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Memory chips

SK Hynix to buy Intel’s NAND business in $9 bn cash deal

Oct 20, 2020 (Gmt+09:00)

SK Hynix Inc. has signed a 10.3 trillion won ($9 billion) all-cash deal to buy Intel Corp.’s NAND memory chip business that will propel the South Korean chipmaker to second in the sector’s global rankings.

The acquisition, if completed, will be the largest ever by a Korean company, far higher than Samsung Electronics Co.'s deal in 2016 when it bought Harman International Industries Inc. for $8 billion.

The semiconductor unit of conglomerate SK Group said in a regulatory filing on Oct. 20 that the acquisition is aimed at building a high value-added product portfolio by strengthening its solid-state drive (SSD) business.

The company said the deal will boost its competitiveness in SSD solutions and strike the right balance in pursuit of becoming a leader in the overall memory business.


“I am pleased to see SK Hynix and Intel's NAND division, which have led the NAND flash technology innovation, work together to build a new future,” said SK Hynix Chief Executive Lee Seok-hee.

“By sharing each other's strengths and technologies, SK Hynix will proactively respond to various needs from customers and optimize our business structure.”

100 TRILLION WON IN ENTERPRISE VALUE

The CEO said SK Hynix made a bold decision to secure a strong foothold in the NAND business, in which the company is a laggard. He said the deal would facilitate its goal to make SK Hynix a chipmaker worth 100 trillion won ($87.7 billion) in enterprise value.

With the acquisition, SK Hynix will be able to overtake Japan’s Kioxia Holdings Corp. in the NAND memory market and narrow the gap with market leader Samsung Electronics.

Hynix, whose customers include Apple Inc. and Huawei Technologies Co., is currently a distant fifth in the NAND flash sector with its market share of 11.4%, although it ranks second after Samsung in global DRAM memory sales.

Under the deal, SK Hynix will acquire all of Intel’s NAND business, including its SSD business, NAND product and wafer business, along with its factory in Dalian, China. Intel will keep its Optane business which owns an advanced non-volatile memory technology.

The US tech company has been weighing its exit for some time driven by the sagging prices for flash memory.

NAND flash chips made by SK Hynix

PANDEMIC DRIVES DEMAND

The market for memory chips slumped in 2018 due to an oversupply of devices, but it began to recover late last year. Demand for NAND memory chips used in data storage devices such as hard drives and cameras rose from early this year owing to a global transition to a work-from-home environment in the COVID-19 pandemic era.

SK Hynix said Tuesday it will pay Intel 8.02 trillion won ($7 billion) in cash by the end of 2021 to acquire the US firm’s Chinese plant and its SSD unit. The Korean company will pay the remaining 2.29 trillion won ($2 billion) by March 2025 to acquire Intel’s remaining assets, including intellectual property related to the manufacture and design of NAND flash wafers, as well as the research and development workforce.

SK Hynix said the completion of the deal is subject to regulatory approval by the governments of related countries.

In the second quarter, the Korean chipmaker posted an operating profit of 1.9 trillion won on revenue of 8.6 trillion won.

Most of SK Hynix’s revenue comes from its DRAM business, where the chipmaker is the world's second-largest supplier. Its NAND flash business accounted for 24% of its second-quarter sales, with SSD sales taking up nearly half of its NAND flash revenue.

Write to Hyung-Suk Song and Jeong-Soo Hwang at click@hankyung.com

In-Soo Nam edited this article.

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