SK hynix, South Korea’s second biggest chipmaker, has announced plans to buy the NAND memory chip business of semiconductor giant Intel for US$9 billion.
SK hynix said it will acquire Intel’s factory in Dalian, China as well as its NAND flash and solid-state drive businesses, excluding its advanced memory technology unit, Optane.
“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 Seok-Hee Lee, the CEO of SK hynix.
Intel and SK hynix will work together to ensure a seamless transition for customers, suppliers and employees. The two companies will work collaboratively as they did recently with DDR5, to better serve the growing demand from the memory-based semiconductor ecosystem.
“By taking each other’s strengths and technologies, SK hynix will proactively respond to various needs from customers and optimise our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM,” added Mr. Lee.
The deal will allow SK hynix to become the world’s second-largest NAND flash chip producer, overtaking Japan’s Kioxia and narrowing the gap with market leader Samsung Electronics, as the shift to work-from-home boosts demand for chips used in tablets and servers.
According to market researcher TrendForce, SK hynix was the world’s fourth-largest NAND flash maker with 11.7% revenue share in the second quarter of 2020, while Intel was ranked sixth with 11.5% revenue share. Samsung Electronics led the market with 31.4% share, followed by Japan’s Kioxia with 17.2%.
With the acquisition, SK hynix, part of South Korean conglomerate SK Group, will have a market share of 23.2%.
Bob Swan, Intel’s CEO 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 prioritise 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.”
Most of SK hynix’s revenue currently comes from the DRAM business, where SK hynix ranks as the world’s second-largest supplier. In the second quarter, the company logged sales of US$7.5 billion (8.6 trillion won), with customers like Apple, Huawei and Microsoft. Its NAND flash business accounted for 24% of the company’s sales in the second quarter, with SSD sales making up nearly half of its NAND flash revenue.
The NAND Flash industry grew between April and June 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.
George Davis, Intel’s Chief Financial Officer, said in March that while the flash memory business showed promise, with a growing market in data centers, the company hadn’t been able to generate the profits it wanted.
SK hynix will pay Intel US$6.9 billion (8 trillion won) by 2021 to acquire Intel’s Chinese production facility and SSD unit, while it will pay the remaining US$2.017 billion (2.3 trillion won) by March 2025 to complete the deal.
Intel intends to invest transaction proceeds to deliver leadership products and advance its long-term growth priorities, including artificial intelligence, 5G networking and the intelligent, autonomous edge.
Intel’s shares were up nearly 3% after the announcement from SK hynix.