Intel casts off more of its memory chip business in $9 billion deal
By Don Clark
Intel moved to further distance itself from its original business, reaching a deal to sell a remaining memory chip unit to SK Hynix of South Korea for $9 billion.
The transaction, announced Monday, includes Intel’s most important factory in China. But it excludes a proprietary memory technology that the company has been promoting as an important tool for accelerating speeds in cloud data centers.
Intel for decades has been known for supplying the microprocessors that serve as calculating engines in most computers. But Intel was founded in 1968 mainly to make memory chips, which store data in all kinds of electronic devices.
Those components are largely interchangeable and come from multiple suppliers, which compete fiercely on price and subject the market to boom and bust periods. So Intel, starting in the 1980s, began retreating from segments of the memory business to focus efforts on more profitable microprocessor sales.
The deal with SK Hynix focuses on chips known as NAND flash memory, which store data in smartphones, computers and many other products. Intel’s flash memory business has been doing well lately, with revenue up 76% in the second quarter owing to factors like pandemic-related spending on personal computers.
But Intel, which has recently suffered from manufacturing problems, has at other times been hurt by drops in flash memory pricing. Robert Swan, Intel’s chief executive, previously signaled that it might seek a partner or acquirer for the unit.
“Memory is never a great business,” said Jim Handy, a market researcher with Objective Analysis. The deal with SK Hynix is “a very natural step” for Intel, he added.
Intel primarily makes flash memory chips at a factory in Dalian, China, though the company also conducts related development work in New Mexico.
The Wall Street Journal reported earlier Monday that the companies were close to a deal. A news release issued in the evening by SK Hynix said it would make an initial $7 billion payment to acquire both the Dalian factory and NAND flash business as well as a related business selling storage drives that use the chips.
Until a final closing of the deal, not expected until March 2025, Intel will continue to make chips at the Dalian factory, the companies said. After the close, SK Hynix will make a final $2 billion payment and receive other assets, including intellectual property needed to make the chips.
The deal does not include rights to a memory technology called 3D XPoint, developed in a joint venture with Micron Technology, which offers higher data transfer speeds than conventional NAND flash. That technology, which Intel markets under the brand name Optane, “is Intel’s crown jewel in the memory sphere,” said Roger Kay, an analyst at Endpoint Technologies Associates.
Intel has spent billions of dollars perfecting the technology, Handy said, but the latest quarterly results suggest it may no longer be selling the chips at a loss.