SK Hynix has just concluded a sales agreement with Intel to sell its NAND memory manufacturing business. Is this agreement beneficial for both Companies? In what follows, we will examine in detail the why and how of this sale.
Why this acquisition?
To increase its market share, South Korean company SK hynix is set to acquire Intel's NAND flash memory business for $ 9 billion . SK Hynix occupies 5th place in the sale of NAND memory with a market share of 12% and Intel is in 6th with its 12%. With the acquisition of Intel's NAND memory business, SK Hynix intends to improve its competitiveness in the NAND memory and SSD storage sector. It will be able to stand up to the giant Samsung which currently holds 1st place in this sector in terms of turnover with a share of 31%. Samsung is followed by Kioxia with its 17%. In 3rd place, we have WD with 16%; then Micron with its 13.7%.
Who benefits from this sale?
Intel agreed to sell this part of the business because it was making little profit and too little return on investment according to George Davis, the Group's Chief Financial Officer. Indeed, the activity only generated $600 million in operating profit with sales of $2.8 billion. Intel has therefore decided to sell this NAND memory activity to concentrate more, among other things, in the field of Artificial Intelligence and 5G. Intel CEO Bob Swan confirmed that this sale allows Intel to focus more on its core areas where Intel can provide its customers, partners and shareholders with greater returns. The sale will therefore be profitable for both companies Intel and SK Hynix. Seok-Hee Lee, CEO of SK hynix, said that by taking the best of the two companies in this field, his company will be able to effectively meet customer needs and replicate its achievements with DRAM memory. .
How will the sale go?
The sale is currently under the control of competition regulatory authorities. This is the usual procedure to follow for an acquisition of this type. An initial payment of $7 billion will be made to first acquire the NAND SSD including human resources, intellectual properties and the Dalian factory. The deal will be finalized in 2025 with the payment of the remaining $2 billion to acquire the remaining assets such as the NAND flash wafer design, related intellectual property and the Research and Development arm of the Dalian factory.
Intel will still be able to continue producing NAND memories until the final payment scheduled at the end of the agreement. It should be noted that the production of 3D XPoint memory is not part of this transaction because it is manufactured by Micron.
In short, everyone wins in this transaction with the exception of Intel's competitors and SK Hynix.
