In a significant development, Intel Corp has agreed to sell its NAND memory chip business to South Korea’s SK Hynix Inc for $9 billion. The all-cash deal will propel the South Korean chipmaker to the second spot in global rankings.
The development marks Intel’s efforts to divest its non-core businesse and move away from the volatile commodity of the NAND chip industry and instead focus on its Optane memory business, which albeit is smaller but is more lucrative since it revolves around a more advanced technology.
The deal will see SK Hynix overtake its Japanese rival Kioxia in the NAND memory market and narrow the gap with market leader Samsung Electronics Co Ltd.
With the news reaching the market, shares of SK Hynix surged before valuation concerns kicked in, following which they fell by 2%; in comparison the overall market was down by 0.7%.
“Shareholders are negative about the deal because they believe the price is too expensive. It’s good news for other memory chipmakers, because the move would lead to industry consolidation,” said Lee Seung-woo, an analyst at Eugene Investment & Securities.
As part of the deal, Intel will be selling all of its NAND business including its solid-state drive business
U.S.-CHINA TRADE WAR IMPACT
According to analysts, trade tensions between the United States And China may have factored in Intel’s decision to sell its NAND flash memory factory in China. The move comes in the wake of Kioxia cancelling a planned initial public offering midst market uncertainties.
Intel’s Dalian factory in China where it produces chips that compete in the cut-throat commodity memory business where prices cycle through booms and bust that can eat profits.
“This transaction will allow us to further prioritise our investments in differentiated technology,” said Intel CEO Bob Swan in a statement.
Earlier Intel sold its 5G modem business to Apple Inc.
SK Hynix said the companies aimed to obtain government approvals in late 2021, and close the deal in March 2025.