Intel is pawning off their moribund flash business on SK hynix todayfor $9 billion. SemiAccurate thinks this complex deal is a sign of the new Intel but not what it appears to be on the surface.
The short version of the story is that Intel is selling their flash SSD business, Dalian fab, and flash IP/development technology to SK hynix in two parts. First up the SSD lines and physical Dalian fab transfer to SK hynix for $7 billion in 2021 pending regulatory approval. This does not include the people, tech, or development processes for the flash itself, just the business and the building ownership.
In 2025, the people, tech, and all the rest go to Hynix in return for another $2 billion. Between these two times, Intel will continue to make and develop flash at Dalian so business as usual. SK hynix will sell, support, and run the enterprise SSD line once it takes that over and all should go on as it was, at least that is the hope of both sides. The Optane line is not included in this deal.
So why is Intel doing this? We told you that Intel lost their largest flash customer two years ago, and that breakup is about to be visible in their numbers. To SemiAccurate, this loss means the flash business is not sustainable, it is that impactful. Intel appears to be selling off enough of the business that this ‘minor dip’ won’t be visible when it happens, or at least there will be enough confusion that most people won’t notice. When you lose nearly half of your business in one go, awkward questions tend to arise so obfuscating the numbers can pay big dividends.
That said, what is SK hynix buying? They are paying $7b for a shell and an enterprise storage line. By the time hynix takes possession of the building for their own uses rather than renting it back to Intel, it will be essentially worthless. Fabs have a finite lifetime before it isn’t worth upgrading to a new node and Dalian will be there in 2025.
This leaves the jewel in the crown, the enterprise SSD lineup. This high margin, hard to build product line is what hynix is paying for, the rest is effectively rounding error. Taking this over will give the company a huge share of a coveted market in which they barely play now, something well worth the price they are paying. If they have to take a clapped out flash foundry in half a decade to get this line, so be it.
In 2025 when the second part of the deal closes, SK hynix will get the people, IP, and any remaining bits of Intel’s flash division for $2 billion. This is important for one main reason, it is the actual value of Intel’s flash division. If you assume the cost of the fab building is balanced out by five years of rent, then SK hynix is paying $7 billion for the SSD business, $2 billion for the IP, development, and people making the tech.
In that light, Intel’s flash business development arm is worth about 29% of the division that puts them on PCBs and buys expensive dinners for potential corporate customers. If you didn’t know about the customer loss, you probably would consider that a steal. If you know the backstory, it looks like SK hynix is holding their nose and taking the chaff to get the wheat. This deal is Intel selling a coveted product line and force bundling a turkey with it, nothing more.S|A
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