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.
After the announcement of the acquisition news, Intel rose more than 1% before trading today, and SK Hynix closed down nearly 2% in South Korea. In addition, NAND manufacturers rose by 1.4%.
Intel stock price trend.
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).
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.
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.
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
After entering 2019, NAND market price continues to be depressed, and Intels storage business also continued to lose money in four quarters of the year, so that in July of that year, SK Hynix wanted to acquire the entire Intel Dalian factory and 3dnand business, and the plan was the same as the current acquisition agreement.
Global NAND flash market price trend picture from: Forbes
But Intel denied the report. The company issued a statement at the time that such rumors were natural and not surprising given the current state of the industry. Memory and storage remain at the core of its data centric strategy and will continue to invest in these businesses.
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.
At an analyst meeting in March, George Davis, the companys chief financial officer, admitted that the NAND memory business was not at the level the company wanted to see. He added that the company was considering establishing partnerships with some companies to improve profitability and could not rule out outsourcing part of its NAND chip manufacturing business to a third party.
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..
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
On April 13, this year, Changjiang storage announced that it has successfully developed 128 layer qlc3dnand flash memory (model: x2-6070) by skipping 96 layers, and has passed the verification on SSD and other terminal storage products of many controller manufacturers.
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.
To be frank, Intel has been distracted by unnecessary acquisitions and forays into completely different markets, including security software, smart phone wireless chips and programmable FPGA chips, according to a commentator at Bloomberg. If the company loses its technology leadership in the CPU market, all of these areas dont matter.
After Intel announced in July that the production of 7Nm chips would be delayed to 2023 at the latest, most industry analysts believe that AMD will produce faster and better performance processors in the next few years. The company has launched products based on TSMCs 7Nm technology.
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.
In the article, commentators also admitted that Intels recent poor performance, leaving the memory industry will help it adjust itself.
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.
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.