Nothing has been agreed yet, and the discussions are still early. SK Hynix is looking at other possible setups too. The possible structure has not been reported before.

Intel could give SK Hynix room in Ohio while both sides work through a U.S. deal

Nobody knows yet which chips SK Hynix would make in Ohio. Its lineup includes DRAM, which helps servers, PCs and phones handle data while they are running, and NAND flash, which stores information for longer periods. SK Hynix is also the top supplier of HBM, the fast memory used with AI processors.

Sources allegedly said the South Korean government may push back if a deal includes HBM or DRAM because those products are viewed as sensitive technology. South Korea’s trade ministry said SK Hynix is free to decide where it invests, but anything involving a “national core technology” would need review under the Industrial Technology Protection Act.

SK Hynix said it is “reviewing various measures, including establishing additional production bases, to strengthen the competitiveness of its memory business,” and added that “no matters have been determined at this stage.”

Intel did not comment on the talks and described the report as speculation, though it said work at the Ohio project is still moving ahead.

Sources said making chips in America costs far more than doing it in South Korea. Labor and construction are more expensive in the U.S., and much of the semiconductor supply chain is still based in Asia. That makes American production more costly.

SK Hynix still has reasons to consider it. The company completed a secondary Nasdaq listing in July and is building a chip-packaging facility in Indiana. It has no U.S. chip fab.

SK Group chairman Chey Tae-won said in July that customers and governments were putting serious pressure on the company to increase supply. Chey told reporters, “I think we need to build a factory in the United States. If possible, I believe we should build it.”

Washington wants more chips made in America while Seoul keeps SK Hynix focused at home

A partnership could also take some pressure off Intel’s Ohio spending bill. Intel said in 2022 that it could invest up to $100 billion in the project, planned as a huge chipmaking hub. Production had been set to start in 2025, but the two factories are now expected in 2030 and 2031. The U.S. government also owns a stake in Intel.

SK Hynix has two governments pulling in different directions. Seoul has been telling SK Hynix and Samsung Electronics (KRX: 005930) to speed up work on a new chip cluster in southwestern South Korea. Washington wants more semiconductor production on U.S. soil.

Howard Lutnick, the U.S. Commerce Secretary, has told both South Korean and Taiwanese firms that duties could be raised to 100% in case they do not make an assurance about increasing their production within the United States. There is another big battle over money involved here.

It seems that South Korea has pledged to invest $350 billion into the U.S. market in exchange for reducing U.S. tariffs on them last year. $150 billion has been allocated to shipbuilding, whereas the remaining $200 billion has yet to be decided.

The sources allegedly said Seoul wants to use any U.S. spending by SK Hynix as leverage in those wider talks. Washington, at the same time, wants the company to commit quickly to expanding in America.

This puts SK Hynix in a tricky situation as it considers whether to use Intel’s Ohio location for its first production of memory chips in America.

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