Intel is taking five years to sell its NAND business to SK hynix, because it needs to unravel commitments to its former partner, Micron.
“The unique structure of this deal is strictly a factor of existing commitments within our long-term agreements with Micron,” Intel CFO George Davis said in Intel’s earnings call. “We will continue to operate the factory for SK hynix until we can transfer the entirety of the business in 2025.”
The $9bn deal, announced on October 20, is constructed in two phases. Phase one nets Intel $7bn as SK hynix buys the NAND SSD business and Dalian, China, fab. SK hynix gets the the Dalian facility and its assets. In 2025 – phase2 – SK hynix will pay Intel an additional $2bn for IP related to the manufacture and design of NAND flash wafers, R&D employees, and the Dalian fab workforce.
Intel will get an immediate financial benefit. Davis said: ‘Capital spending for the NAND business will be shown in assets held for sale and excluded from free cash flow. This will reduce our forecasted capital spend for 2020 by approximately $300m and raise our free cash flow by a similar amount.”
He added: “SK hynix will commit the necessary investment to bring this business to scale, and Intel will dispose of a non-strategic asset to focus on our core opportunities ahead.”
Intel set up the 3D NAND facility at Dalian in China in late 2015 with production scheduled for 2016. Until then the company had made NAND in a joint venture with Micron, IM Flash Technologies. January 2018 saw Intel officially separate its 3D NAND technology development from Micron.
In October 2018 Micron said it would exercise its right to buy out Intel’s share of IM Flash Technologies. That deal cost Micron up to $1.5bn and the JV ended in late 2019.