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Intel to sell NAND chip business to SK Hynix

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Intel has entered a deal to sell its NAND flash memory business to South Korean chipmaker SK Hynix for $9bn in cash over almost five years.

Under the terms of the deal, Intel would sell all of its NAND business, including its solid-state drive business, NAND component and wafer operation, and its factory in Dalian, Liaoning Province - Intel’s only chipmaking facility in China.

According to SK Hynix, the companies aim to obtain government approval in late 2021 (triggering a $7bn payment) and close the deal in March 2025 (with the remaining $2bn being paid upon completion). The IP related to NAND flash wafers, the R&D workforce and the Dalian workforce will be transferred upon completion.

NAND chips – non-volatile storage technology based on NAND logic gates – are found across consumer and enterprise applications, from smartphones and thumb drives to digital billboards and data centres.

Reports suggest that Intel has considered jettisoning its NAND business for some time, amid slumping prices for memory chips associated with oversupply of the devices and uncertainty surrounding US export restrictions to several major Chinese tech companies. Demand increased earlier this year as businesses rushed to buy PCs to support remote working.

“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,” said Bob Swan, Intel CEO, in a statement. “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 attracted returns to our stockholders.”

SK Hynix has been one of Intel’s major flash memory competitors. However, Intel is in the process of divesting its non-core memory businesses and focusing on its smaller but more lucrative Optane memory business, which is closely tied to its next-generation enterprise server CPUs and which appears to have finally stopped losing money. Last year, Intel sold its 5G modem business (including IP and equipment, along with the transfer of over 2,000 employees) to Apple for $1bn.

The acquisition will be the biggest to date for SK Hynix, which will be boosted from fourth to second in the NAND memory market behind Samsung with a market share of 23.2 per cent.

“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,” said Lee Seok-hee, SK Hynix president and CEO.

SK Hynix shares jumped briefly after the news emerged, before tumbling again.

“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,” Lee Seung-woo, an analyst at Eugene Investment & Securities, told Reuters.

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