US multinational Semiconductor Company, Intel Corporation has agreed to sell its NAND memory chip business to South Korea-based SK Hynix Incorporation for $9 billion in an all-cash transaction.
The move represents the latest attempt by the US chip giant to divest its non-core companies, moving away from the competitive NAND chip commodity market and concentrating on its remaining smaller yet more profitable Optane memory business because it uses more advanced technology.
It is SK Hynix’s largest acquisition to date following its $3.7 billion investment in Japanese competitor Kioxia in 2017, as the Korean company aims to expand its ability to develop NAND chips that are used to store data on smartphones and servers in data centers.
The deal would allow SK Hynix to overtake Kioxia in the NAND memory market while reducing the gap with the market leader, Samsung Electronics.
SK Hynix shares soared immediately after the news before valuation issues saw them fall 2 percent in reverse gear, while 0.7 percent was down in the broader market. 1 percent was gained by Samsung Electronics.
Lee Seung-woo, an analyst at Eugene Investment & Securities said, “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”.
Intel will sell all of its NAND business, including its solid-state drive company, NAND component and wafer operation, and its Dalian, China factory, SK Hynix said.
Intel will maintain its advanced Optane memory technology, built-in collaboration with Micron Technology Incorporation, which makes the Optane chips for Intel under a supply agreement.
In 2019, the Intel group, which includes its NAND and Optane companies, reported a fourth consecutive annual loss, while in the first half of this year it turned to a profit. In its NAND market, SK Hynix has also reported losses.
According to the analysts, Intel’s decision to sell its NAND flash memory factory in China may have been motivated by US-China tensions. Amid market uncertainty, the moves come a month after Kioxia canceled a proposed initial public offering.
In the NAND memory chip market, SK Hynix, which counts Apple and Huawei Technologies Company Limited as customers, is a distant fourth, while it ranks second in DRAM memory sales after Samsung Electronics.
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 the South Korean SK Group conglomerate, will have a 23.2 percent market share.
Lee Seok-hee, CEO and president, SK Hynix said, “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”.
The second-largest memory chipmaker and the third biggest semiconductor firm in the world, SK Hynix Incorporation is a supplier of dynamic random-access memory chips and flash memory chips to South Korean memory semiconductors.