Intel Deal Will Allow SK Hynix To Become World’s Second-Largest NAND Flash Seller – Report

Ramish Zafar

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

After a report from The Wall Street Journal broke the news about chipmaker Intel Corporation selling its memory and storage division to South Korean SK Hynix surfaced yesterday, the two companies announced the specifics of the deal later on. Through the sale, whose phase two will be completed in 2025, Intel will transfer its NAND memory and storage business, NAND component business and its NAND manufacturing facility in China to SK Hynix for a final price of $2 billion.

Once the deal closes, SK Hynix will have managed to secure a big portion of the NAND industry in the form of Intel's customers. This will allow the company to become the world's second-largest in terms of market share according to a fresh research report from TrendForce.

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The details of today's report suggest that currently, Intel and SK Hynix have captured 11.5% and 11.7% of the NAND Flash market in terms of revenue. This has enabled Intel to rank in sixth place and SK Hynix to rank in fourth place when they are compared to other manufacturers such as market leader Samsung and Kioxia Holdings Corporation.

After the acquisition secures regulatory approval and Intel transfers all of its assets and other property to SK Hynix, a process that will take several years and not fully culminate before 2025, SK Hynix will have jumped from its current fourth place to second place in the NAND Flash market believes TrendForce.

Hynix will achieve this by securing 20% of the NAND Flash market share once the deal is complete, believes TrendForce. The acquisition will also provide the Korean company with significant resources in the enterprise solid-state drive (SSD) market which is Intel's most profitable NAND product and of which the company commands more than half of the market share in China.

The deal will allow SK Hynix to complement its strengths in the mobile NAND sector with Intel expertise in the enterprise NAND segment. As is the case with all acquisitions of such nature, the two companies will now proceed to secure regulatory approval from government bodies in the United States, China and other foreign nations.

They will proceed with the transfer of assets and payments in two phases. Phase one of the deal will see SK Hynix transfer Intel $7 billion in pre-adjusted cash only, and Intel will proceed towards transferring employees, assets and intellectual property to subsidiaries dubbed U.S. OpCo and China OpCo. Intel will continue to wholly own these subsidiaries and manufacturer NAND memory wafers through them. The subsidiaries will be formed at the end of phase one, currently targetted for November 1, 2021. Between phase one and phase two, SK Hynix will purchase memory wafers manufactured by OpCo through the facility in Dalian, China.

Phase two of the deal, which will start in November next year is slated to end on March 15, 2025. This phase will witness Intel transfer its ownership stake in OpCo to SK Hynix, following which the Korean company will pay the Santa Clara chip giant $2 billion in pre-adjusted cash.

Both parties also have the option to terminate the deal if the first phase is not completed by April 2022. Furthermore, Intel will have to pay SK Hynix a $140 million termination fee if it fails to meet closing conditions before the end of phase one and a $40 million fee if it fails to do so between the first and second phases. For SK Hynix, the fees are higher, with the Korean company required to pay Intel a whopping $350 million if termination occurs before the first stage an $100 million if it occurs between the first and second phases.

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