Once finalized, the transaction would make SK Hynix the world’s largest NAND vendor behind market leader Samsung.
Intel-SK Hynix Memory Unit Sales Details
In a press release, Intel explained how the multipart sale of its flash memory division would proceed.
Both companies are aware of the U.S. government’s scrutiny of multibillion-dollar, international tech sector mergers and acquisitions. Accordingly, the chipmakers are seeking the appropriate authorizations before proceeding with their transaction. After the sale is cleared, which is expected to happen in 2021, SK Hynix will pay Intel $7 billion.
With that payment, the South Korean company will acquire the California firm’s NAND SSD department and its staffers in a production facility located in Dalian, China. Once the deal closes, currently pegged for March 2025, SK Hynix would acquire Intel’s remaining flash memory segment employees and intellectual property in exchange for another $2 billion. The agreement also stipulates the seller must keep the Sino factory running until the transfer of assets concludes.
Although Intel is selling off its NAND division, it is not entirely exiting the memory market. The corporation will retain control of its Optane assets and will continue developing the technological innovation.
A Mutually Beneficial Arrangement
Despite its abruptness, Intel and SK Hynix’s deal looks to be a mutually beneficial arrangement.
For Intel, the transaction represents an opportunity to streamline its business. The Wall Street Journal reported the chipmaker’s traditional memory segment made $2.8 billion in the first half of 2020. But earlier this year, CEO Bob Swan indicated the unit had not been generating enough revenue. By divesting itself from an underperforming division, the company can focus more on its core processor business.
In fact, Intel said it would use the proceeds of its NAND business sale to fund the expansion into the 5G, artificial intelligence, and edge computing sectors.
Similarly, SK Hynix is setting itself up for future success by acquiring Intel’s flash memory unit. In the second quarter, the corporation grew its net income by 135 percent year-over-year due to a coronavirus pandemic related spike in demand. But to cement its recent expansion, the company needs to diversify its portfolio and increase production capacity.
SK Hynix’s agreement with Intel will allow it to achieve both aims.
With Analog Devices acquiring Maxim Integrated, Nvidia planning to buy Arm, and AMD potentially purchasing Xilinx, 2020 has seen considerable consolidation within the semiconductor industry. Nevertheless, few proposed agreements make as much business sense as Intel’s deal with SK Hynix