SK hynix and Intel today announced that SK hynix will acquire Intel’s NAND flash business for $9 billion. SK hynix gets Intel’s business, its manufacturing plant with two fabs in Dalian, China, and all of Intel’s designs and intellectual property. The Memory Guy thinks this is a pretty good deal all around.
Intel doesn’t do well in memories, and has shedded numerous memory businesses in the past: SRAM, DRAM, EPROM, EEPROM, PCM, and NOR flash. It simply stopped its bubble memory business. Compared to the company’s processor business the memory business is less profitable (on average) and is highly cyclical, which the stock market really hates.
So this really is no surprise.
What interests me is that the purchaser is SK hynix. This company hasn’t been having the best time in flash lately, working hard to get back to break-even by the second quarter. Now, with the Intel technology, SK hynix will be managing two incompatible 3D NAND designs (charge trap and floating gate) which will prevent any near-term benefit from process synergies.
Although The Memory Guy always expected for Intel to sell this business off, I thought that a more likely candidate would have been YMTC. This NAND flash start-up in China is wrestling to bring its proprietary NAND into mass production and could greatly benefit from the know-how of Intel Dalian’s proven mass-produced technology.
Intel’s Dalian plant is already in China, so that would be a plus, and Intel is an investor in Tsinghua, China’s fund that is financing YMTC. There is a good relationship between Intel and China’s government.
But today we have a big trade war going on. It’s unlikely that an Intel/YMTC deal would have been accepted by government regulators in either country.
In a report to Objective Analysis clients I outline the reasons that other companies were not involved. Check with us if you would like to purchase that report.
In the end, though, SK hynix should benefit over the long term, and Intel gets a $9 billion cash infusion, so there should be smiles at both sides of the negotiating table.