SK hynix's NAND flash subsidiary Solidigm recorded its first profit since its acquisition last year and is showing a distinctly different appearance after significantly expanding production in the second half of this year. Solidigm is enhancing profitability with enterprise solid-state drive (SSD) NAND flash, which is essential for artificial intelligence (AI) data center infrastructure, while also increasing research and development investment outside of China.
According to industry sources on the 13th, Solidigm plans to increase the NAND wafer input volume for its Dalian production line in China to 350,000 units in the second half of this year and will focus on NAND production for enterprise SSDs. This represents a 25% increase compared to the first half of this year, and it is expected that by the end of the year, production will reach its highest level since Solidigm's establishment. Previously, Solidigm had maintained a production cut to reduce the scale of its losses, but with the recent surge in demand for enterprise SSDs, it is increasing deliveries to global server clients.
SSDs are broadly divided into two types: enterprise SSDs, referred to as eSSD (Enterprise SSD), and client SSDs (Client SSD). SSDs optimized for servers, data centers, and corporate storage are eSSDs, and recently, demand has grown significantly among U.S. big tech companies as well as data center and cloud companies amid the AI era. This is because massive amounts of data need to be stored and processed rapidly during AI learning and inference processes. For example, if ChatGPT needs to learn from tens to hundreds of terabytes (TB) of data, high-performance storage capable of quickly reading and storing that data is essential. eSSDs are also needed for autonomous driving, medical and financial AI, and cloud services.
SK hynix acquired Solidigm for 13 trillion won in 2021 to strengthen its NAND business, which had been weak compared to early movers like Samsung Electronics and Kioxia. However, it has been labeled a 'failed acquisition.' This is because, shortly after the acquisition, the NAND market fell sharply into a supply glut, resulting in lackluster performance. From 2022 through the first half of the following year, NAND prices dropped by more than 50%, and Solidigm recorded losses in the trillions, which burdened SK hynix's finances.
However, with explosive growth in AI demand last year, the demand for high-performance, large-capacity SSDs became significant, prompting Solidigm to undergo a transformation. Solidigm successfully mass-produced the largest existing capacity eSSD, contributing to SK hynix's performance, bolstered by favorable AI trends. Notably, the product introduced by Solidigm is the new 122TB QLC (Quadruple Level Cell) model 'D5-P5336', which has been recognized by global server companies, solidifying its position in the large-capacity enterprise SSD market.
Solidigm's strength lies in its ability to stably mass-produce QLC-based large-capacity SSDs. NAND specifications are divided based on the number of bits stored in a single cell: SLC (1 bit), MLC (2 bits), TLC (3 bits), QLC (4 bits), and PLC (5 bits). QLC can store four times more data than SLC with the same number of cells, making it easier to achieve high capacity and enhancing production cost efficiency.
An industry source said, 'Starting in the first quarter of this year, Solidigm's QLC-based industry-leading capacity eSSDs began to be supplied in earnest, and customer demand is steadily expanding.' They added, 'The technical difficulty of QLC is high, making it hard for competitors to easily enter. Solidigm was the fastest in the NAND industry to commercialize QLC-based SSDs in 2018, and their quality is relatively high.'
Meanwhile, the NAND flash market situation is favorable this year. According to market research firm TrendForce, the average selling price (ASP) of NAND is expected to rise by 5-10% in the third quarter. In the second quarter, prices increased by 3-8% by product type. TrendForce analyzed that 'the supply and demand in the NAND flash market are improving due to production cuts and inventory reductions in the first half of this year.'