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Intel deal to make SK hynix world's No. 2 NAND provider

South Korean chipmaker buys Intel’s NAND business for $9b in biggest M&A since 2016

SK hynix's memory plant in Cheongju (SK hynix)
SK hynix's memory plant in Cheongju (SK hynix)

SK hynix announced Tuesday that it would acquire Intel’s NAND business for $9 billion, in a deal that will make it the world’s second-largest NAND flash memory provider.

SK hynix said it has signed an agreement with Intel under which the Korean chipmaker will acquire the US tech giant’s NAND memory and storage business.

The $9 billion deal includes transaction of the NAND solid-state drive business, the NAND component and wafer business and the Dalian NAND memory manufacturing facility in China. Intel will retain its distinct Intel Optane memory storage business.

The deal marks the biggest merger and acquisition deal involving a Korean company since 2016, when Samsung Electronics acquired US-based automotive infotainment company Harman for $8 billion.

The Intel unit produces NAND flash memory products primarily used in hard drives, thumb drives and cameras. The US chipmaker has been looking for a new owner to get out of the business due to falls in flash memory prices.

Intel possesses industry-leading NAND SSD technology and quadruple-level cell NAND flash products.

As of June, the Intel unit had earned $2.8 billion in revenue and $600 million in operating profit.

“I am pleased to see SK hynix and Intel’s NAND division, which have led the NAND flash technology innovation, work to build the new future together,” said Lee Seok-hee, chief executive officer of SK hynix. “By taking each other’s strengths and technologies, SK hynix will proactively respond to various needs from customers and optimize our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM.”

With this acquisition, SK hynix will make its storage solutions, including enterprise SSDs, more competitive in the rapidly growing NAND flash space.

The Korean company has been trying to expand its NAND business through technological innovations.

SK hynix developed the world’s first Charge Trap Flash-based, 96-layer 4D NAND flash in 2018 and 128-layer 4D NAND flash in 2019.

It plans to combine Intel’s solutions technology and manufacturing capability in order to establish a higher value-added 3D NAND solutions portfolio including enterprise SSDs, it said.

This would propel the NAND business up to 40 percent of the company’s total sales, reducing its reliance on DRAM.

In terms of market share, the acquisition would make SK hynix the second-biggest NAND memory provider with a market share of over 19 percent, rising from the current fifth place.

As of the second quarter of 2020, Korea’s Samsung Electronics maintained the top position in the market at 35.9 percent, followed by Japan’s Kioxia with 19 percent and US-based Western Digital at 13.8 percent. Intel held a 9.5 percent share.

SK hynix and Intel will elevate the level of cooperation spanning from DRAM to NAND memory. The two recently announced their collaboration on DDR5.

Intel CEO Bob Swan said, “I am proud of the NAND memory business we have built and believe this combination with SK hynix will grow the memory ecosystem for the benefit of customers, partners and employees.”

“For Intel, this transaction will allow us to further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders,” Swan said.

Intel plans to invest the proceeds of the transaction to deliver leadership products and advance its long-term growth priorities, including artificial intelligence, 5G networking and intelligent, autonomous technology.

The two companies are planning to obtain the required approval from governments by late 2021.

As soon as it is approved, SK hynix will acquire the NAND SSD business, including NAND SSD-associated intellectual property and employees as well as the Dalian facility, the company said, by paying the US firm $7 billion.

The Korean chipmaker will take over the rest of Intel’s NAND business assets, including intellectual property related to manufacturing and the design of NAND flash wafers, research and development employees and the Dalian fab workforce upon a final closing scheduled for March 2025 with the remaining payment of $2 billion.

Intel will continue to manufacture NAND wafers at the Dalian Memory Manufacturing Facility and retain all intellectual property related to the manufacture and design of NAND flash wafers until the final closing.

Despite some bright prospects for SK hynix’s growth in the overall memory market, the chipmaker’s stock price slid nearly 2 percent during the day due to concerns about the financial burden from making such a heavy investment in a relatively limited market, which defied investors’ expectations that SK hynix would enter the non-memory market.

SK hynix closed at 85,200 won ($74.80) on Tuesday, 1.73 percent down from the previous day.

By Song Su-hyun (song@heraldcorp.com)
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