Intel has stated in past earnings calls that it was looking at options to reduce its exposure to the ups and downs of the storage business, so it comes as no surprise that the Wall Street Journal today reports that Intel is negotiating to sell its NAND production unit to SK hynix for roughly $10 billion.
Intel has long been rumored to be in talks with its rival NAND chipmaker SK hynix, and today’s report seemingly confirms that Intel will divest itself of at least part of its storage business to the South Korean firm. Analysts expect the deal could be announced as soon as today.
Intel CEO Bob Swan has said in the past that Intel was exploring either forging a partnership or spinning off its NAND fabrication business, largely because the low-profit flash memory business is capital-intensive and subject to extreme pricing volatility.
Intel makes both NAND flash, the most common form of non-volatile memory in SSDs, and the exotic 3D XPoint memory that is only manufactured by Intel and Micron. The WSJ reports that details are slight on exactly what Intel would sell to SK hynix. Still, it is unlikely that Intel will part ways with its 3D XPoint business, largely because it gives Intel a unique advantage over competitors, and its Optane Persistent Memory Modules are closely tied in with its Xeon processors.
Instead, Intel is likely to either enter into a NAND production partnership with SK hynix, much like its old partnership with Micron, or sell its NSG (Non-Volatile Memory Storage Group) flash production unit outright.
Intel already sources some of its NAND from SK hynix, which then makes its way into some of Intel’s consumer SSDs. It’s unclear if Intel will cease developing and selling its own SSDs, or just sell off the flash production arm of its business while securing a long-term supply agreement from SK hynix so it can continue to sell Intel-branded SSDs.
The low-margin storage business doesn’t fit well with Intel’s company goals of operating at a ~60% margin. The company was previously rumored to be in talks with China-based Tsinghua Unigroup, but that obviously wouldn’t pass regulatory scrutiny in the midst of the US-China trade war.
The move comes not long after Intel parted ways with Micron, which was its joint partner in the now-defunct IMFT partnership that helped pave the way for the SSD era. Micron bought Intel out of that partnership for $1.5 billion in January 2020, which followed the decision to cease the joint development of 3D XPoint memory with Micron in 2018. However, Intel continues to fabricate both NAND and 3D XPoint, though that may obviously come to an end soon.
This is breaking news…more to come.