Wall Street backs Intel's US$9 billion sale of NAND unit to Hynix

Wall Street backs Intel's US$9 billion sale of NAND unit to Hynix

US chipmaker Intel Corp's logo
US chipmaker Intel Corp's logo is seen on their "smart building" in Petah Tikva, near Tel Aviv, Israel on Dec 15, 2019. (Photo: REUTERS/Amir Cohen)

NEW YORK: Intel Corp's US$9 billion sale of its NAND memory chip unit will help the US chip giant focus on its core business in higher-margin processors, Wall Street analysts said on Tuesday (Oct 19), after its deal with South Korea's SK Hynix.

Intel, best known for making computer processors used in desktops and laptops, has been trying to focus more on its strengths, including the Optane memory business, which is smaller but lucrative as it taps more advanced technology.

Exiting the NAND chips business will also help the chipmaker fend off the impact on profit from being in a cut-throat commodity memory market, where prices cycle through booms and busts.

Cowen and Co analysts said the deal was critical for Intel as it would lessen "the product and manufacturing variables" required to get its core PC/server processor businesses back on track.

SK Hynix had 11.7 per cent market share in the NAND Flash market in the second quarter, while Intel occupied 11.5 per cent, according to technology research firm TrendForce, placing the two companies in fourth and sixth places, respectively.

The deal, the biggest acquisition for SK Hynix, will help it overtake Kioxia in the NAND memory market, while narrowing the gap with market leader Samsung Electronics Co Ltd.

Analysts said with only six players in the market, the value of Western Digital and Micron Technologies' NAND assets are on the rise.

Evercore ISI, however, said the deal may not alter the industry dynamics as six players are still too many. "Further industry consolidation necessary," said analyst CJ Muse.

Twenty-one of the forty-two analysts rated the stock at "hold", while 10 rated it at "buy" or higher. The median price target is US$55, down from US$62 in July, Refinitiv data showed.

Intel shares, which have fallen nearly 8per cent so far this year, were marginally down in morning trading on Tuesday.

Source: Reuters