SK Hynix’s $9 bn Intel NAND deal ‘not overvalued’: CEO

SK Hynix Inc.’s $9 billion deal to acquire Intel Corp.’s NAND memory chip business is not overvalued as the price tag reflects the US firm’s intangible assets, crucial to the Korean chipmaker's business.

Lee Seok-hee, chief executive of SK Hynix, said on Oct. 29 that the recent acquisition will help the company beef up its memory business and complete its product portfolio.

“I don’t think it (the deal) is expensive,” Lee told reporters at a Korea Semiconductor Industry Association event in Seoul. “It's a price that reflects Intel's intangible assets, including its SSD (solid-state drive) capability and solutions. The valuation was fair."

He was responding to market chatter that SK Hynix was paying too much to purchase the NAND business, which Intel seeks to exit for the division’s worsening profitability.

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

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

SK Hynix will pay Intel 8.02 trillion won ($7 billion) in cash by the end of 2021 and the remaining 2.29 trillion won ($2 billion) by March 2025.

Lee, who worked at Intel for 10 years from 2000, said it aims to build a high value-added product portfolio through the deal.

“We developed the industry’s first 128-layer NAND flash and made significant progress in chip manufacturing. But we wanted to beef up our NAND chip solutions and complete our product portfolio,” he said.

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.

HYNIX TO RETAIN KIOXIA STAKE

CEO Lee ruled out the possibility of selling its stake in rival Kioxia Holdings Corp. to raise money needed for the Intel deal.

“We didn’t invest in Kioxia for a short-term return. We wanted to build a cooperative tie-up over the long term,” he said. “Now that Kioxia’s IPO plan has been postponed, we’ll keep assessing its strategic value.”

Back in 2018, SK Hynix, the semiconductor arm of SK Group, invested about 4 trillion won ($3.37 billion) in the Japanese chipmaker through a consortium led by US private equity firm Bain Capital.

Meanwhile, Lee said the construction of its latest M16 chip line in Icheon, south of Seoul, will be completed by the end of this year.

He expects the facility to mass produce the fourth-generation 10-nanometer DRAM chips with its extreme ultraviolet (EUV) lithography technology in the second half of 2021.

Write to Jeong-Soo Hwang at hjs@hankyung.com
In-Soo Nam edited this article.