Intel in US$9b deal to sell its memory unit

Intel Corp has agreed to sell its NAND memory chip business to SK Hynix Inc for US$9 billion in an all-cash deal that would propel the South Korean chipmaker to second in the global rankings.

The move marks the latest effort by the US chip giant to divest its non-core businesses, move away from the volatile commodity NAND chip industry and focus on its remaining Optane memory business, which is smaller but more lucrative because it taps more advanced technology.

It is the biggest acquisition to date for SK Hynix and follows its US$3.7 billion investment in Japanese rival Kioxia in 2017, as the Korean firm tries to boost its capacity to build NAND chips — used to store data in smartphones and data center servers — and beef up its pricing power.

The deal will help SK Hynix overtake Kioxia in the NAND memory market while narrowing the gap with market leader Samsung Electronics Co Ltd.

According to the plan confirmed by the companies on Tuesday, Intel would sell all of its NAND business including its solid-state drive business, NAND component and wafer operation, and its factory in Dalian, China.

Intel would keep its advanced Optane memory technology, developed in partnership with Micron Technology Inc, which makes the Optane chips for Intel under a supply agreement.

The Intel division which includes its NAND and Optane businesses posted a fourth consecutive annual loss in 2019, although it swung to a profit in the first half of this year. SK Hynix has also posted losses in its NAND business.

“This transaction will allow us to further prioritize our investments in differentiated technology,” Intel CEO Bob Swan said in a statement. He has told investors he plans to divest non-core businesses. The company earlier 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.

The NAND flash industry grew in the April-to-June quarter thanks to robust demand for PCs and servers as the COVID-19 pandemic forces millions of people to work from home, according to market researcher Trendforce.