South Korea’s SK Hynix to buy Intel’s NAND business for $9 billion

Intel Corp has agreed to sell its NAND memory chip business to SK Hynix Inc 000660.KS for $9 billion in an all-cash deal that would propel the South Korean chipmaker to second in the global rankings.

The move marks the latest effort by the U.S. chip giant to divest its non-core businesses, move away from the volatile commodity NAND chip industry and focus on its remaining memory business, Optane.

It is the biggest acquisition to date for SK Hynix, helping it overtake Japan’s Kioxia Holdings Corp 6600.T in the NAND memory market and narrow the gap with market leader Samsung Electronics Co Ltd 005930.KS.

SK Hynix shares rose as much as 4.8% immediately after the news before reversing gear to fall 1.5%, compared to a flat wider market .KS11.

“For the short-term, the deal would be a financial burden on SK Hynix, which is expected to continue to post losses in its NAND business, dogged by oversupply,” said Park Sung-soon, an analyst at Cape Investment & Securities.

“For the longer term, it will lead to industry consolidation and help reduce competition while helping SK Hynix pull ahead of rivals.”

SK Hynix said Intel would sell all of its NAND business including its solid-state drive business, NAND component and wafer business, and its factory in Dalian, China. Intel would keep its Optane business, its advanced memory technology.

Intel’s factory in Dalian makes chips that compete in the cut-throat commodity memory business where prices cycle through booms and bust that can eat profits.

Intel’s so-called Optane memory, by contrast, uses more advanced technology that makes it closer in speed to DRAM chips but at NAND prices.

Intel CEO Bob Swan has told investors he plans to divest non-core businesses. The company earlier sold its 5G modem business to Apple Inc.

“This transaction will allow us to further prioritize our investments in differentiated technology,” Swan said in a statement.

Intel said it intended to invest the proceeds of the transaction to deliver leadership products and advance its long-term growth priorities, including artificial intelligence and 5G networking.

SK Hynix said the companies aimed to obtain government approvals in late 2021, and close the deal in March 2025.

pandemic-driven demand
The Nand Flash industry grew in the April-to-June quarter thanks to robust demand for PCs and servers as the COVID-19 pandemic forced millions of people to work from home, according to market researcher Trendforce.

SK Hynix, which counts Apple and Huawei Technologies Co Ltd [HWT.UL] as customers, is a distant fourth in the NAND memory chip market, although it ranks second after Samsung Electronics in DRAM memory sales.

Samsung is the leader in the NAND flash market with a 31.4% share, followed by Kioxia with 17.2%, SK Hynix with 11.7%, and Intel and Micron MU.O with 11.5% each.

With the acquisition, SK Hynix, part of South Korean conglomerate SK Group, will have a market share of 23.2%.

The Wall Street Journal reported earlier that the deal was imminent. Intel’s shares were up nearly 3% after the report. Reuters