SK Hynix raised approximately $26.5 billion through a Nasdaq American Depositary Receipt (ADR) offering on the 10th, with funds scheduled for deposit on the 14th. The company plans to convert the majority of proceeds into Korean won for domestic investments including the Yongin semiconductor cluster, Cheongju P&T7 advanced packaging facility, and extreme ultraviolet (EUV) lithography equipment purchases. The dollar inflow represents a significant supply injection into Korea's foreign exchange market, which has faced pressure from global dollar strength and increased domestic overseas investment. An SK Hynix official stated that ADR funds will be used for investments disclosed in the securities filing and will be partially converted to won for execution, though the conversion scale and timing have not been finalized. Market observers expect the large-scale dollar supply to ease the prolonged won depreciation (exchange rate rise), with the won-dollar rate falling from around 1,560 won to the 1,400 won range even before the ADR issuance was confirmed.
SK Hynix Plans Domestic Investment and Won Conversion from ADR Proceeds
According to industry sources on the 12th, SK Hynix raised approximately $26.5 billion (approximately 40 trillion won) through the ADR issuance on the 10th. The dollar offering proceeds will be deposited to SK Hynix on the 14th when the public offering process concludes. Given that SK Hynix plans to use the majority of funds for domestic investments — including the Yongin semiconductor cluster, Cheongju P&T7 advanced packaging facility, and EUV lithography equipment procurement — the large-scale dollar funds will be converted to Korean won. This translates to a large-scale "dollar supply" in Korea's foreign exchange market. An SK Hynix official stated, "ADR funds will be used for investments disclosed in the securities filing, and we plan to convert a portion to won for execution. The conversion scale and timing have not been finalized yet."
Market participants view the large-scale dollar inflow as a factor that will stabilize the recent prolonged won weakness (exchange rate rise). In the foreign exchange market, forward exchange selling volume emerged even before the ADR issuance was confirmed, causing the won-dollar exchange rate — which had risen to around 1,560 won intraday — to fall to the 1,400 won range. The scale of dollar inflow is being described as "currency swap-level." During the 2020 COVID-19 crisis, when financial markets gripped by panic experienced unprecedented volatility, the stabilizing solution was a $60 billion currency swap agreement between the Bank of Korea and the U.S. Federal Reserve. The $60 billion currency swap was a limit concept; the actual dollars supplied domestically through it totaled $19.872 billion. More dollars ($26.5 billion) are flowing into Korea this time.
ADR Fundraising Scale Exceeds 2020 Currency Swap Actual Supply
SK Hynix's fundraising scale is approximately 73% of Korea's June trade surplus (approximately $36.2 billion). Unlike many companies that retain a significant portion of export-earned dollars for further overseas investment, SK Hynix's listing funds are for domestic investment, meaning actual currency conversion will occur. The dollars raised by SK Hynix are comparable to the daily average spot exchange trading volume ($33.28 billion) for the won-dollar pair in the first quarter as announced by the Bank of Korea, and are nearly double the dollars ($13.6 billion) net sold by foreign exchange authorities in the first quarter forex market for "exchange rate defense." In fact, SK Hynix's currently planned domestic investment scale alone exceeds the ADR fundraising amount. Securities industry analysts forecast the company will generate operating profit of around 300 trillion won this year, and with cash secured through future operating activities added, AI semiconductor investment capacity is expected to expand further. The ADR offering price was finalized at $149 per share. The $26.5 billion offering surpassed the $25 billion raised by China's Alibaba in 2014, making it the largest US IPO by a foreign company.
Analysts Project Gradual Dollar Conversion from Late July Through September
The actual currency conversion is expected to begin from late July through August-September after the offering proceeds are deposited. This is because the company is likely to sell dollars in installments aligned with investment schedules to reduce market impact. Kwon Ah-min, a researcher at NH Investment & Securities, stated, "Conversion is expected to start from mid-to-late this month. Dollars will be sold sequentially to secure the won needed for domestic facility investment, but not all fundraising will be converted to won because foreign currency settlement is required for purchases such as ASML equipment from the Netherlands." She continued, "Given that plans for converting approximately $1 billion per day in installments are being discussed, the actual dollar supply effect could continue through August-September. The recent exchange rate decline also reflects these expectations being priced in."
FAQ
Q: What did SK Hynix raise through its Nasdaq ADR offering on the 10th?
A: SK Hynix raised approximately $26.5 billion through the ADR offering on the 10th, with funds scheduled for deposit on the 14th.
Q: Why is SK Hynix converting the ADR proceeds to Korean won?
A: The company plans to use the majority of funds for domestic investments including the Yongin semiconductor cluster, Cheongju P&T7 advanced packaging facility, and EUV lithography equipment purchases, requiring conversion to Korean won.
Q: How does the ADR fundraising scale compare to the 2020 Korea-US currency swap?
A: The $26.5 billion inflow exceeds the actual $19.872 billion supplied domestically through the 2020 $60 billion currency swap agreement between the Bank of Korea and the U.S. Federal Reserve.
