Intel agrees to sell its NAND unit to SK Hynix for $9B

sk nynix
South Korea's SK Hynix could pay $10 billion for Intel's NAND flash memory unit, including a plant in China. (SK Hynix)

Intel is selling its NAND memory and storage manufacturing unit to SK Hynix of South Korea for $9 billion, the two companies announced late Monday. 

Intel will hold onto its Optane business, but SK Hynix will acquire the Intel NAND SSD business, the NAND component and wafer business and the Dalian NAND memory factory in China, the companies said.

It will take years for Intel to completely transfer the assets. Closing on the deal depends on government approvals from the U.S., South Korea and China, expected in late 2021, at which point SK Hynix will transfer its first payment of $7 billion, with a final payment in March of 2025.

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Intel had been evaluating whether to get out of making NAND flash going back at least a year after the memory market declined in 2018 due to an oversupply. 

Even as big data centers and cloud operators rely more and more on flash memory, Intel hasn’t apparently been able to take advantage of that growth curve.  Ironically, Intel started in the 1960s as a memory product maker.

Intel CEO Bob Swan reported in April that the company wanted greater returns from the NAND unit and said it could partner with another company to improve.

However, regarding the sale to SK Hynix, Swan said Monday that the transaction will allow Intel to "further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to stockholders."

The transaction proceeds will be used to advance what Intel calls "long-term growth priorities" such as AI, 5G networking and intelligent, autonomous edge products.

SK Hynix said it hopes to use the acquisition to enhance its storage products, including enterprise SSDs "in the rapidly growing NAND flash space." 

Analysts at Trend Force said Intel has lately "been performing superbly in the enterprise SSD market" and is on par with Samsung in that arena with 50% of the Chinese market.  Enterprise SSD yields the greatest profits for Intel's NAND Flash end-product, the analyst firm said.

Intel is fifth in the global NAND market with about 11%, tied with Micron. SK Hynix is just ahead with 11.7%  and Western Digital has 16%, according to Statista Data.  Samsung has a 31.4% share, making it the leader. The acquisition of NAND flash from Intel will move SK Hynix to second highest market share behind Samsung, Trend Force said.

In the first six months of 2020, Intel earned $2.8 billion in revenue and $600 million in operating income for its NAND products that are made by its Non-volatile Memory Solutions Group. 

In January, Micron Technology bought for $1.5 billion Intel’s share in a joint venture related to memory production of technology called 3D XPoint.

Intel makes 3D NAND with multiple layers of memory cells stacked atop each other.  It is produced in Dalian, China, the only major chipmaking site for Intel in China. The transaction includes Intel's 3D NAND, but not its 3D-XPoint memory technology, TrendForce said.

Intel announces third quarter earnings on Thursday.  Its shares gained less than 1% overnight after the deal was announced, reaching $54.99.  Shares for SK Hynix dropped nearly 2%.

Shares rose 8% for Western Digital after the report of the Intel/Hynix deal, while shares for Micron gained 2%.

RELATED: How buying Xilinx makes AMD a tall dog in chips, especially FPGAs

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