SK hynix to Acquire Intel NAND Memory Business (but Optane) for $9 Billion
Biggest storage acquisition in 2020 in front of Veeam by Insights Partners for $5 billion
This is a Press Release edited by StorageNewsletter.com on October 20, 2020 at 2:30 pmSK hynix, Inc. and Intel Corp. have signed an agreement on October 20, under which SK hynix would acquire Intel’s NAND memory and storage business for $9 billion.
The transaction includes the NAND SSD business, the NAND component and wafer business, and the Dalian NAND memory manufacturing facility in China.
Intel will retain its distinct Intel Optane business.
The two companies will endeavor to obtain required governmental approvals expected in late 2021.
Following receipt of these approvals, SK hynix will acquire from Intel the NAND SSD business (including NAND SSD-associated IP and employees), as well as the Dalian facility, with the first payment of $7 billion. It will acquire from Intel the remaining assets, including IP related to the manufacture and design of NAND flash wafers, R&D employees, and the Dalian fab workforce, upon a final closing, expected to occur in March 2025 with the remaining payment of $2 billion.
Per the agreement, Intel will continue to manufacture NAND wafers at the Dalian memory manufacturing facility and retain all IP related to the manufacture and design of NAND flash wafers until the final closing.
With this acquisition, SK hynix aims to enhance the competitiveness of its storage solutions, including enterprise SSDs, in the growing NAND flash space, and further aims to leap forward as one of the leading global semiconductor companies in the industry.
SK hynix expects that the transaction would enable SK hynix to grow the memory ecosystem to the benefit of customers, partners, employees and shareholders.
Intel possesses leading NAND SSD technology and QLC NAND flash products.
For the first six months ended June 27, 2020, the NAND businesses represented approximately $2.8 billion of the revenue for Intel’s Non-volatile Memory Solutions Group (NSG) and contributed approximately $600 million to NSG operating income.
SK hynix developed the first Charge Trap flash (CTF)-based, 96-layer 4D NAND flash in 2018 and 128-layer 4D NAND flash in 2019.
It will combine Intel’s solutions technology and manufacturing capability in order to establish a higher value-added 3D NAND solutions portfolio including enterprise SSDs.
Intel intends to invest transaction proceeds to deliver leadership products and advance its long-term growth priorities, including AI, 5G networking and the intelligent, autonomous edge.
The two firms will work together to ensure a seamless transition for customers, suppliers and employees. They will work collaboratively as they did recently with DDR5, to better serve the growing demand from the memory-based semiconductor ecosystem.
“I am pleased to see SK hynix and Intel’s NAND division, which have led the NAND flash technology innovation, work to build the new future together,” said Seok-Hee Lee, CEO, SK hynix. “By taking each other’s strengths and technologies, SK hynix will proactively respond to various needs from customers and optimize our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM.”
Bob Swan, Intel CEO, said: “I am proud of the NAND memory business we have built and believe this combination with SK hynix will grow the memory ecosystem for the benefit of customers, partners and employees. For Intel, this transaction will allow us to further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders.“
Citi, Inc. served as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP, K&C and Fangda Partners served as legal counsel to SK hynix. BofA Securities served as financial advisor and Munger, Tolles & Olson LLP, Wilmer Cutler Pickering Hale and Dorr LLP, Linklaters LLP and Bae, Kim & Lee LLC served as legal counsel to Intel.
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This is an Executive Brief from Trendfocus, Inc.'s Information Services published on October 19, 2020 (just one day before the official transaction).
Intel Possibly in Negotiations to Sell NAND Unit to SK Hynix
The Wall Street Journal published an article suggesting that Intel may be close to selling its NAND business to SK Hynix, with an official announcement coming as early as next week, and a rumored price tag of approximately $10 billion. The article did not specify whether this would include Intel's SSD business or not.
Although Intel only represents approximately 7.5% of the NAND market worldwide, this is more than double its market share from just three short years ago. SK Hynix, on the other hand, has had a larger share over the years as NAND has been, and continues to be, one of its core businesses. SK Hynix currently holds about 14% of total NAND market share from a bit shipment perspective, and it continues to post growth in both the mobile and SSD markets, especially in the rapidly growing data center SSD business. Acquiring Intel's NAND capacity will only help SK Hynix in ensuring longer-term supply for a market segment that is outpacing overall NAND industry growth.
Additionally, Intel has been one of the leaders in introducing and shipping QLC NAND into the market. Although QLC has held a lower share mix vs. other NAND technologies (mainly 3D TLC), QLC will enjoy healthy growth over the coming years, in both client and enterprise applications as deployments in both market segments have already begun. This deal would give SK Hynix an immediate advantage in this next-gen NAND technology, complementing its already deep relationships and product success with customers across various market segments.
A key priority for both SK Hynix and Intel over the past number of years, Intel has been very successful in deploying its NAND-based data center products across a broad geographical and market segment footprint.
From a portfolio perspective, Intel holds approximately 25% of the world's NAND exabytes shipped in the enterprise SATA SSD market, and about 30% of all enterprise PCIe exabytes shipped in the world, selling to both data center and system OEM customers.
In addition to these end market successes, Intel sells to multiple geographies around the world, including Europe, Asia, and the United States.
SK Hynix, in comparison, had virtually zero market share in both enterprise SATA and enterprise PCIe just 3 short years ago. It did, however, have some presence in the client SSD market - around 7 to 8% of the market.
Intel was not too far behind with approximately 6% of the client market around that same time.
Today, SK Hynix has found great success in the enterprise PCIe market, shipping about a third of the units worldwide, and over 15% of all exabytes shipped. Assuming incremental share gains with an Intel NAND business purchase, SK Hynix would increase its client SSD share to over 15% of the client market today and would hold a dominant 45% of the all-important enterprise PCIe SSD market.
In addition to SSD share, SK Hynix would also have a larger supply of NAND to address the growing DIY SSD (self-build) customer segments, which include both OEM and data center customers. Trendfocus estimates that the DIY SSD market will track a bit-growth CAGR of 43% over the next 5 years, far outpacing the overall NAND industry CAGR.
Combined with an enterprise PCIe SSD bit growth CAGR of close to 40% and a solid presence in client PCIe SSD solutions, an acquisition of Intel's NAND business gives SK Hynix additional tools to grow share over the long term along with an immediate presence in the QLC NAND solutions market.
Although the NAND market suffers periodic volatility when bit growth outpaces short-term demand, SK Hynix has shown the product and customer breadth to weather past market difficulties. Having additional capacity and technical depth through an acquisition should combine well with its disciplined business leadership to further ensure that it thrives over the long-term.
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