The world’s second-largest chipmaker, South Korea’s SK Hynix, on Tuesday announced a $9 billion (roughly Rs. 66,000 crores) deal to buy Intel’s flash memory chip operations.

It is the biggest acquisition to date for SK Hynix and follows its $3.7 billion investment in Japanese rival Kioxia in 2017

The deal will help SK Hynix overtake Kioxia 6600.T in the NAND memory market while narrowing the gap with market leader Samsung Electronics Co Ltd (005930.KS)

About Intel

Intel Corporation is an American multinational corporation and technology company headquartered in Santa Clara, California, in Silicon Valley.

It is the world’s largest and highest-valued semiconductor chip manufacturer on the basis of revenue and is the developer of the x86 series of microprocessors the processors found in most personal computers (PCs).

Intel ranked No. 46 in the 2018 Fortune 500 list of the largest United States corporations by total revenue.

About SK Hynix

SK hynix Inc. (KRX: 000660) is a South Korean memory semiconductor supplier of dynamic random-access memory (DRAM) chips and flash memory chips.

Hynix is the world’s second-largest memory chipmaker (after Samsung Electronics) and the world’s 3rd-largest semiconductor company.

Founded as Hyundai Electronic Industrial Co., Ltd. in 1983 and known as Hyundai Electronics, the company has manufacturing sites in Korea, the United States, China and Taiwan.

About the deal

The deal includes an initial $7 billion payment for the NAND SSD-associated intellectual property and employees.

And in two years it will also acquire everything related to the NAND flash wafers, including design, R&D engineers, and employees.

Intel will keep using the factory in the next 12 months until the deal is finalized.

Transaction Completion

The two companies hope to gain the required government approvals in late 2021, with the final closing scheduled for March 2025.

Intel’s NAND Performance

During the six-month period ending on June 27, 2020, NAND business represented about $2.8 billion of revenue for its Non-volatile Memory Solutions Group (NSG)

Also contributed about $600 million to the division’s operating income.

Market Maker

Samsung is the leader in the NAND flash market with a 31.4% share, followed by Kioxia with 17.2%, SK Hynix with 11.7%, and Intel and Micron (MU.O) with 11.5% each.

Shareholders Review

Shareholders are negative about the deal because they believe the price is too expensive. It’s good news for other memory chipmakers, because the move would lead to industry consolidation

Stock Market Impact

SK Hynix shares jumped immediately after the news before valuation concerns saw them reverse gear to fall 2%, while the wider market .KS11 was down 0.7%.

Samsung Electronics gained 1%.

Comment from SK hynix CEO

“Although the competitive environment surrounding us is not easy, we have made a bold decision to pave the way for our leap toward securing a firm position in the NAND business as in DRAM,” Lee Seok-hee.

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