In a current press launch, SK Hynix and Intel collectively introduced that Intel will be selling the entirety of its NAND memory business.
The deal, which at the moment has Intel’s NAND holdings valued at $9 billion, will see Intel switch over the NAND enterprise in two components with Seoul-headquartered SK Hynix buying all IP, services, and workers associated to Intel’s NAND efforts over the following 5 years. This contains the NAND SSD enterprise, the NAND part and wafer enterprise, and the NAND reminiscence manufacturing facility in Dalian, China.
Not Fully Sudden
This sale is the newest in a collection of changes as Intel leaves behind non-core actions, marking the corporate’s departure from a market that has lengthy been seen as non-strategic. Certainly, the U.S. chipmaker has been trying to get out of the enterprise for fairly a while, a need pushed by falling costs for flash reminiscence and troubles turning a revenue.
For 4 of the final 5 years, Intel, an organization recognized for its sturdy gross margins in different areas, has recorded flat or unfavorable working incomes for its NAND enterprise, and solely within the final six months has the corporate made any cash from it, reporting $600M in working earnings for Q1 and Q2 2020.
NAND’s contract costs. Picture used courtesy of Coughlin Associates and Forbes
Sadly, Intel has by no means been as profitable within the NAND market as they most likely would have hoped. Since considered one of Intel’s core NAND efforts—their IMFT joint-venture with Micron—was scaled again in 2018, the corporate has famously struggled with its NAND enterprise, only managing to secure the number six spot that year for global NAND flash market share behind SK Hynix, Samsung, Micron, and others.
A Sale in Two Components
Under the first phase, which is able to happen subsequent 12 months as soon as authorised by the required regulatory our bodies, SK Hynix can pay $7 billion to Intel for his or her SSD enterprise and the Dalian NAND fab. This can switch Intel’s shopper and enterprise SSD companies to SK Hynix, together with all related IP and SSD enterprise workers, however no NAND or IP workers. And whereas SK Hynix will purchase the Dalian fab, the workers working on the facility aren’t included.
After the primary part, Intel will proceed to develop and manufacture NAND out of the Dalian fab till roughly early 2025 when the deal is predicted to totally shut. Right now, SK Hynix can pay Intel an extra $2 billion for the rest of their NAND enterprise and can see all of Intel’s NAND IP and associated workers switch to SK Hynix, together with the workers on the Dalian fab.
At this stage, neither social gathering has supplied any rationale for the staggered acquisition.
Intel shall be carrying on with the event of its Optane reminiscence options. Picture used courtesy of Intel
Intel gained’t be promoting its Non-Unstable Reminiscence Options Group as a part of this deal. The corporate will as a substitute be holding on to this because it continues to develop and promote its Optane reminiscence know-how. This shouldn’t come as a lot of a shock; Optane is a key a part of Intel’s plans to consolidate its main place within the knowledge middle infrastructure market.
New Alternatives for SK Hynix
In the meantime, the deal will create loads of new alternatives for SK Hynix, making the corporate one of many world’s largest NAND reminiscence makers. Mixed, SK Hynix and Intel’s market share was greater than 20% in Q2 2020, trailing solely their rival South Korean agency and market chief Samsung Electronics Co., which holds over 30% of the market.
By buying Intel’s Dalian-based NAND fab, it’s not unrealistic to count on that SK Hynix may scale up their operations to take care of the competitors of its remaining rivals and go for the market prime spot.
SK Hynix could advance in NAND reminiscence know-how from the acquisition. Picture used courtesy of Nikkei Asia
That being mentioned, SK Hynix is greater than able to constructing extra of its personal fabs if it needed extra NAND manufacturing capability. What SK Hynix doesn’t have, nevertheless, is a large SSD enterprise. That is what seems to be probably the most invaluable a part of the deal for SK Hynix; the corporate particularly mentions this within the joint press launch.
Intel’s presence within the enterprise SSD market, which was achieved with intelligent early funding and dominance in enterprise CPU gross sales, will put SK Hynix in a a lot better place to chase its greatest rival, Samsung, as this was Intel’s solely main competitor within the SSD market.
In the long run, nevertheless, we’ll have to attend and see what SK Hynix plans to do with the NAND fab aspect of the acquisition.