In the past two years, NAND flash memory market price is low, the competition among major manufacturers is fierce, and Intels market share has not improved significantly. At the same time, AMD and NVIDIA are also pressing Intel in the fields of CPU, data center and artificial intelligence.
In this regard, commentators believe that it is wise for Intel to withdraw from the storage business at this time, and the company needs to focus on its main business: CPU chips. If Intel loses its technology leadership in the CPU market, other areas will become irrelevant.
Intel stock price trend.
Six consecutive quarters of losses
Intel is likely to give up its own NAND flash memory and buy it from a third-party supplier. In March this year, a report by foreign science and technology media did not attract much attention. At the time, intel was experiencing a sixth consecutive quarter of losses in its storage business.
Half a year later, the NAND flash business, which was regarded as a big bet by Intels chief financial officer, George Davis, has successfully helped the entire storage business to turn a loss into a profit. However, Intel lost patience and did not want to continue.
On October 20 local time, SK Hynix, a South Korean semiconductor giant, announced that it had reached an acquisition agreement with Intel. The former will purchase Intels NAND flash memory and storage business for us $9 billion (about RMB 60 billion).
The two companies hope to obtain the required government permits by 2021. If the deal is finally concluded, SK Hynix will surpass kioxia to become the second largest manufacturer in the global NAND memory market, and further narrow the gap with Samsung, the industry leader.
Screenshot of SK Hynix official website
According to the agreement, Intel will sell all of its NAND businesses, including nandssd business, NAND components and wafer business, as well as its NAND flash memory manufacturing plant in Dalian, China, but the company will retain its unique Intel Artem business.
Sk Hynix disclosed the details of the transaction on its official website. After obtaining the relevant license, SK Hynix will purchase nandssd business (including nandssd related intellectual property rights and employees) and Dalian factory from Intel by paying the first phase of consideration of $7 billion.
After that, SK Hynix is expected to pay the balance of US $2 billion at the final delivery in March 2025 to acquire other related assets from Intel, including intellectual property rights related to the production and design of NAND flash wafers, R & D personnel and employees of Dalian factory.
According to observer.com, Intel Dalian factory was put into production in 2011, initially mainly producing chips with 65nm technology. Then, the company spent 5.5 billion US dollars in 2015 to upgrade the Dalian factory to a non-volatile storage (NVM) manufacturing plant, which is the largest single investment of Intel in China so far.
Intel SSD products image source: Official Website
In July 2016, the first phase of the project was put into production after the upgrading of the Dalian plant. Some of the data center level solid-state disks released by Intel the next year used the 3dnand produced here. In September 2018, the phase II project was put into operation, and Intels most advanced 96 layer 3dnand was produced in this plant.
However, in Intels business, the storage business is not as well-known as the data center and PC business, and its 3dnand products are sold under the NSG (non volatile memory solutions group) business group. In the 2016-2018 fiscal year, NSG business achieved revenue of US $2.58 billion, US $3.51 billion and US $4.3 billion, with an annual compound growth rate of about 20%.
However, due to the heavy investment in the early stage of 3dnand and the depreciation period of equipment in Dalian plant, NSG business has been in continuous loss since 2016. From 2016 to 2017, NSG lost $540 million and $260 million respectively. In 2018, after receiving $160 million in government subsidies, it still lost $5 million.
The domain that cannot be dominated
Global NAND flash market price trend picture from: Forbes
At the same time, Intels market share has not improved significantly.
According to Chinas flash market data, Intels share of NAND market in the fourth quarter of 2019 was 9.8%, an increase of 1.8 percentage points compared with the first quarter of that year, and the industrys first Samsung increased by 4.1 percentage points in the same period, and the market share reached 35.1%.
In 2020, Intel NAND business lost money again in the first quarter.
With the popularity of the new crown in the second quarter of the world, home office and online education have brought huge demand to the intelligent terminal market, and NAND market price has also begun to rebound.
In this context, Intels storage business achieved revenue of US $1.659 billion in the second quarter, with a year-on-year growth of 76.5% and a month on month growth of 24%, setting a record high. The operating profit was $322 million, ending six consecutive quarters of losses.
But Intel is obviously lack of confidence, has no love war..
Although the second quarter benefited from the new outbreak, investors are worried that if the second wave of the epidemic starts again, the driving force for technology products will be greatly reduced compared with the beginning of the first wave. After all, in order to maintain the demand of home office and online education, PC, tablet, etc. are basically replaced. Moreover, the service life of these products is very long, so it is impossible to maintain the demand for machine replacement for a long time.
The research organization China flash market also pointed out that under the new crown epidemic situation facing the rebound in autumn and winter, the high unemployment rate, and the tense Global trade situation, the channel market customers are still strictly controlling the inventory, and the enthusiasm of pulling goods is poor, reflecting the pessimistic attitude towards the future development.
An executive at a solution provider with Intel said frankly that the decision to sell NAND was not surprising given that Intel was far from the largest player in the SSD market. The companys NAND flash memory revenue accounted for 11% of the market in the second quarter, lagging behind SK Hynix, micron, Western Digital, Toshiba and Samsung.
Global NAND market share in the second quarter of 2020
In fact, in the field of NAND flash memory market, Chinese enterprises are also trying to catch up.
The first phase production line of Changjiang storage has a monthly production capacity of 100000 pieces, which has been climbing since this year. For mass production time, the company disclosed to observer. Com that with the above capacity, 128 layer NAND flash memory will be in mass production from the end of this year to the first half of next year.
In the wake of the deal between Intel and SK Hynix, commentators from the news agency commented on Intel can leave the storage game to Samsung, praising Intel for giving up its memory business in a gloomy future.
The article believes that this is a battle that does not require Intel to participate, and the company needs to give priority to its main business: CPU chips.
A screenshot of the blog
According to the data released by mercury research, as of the fourth quarter of 2019, amd has increased its market share of X86 CPU for the ninth consecutive quarter, with a share of 15.5%, up 3.2 percentage points year on year.
The agency believes that AMDs market share increase is related to the shortage of Intel processors, but the performance of the sharp dragon mobile processor is also commendable, and with the release of ryzen4000 series processors, the company should get more shares in 2020.
In addition, due to the poor progress in the manufacturing process and other reasons, Intels the largest semiconductor enterprise in the United States was also taken away by NVIDIA. The latter benefited from the rapid growth of data center business, and its share price has risen by 130% since this year, and its market value is now 100 billion US dollars higher than Intel.
While a $9 billion deal doesnt solve all the problems of a $200 billion company, every step Intel takes toward a more focused approach is positive, and if the company exits the storage business, its annual free cash flow could increase by $2 billion. According to the article.
While Intel is selling NAND, it is also devoting resources to other fields.
The company disclosed that it plans to use the funds obtained from the transaction to develop industry-leading products and strengthen its business focus with long-term growth potential, including artificial intelligence (AI), 5g network and intelligence, and edge equipment related to automatic driving.
For Intel, this deal will allow us to focus more on investing in differentiated technologies, which will enable us to play a more important role in the success of our customers and deliver substantial returns to our investors. Intel CEO Bob Swann said.