As it works toward diversifying its technologies, Intel Corp. (INTC, Financial) announced on Tuesday it is selling the majority of its memory business to SK Hynix Inc. (XKRX:000660, Financial).
According to the terms of the agreement, the South Korean company will acquire the chipmaker's NAND memory chip and storage business, as well as a related manufacturing plant in Dalian, China, for $9 billion.
The Santa Clara, California-based company will retain its Optane business, which produces more advanced memory products that are used in data centers. Intel plans to invest the proceeds of the transaction into its long-term growth priorities, including technologies related to artificial intelligence and fifth-generation wireless networks.
Demand for flash memory products has increased in recent months as millions of people have bought personal computers and servers so they could work from home in the wake of the Covid-19 pandemic. Intel reported that the operations being sold generated approximately $2.8 billion in sales during the first six months of the year, representing the lion's share of its overall memory revenue of $3 billion for that period.
In a statement, Intel CEO Bob Swan said he believes the deal with SK Hynix will "grow the memory ecosystem for the benefit of customers, partners and employees."
"For Intel, this transaction will allow us to further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders," he added.
As for SK Hynix, the deal will make it one of the world's largest NAND memory manufacturers. The company also hopes to enhance the competitiveness of its storage products. CEO Seok-Hee Lee said he is excited to see the two entities "work to build the new future together."
"By taking each other's strengths and technologies, SK Hynix will proactively respond to various needs from customers and optimize our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM," he said.
The companies said they anticipate receiving the necessary government approvals by the end of 2021.
Following the announcement, shares of Intel declined 1.47% to $53.78 while SK Hynix shares were down 1.73% at 85,200 won ($74.81). Year to date, GuruFocus estimates both stocks have fallen around 10%.
According to GuruFocus' Industry Overview, both Intel and SK Hynix are major players in the semiconductor sector in their respective regions.
Gurus who are currently invested in Intel include Ken Fisher (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Chris Davis (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Michael Price (Trades, Portfolio) and the Parnassus Endeavor Fund (Trades, Portfolio), among others. Bernard Horn (Trades, Portfolio) has a position in SK Hynix as of the end of the second quarter.
Disclosure: No positions.
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