China to Benefit from SK Hynix's Investment
SK Hynix’s acquisition of the NAND Business Unit from Intel has finally cleared the final hurdle, with approval from the Chinese government. As a result, SK Hynix has wrapped up the long process of undergoing reviews by fair competition authorities in countries concerned.
SK Hynix announced on Dec. 22 that it has received approval from China’s State Administration for Market Regulation (SAMR) in an anti-trust review of the acquisition of the NAND and solid state drive (SSD) business divisions from Intel. Earlier, on Oct. 20 in 2020, SK Hynix signed a contract to acquire the Intel NAND division for US$9 billion.
Since then, SK Hynix has undergone regulatory reviews by fair competition watchdogs in eight countries. The Korean chipmaker received approval from seven countries including the United States, the European Union, and Taiwan, but China alone has not approved the deal for nearly one year. Insiders of the Korean semiconductor industry were very concerned that China, which declared the promotion of its semiconductor industry, deliberately delayed its review to keep Korea in check.
Contrary to such concerns, however, China approved the deal for practical reasons. China has stepped up its efforts to realize its ambition to become a global semiconductor powerhouse but is having difficulty localizing chips as the United States is blocking it from purchasing major semiconductor production equipment. Under these circumstances, it would be more advantageous for China to allow SK Hynix to take over Intel's NAND flash business unit and continue to run the business in China. Experts say that SK Hynix is expected to expand investment and employment in China, so SK Hynix’s acquisition of Intel's NAND plant in China will help China create a semiconductor ecosystem.
SK Hynix actively persuaded Chinese authorities to endorse the takeover by the end of 2021. SK Group chairman Chey Tae-won used his wide network as well. He has built a human network in China by holding the Beijing Forum, the Shanghai Forum, and the Nanjing Forum every year, and participating in the Boao Forum for Asia for a long time. He reportedly appointed group vice chairman Seo Jin-woo as the head of the Chinese business in September, and had Seo persuade senior officials of the Wuxi and Dalian governments to request the Chinese central government to approve the SK Hynix-Intel deal.
Although SK Hynix jumped over the highest hurdle -- receiving approval from fair trade watchdogs -- its acquisition process is not over yet. First, SK Hynix has to make a first payment of US$7 billion to Intel to take over it SSD business and fab assets in Dalian of China.
Afterwards, it needs to pay the remaining US$2 billion by March 2025 to take over all remaining business rights to Intel’s NAND business. Until 2025 when the acquisition contract will be finalized, Intel produces NAND flashes at its Dalian Fab, and the related intellectual property rights (IPs) will belong to Intel.
Therefore, industry insiders say that SK Hynix cannot immediately enjoy acquisition effects. Nevertheless, the acquisition will help SK Hynix sharpen its competitiveness in the NAND flash market in the mid to long term.
As of the third quarter of this year, SK Hynix and Intel accounted for 13.5 percent and 5.9 percent, respectively, of the global NAND flash market. Their combined market share stood at 19.4 percent. The percentage is on par with 19.3 percent of second-placed Kioxia of Japan. Although the gap with top-ranking Samsung Electronics' 32.9 percent is still wide, the acquisition will lay the foundation for SK Hynix to chase Samsung Electronics.