SEOUL: Intel Corp. has agreed to sell its NAND memory chip business to SK Hynix Inc. 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 US chip giant to divest its non-core businesses, move away from the volatile commodity NAND chip industry and focus on its remaining, more lucrative Optane memory business.
It is the biggest acquisition to date for SK Hynix and follows its $3.7 billion investment in Japanese rival Kioxia in 2017, as the Korean firm tries to boost its capacity to build NAND chips — used to store data in smartphones and data center servers — and beef up its pricing power.
The deal will help SK Hynix overtake Kioxia in the NAND memory market while narrowing the gap with Samsung Electronics.
SK Hynix shares jumped after the news before valuation concerns saw them reverse gear to fall 2 percent, while the wider market was down 0.7 percent. Samsung Electronics gained 1 percent.
“Shareholders are negative about the deal because they believe the price is too expensive. It’s good news for other
memory chipmakers, because the move would lead to industry consolidation,” said Lee Seung-woo, an analyst at Eugene Investment & Securities.
SK Hynix said Intel would sell all of its NAND business including its solid-state drive business, NAND component and wafer operation, and its factory in Dalian, China.
Intel would keep its advanced Optane memory technology, developed in partnership with Micron Technology Inc, which makes the Optane chips for Intel under a supply agreement.
The Intel division which includes its NAND and Optane businesses posted a fourth consecutive annual loss in 2019, although it swung to a profit in the first half of this year. SK Hynix has also posted losses in its NAND business.
Analysts said US-China tensions may have influenced Intel’s decision to sell its NAND flash memory factory in China. The moves come a month after Kioxia canceled a planned initial public offering amid market uncertainty.
Intel’s Dalian factory makes chips that compete in the cut-throat commodity memory business
“This transaction will allow us to further prioritize our investments in differentiated technology,” Intel CEO Bob Swan said in a statement.
Swan told investors he planned to divest non-core businesses, after Intel sold its 5G modem business to Apple. SK Hynix said the companies aimed to obtain government approvals in late 2021, and close the deal in March 2025.
The NAND industry grew in 2020 thanks to demand for PCs and servers as the coronavirus forced millions to work from home.
SK Hynix, which counts Apple and Huawei Technologies as customers, is a distant fourth in the NAND memory chip market, although it ranks second after Samsung in DRAM memory sales.
Samsung is the leader in the NAND flash market with a 31.4 percent share, followed by Kioxia with 17.2 percent, SK Hynix with 11.7 percent, and Intel and Micron with 11.5 percent each.
With the acquisition, SK Hynix, part of South Korean conglomerate SK Group, will have a market share of 23.2 percent.
“Although the competitive environment surrounding us is not easy, we have made a bold decision to pave the way for our leap toward securing a firm position in the NAND business as in DRAM,” SK Hynix President and CEO Lee Seok-hee said in a statement.