The Core Reason SK Hynix Invested 10 Trillion Won to Acquire Intel's 'NAND'

[Asia Economy Reporter Changhwan Lee] SK Hynix's acquisition of Intel's NAND flash business for 10.3 trillion KRW, the largest amount in the history of Korean corporate mergers and acquisitions (M&A), is evaluated to be due to the high growth potential and prospects of NAND. In particular, Intel's industry-leading SSD (Solid State Drive) technology and market share are considered the core of this M&A.

On the 20th, SK Hynix announced that it signed a transfer agreement to acquire Intel's NAND division in the United States for $9 billion (10.3104 trillion KRW). This amount surpasses Samsung Electronics' acquisition of Harman in 2016 ($8 billion), making it the largest domestic M&A deal to date.

With this acquisition, SK Hynix plans to strengthen its solution competitiveness such as SSDs in the rapidly growing NAND sector amid the Fourth Industrial Revolution era and leap forward as a global leading company.

SSD is a data storage device made with NAND and is used in servers, PCs, gaming consoles, and more. Due to the expansion of untact (contactless) demand, the demand for related products has surged, and SSDs have recently attracted significant market attention.

According to market research firm Omdia, the global SSD market size, which was $23.1 billion last year, is expected to increase 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's global SSD market share was 19.1%, ranking second after Samsung Electronics with 31.2%. During the same period, SK Hynix held about 8%, but with the acquisition of Intel's SSD business, it will exceed 27%, threatening Samsung Electronics, the number one.

Especially in the enterprise SSD market, Intel held 29.6% in the second quarter, ranking second, and SK Hynix had 7.1%, ranking fifth. Combined, their market share reaches 36.7%, surpassing Samsung Electronics' current 34.1% market share.

Hyunwoo Do, a researcher at NH Investment & Securities, said, "This acquisition will help SK Hynix strengthen its NAND business by immediately securing Intel's NAND production facilities in Dalian, China, as well as NAND-related intellectual property rights and SSD technology competitiveness," adding, "It is also positive in terms of expanding SK Hynix's lacking data center portfolio and controller technology."

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

◆Leaping as a NAND Market Leader Based on SSD Competitiveness

Based on SSD competitiveness, SK Hynix is expected to stand out in the NAND market, where it has faced difficulties so far.

In SK Hynix's overall business, DRAM accounted for 73% of sales as of the second quarter, and NAND accounted for 24%. NAND is still known to be at a loss level. Most sales and profits depend on DRAM, so expanding the NAND business was urgent.

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

Meanwhile, NAND, a type of memory semiconductor, can store data in memory even when the power is off, unlike DRAM, which loses stored data when power is off.

Although the market size is smaller than DRAM, it is growing every year thanks to the Fourth Industrial Revolution and the expansion of untact demand. Market research firm IC Insights forecasts that the NAND market will grow sharply by 27% this year compared to the previous year due to the spread of untact.

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