SK Hynix Accelerates Samsung Electronics SSD Chase with Intel NAND Acquisition (Comprehensive Report 2)

SK Hynix's Acquisition of Intel NAND Business Expected to Greatly Enhance SSD Competitiveness... Market Share Surpasses 27%, Closing in on Samsung Electronics
SSD Business Set to Soar Amid Untact Demand Surge
SK Chairman Chey Tae-won's Semiconductor Business Gamble

[Image source=Yonhap News]

[Asia Economy reporters Changhwan Lee and Dongwoo Lee] SK Hynix, a strong player in the DRAM industry, is a latecomer in another memory semiconductor sector, NAND flash. Unlike the DRAM sector where it competes with Samsung Electronics, SK Hynix has yet to achieve profitability in NAND and holds only about a 10% share of the global market. However, by investing 10.3 trillion KRW?the largest amount ever in Korean mergers and acquisitions (M&A)?to acquire Intel's NAND business, it has instantly risen to become the world's second-largest NAND supplier.

This acquisition is expected to help SK Hynix establish a solid position in the NAND market following its dominance in DRAM. Since returning to management in 2015, SK Group Chairman Chey Tae-won has successfully completed major M&As, and this move is seen as another strategic bet to expand the semiconductor business.

◆Leap to World No. 2 with Intel NAND Business Acquisition

On the 20th, SK Hynix's move to acquire Intel's NAND business is analyzed as an effort to strengthen its market competitiveness in the relatively smaller NAND sector compared to DRAM. While SK Hynix ranks second in global market share in DRAM behind Samsung Electronics, its NAND sales and market influence remain relatively small.

As of the second quarter, DRAM accounted for 73% of SK Hynix's total sales, while NAND made up 24%. NAND is still reportedly operating at a loss. The company has been heavily reliant on DRAM for most of its revenue and profits, making the expansion of the NAND business urgent.

NAND, a type of memory semiconductor, differs from DRAM in that it retains stored data even when power is off, whereas DRAM loses data without power. Although the NAND market is smaller than DRAM's, it is growing annually, driven by the Fourth Industrial Revolution and the expansion of untact (contactless) demand. Market research firm IC Insights forecasts that the NAND market will grow by 27% this year compared to the previous year due to the spread of untact services.

With this acquisition, SK Hynix will raise its global NAND market share to around 23%. According to market research firm Omdia, as of the second quarter this year, Samsung Electronics held the top spot with 33.8%, Kioxia (formerly Toshiba) was second with 17.3%, Western Digital third with 15%, Intel fourth with 11.5%, and SK Hynix fifth with 11.4%.

SK Hynix has high expectations for the SSD (Solid State Drive) business through acquiring Intel's NAND operations. SSDs are data storage devices made from NAND and are used in servers, PCs, and gaming consoles. The surge in untact demand has led to a boom in related products, making SSDs a major focus in the market. Omdia projects that the global SSD market, which was $23.1 billion last year, will grow by about 41% to $32.6 billion this year.

In the SSD market, Intel is a strong player far surpassing SK Hynix. In the second quarter, Intel held 19.1% of the global SSD market share, ranking second behind Samsung Electronics at 31.2%. During the same period, SK Hynix held about 8%, but with Intel's SSD business acquisition, its share will exceed 27%, posing a threat to Samsung Electronics, the market leader.

Do Hyun-woo, a researcher at NH Investment & Securities, said, "This acquisition allows SK Hynix to immediately secure Intel's NAND production facilities in Dalian, China, as well as NAND-related intellectual property and SSD technological competitiveness, which will help strengthen SK Hynix's NAND business. It is also positive in terms of expanding SK Hynix's data center portfolio and controller technology, which were previously lacking."

An SK Hynix official emphasized, "Intel holds a high market share and top-level technology in the high-value-added SSD market. In the era of big data, NAND competitiveness, led by SSD, will be further strengthened."

◆SK Group Elevates Semiconductor Competitiveness with 10 Trillion KRW Investment

This M&A is seen as Chairman Chey Tae-won's strategic move to take SK's semiconductor business to the next level.

Despite opposition in 2011, Chairman Chey acquired SK Hynix and turned it profitable by 2012, establishing it as a core affiliate generating trillions of won in annual profits. Subsequently, SK expanded its semiconductor-related industries by acquiring SK Materials, a specialty gas manufacturer for semiconductors; SK Airgas, an industrial gas manufacturer; and SK Siltron, a semiconductor wafer specialist.

The acquisition price of 10.31 trillion KRW will be covered through cash reserves and borrowings. According to SK Hynix's semiannual report, the company held 4 trillion KRW in cash equivalents as of the first half of the year. The payment schedule includes 8.0192 trillion KRW at the first deal closing expected by the end of next year, with the balance paid at the second closing anticipated in March 2025.

The industry expects SK Hynix's semiconductor business to make a significant leap forward with the acquisition of Intel's NAND business.

An Ki-hyun, executive director of the Korea Semiconductor Industry Association, said, "With this contract with Intel, SK Hynix can secure the lacking technology and market share in the relatively weak NAND business. Especially, by increasing its global NAND market share to about 20%?second only to Samsung Electronics?it has laid the foundation to leap into the leading group in terms of scale competition."

This content was produced with the assistance of AI translation services.