SK hynix to Become eSSD Market Leader
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
SK hynix to become world’s second-largest NAND manufacturer
We maintain BUY and our TP of KRW105,000 for SK hynix. On Oct 20, the company announced that it will acquire Intel’s NAND business (NAND SSD business/NAND component & wafer business/Dalian NAND production facility in China) for KRW10.3tn (KRW8.0tn in 2021; KRW2.3tn in 2025). We view the move as mutually beneficial because it should: (1) Elevate SK hynix’s status to the world’s second-largest NAND manufacturer; as of 2Q20, SK hynix and Intel held global market share of 11.7% (fourth) and 11.5% (sixth), respectively vs. market leaders Samsung Electronics (005930.KS/BUY/ 80,000 TP/60,900 CP) and Kioxia at 31.4% and 17.2%, respectively (2) Allow Intel to focus on its non-memory business.
NAND industry consolidation to result in oligopolistic supply structure
The acquisition will lead to industry consolidation in the NAND space, reducing the number of NAND suppliers from seven to four. A similar situation happened in the DRAM market in July 2013, when Micron Technology acquired Elpida, which had 15% market share as of 2Q13, resulting in the acquirer increasing its market share to 26% in 3Q13 (vs. 13% in 2Q13). In 2Q20, three DRAM manufacturers formed an oligopolistic supply structure, with Samsung Electronics accounting for 44% of the market, followed by SK hynix at 30% and Micron at 21%.
SK hynix to become eSSD market leader
Intel’s NAND business, which entered positive territory in 1H20, ranks second in terms of eSSD (enterprise SSD), which provides solid margins. SK hynix, with its current 4-5% share of the eSSD market, is now set to leap forward to become market leader. We expect SK hynix to (1) bolster its competitiveness in server-user memory (eSSD/server DRAM) and (2) add to its technological prowess in NAND by utilizing Intel’s NAND IP and software.