Intel Corporation has agreed to sell its NAND memory chip business to SK Hynix for $9 billion in an all-cash deal that would propel the South Korean chipmaker to second in the global rankings.

The move marks the latest effort by Intel, the US chip giant, to divest its non-core businesses, move away from the volatile commodity NAND chip industry and focus on its remaining Optane memory business, which is smaller but more lucrative because it taps more advanced technology.

It is the biggest acquisition to date for SK Hynix and follows its $3.7 billion investment in Japanese rival Kioxia in 2017, as the Korean firm tries to boost its capacity to build NAND chips - used to store data in smartphones and data centre servers - and beef up its pricing power.

The deal will help SK Hynix overtake Kioxia in the NAND memory market while narrowing the gap with market leader Samsung Electronics Co.

SK Hynix shares jumped immediately after the news before valuation concerns saw them reverse gear to fall 2%, while the wider market was down 0.7%. Samsung Electronics gained 1%.

“Shareholders are negative about the deal because they believe the price is too expensive. It’s good news for other memory chipmakers, because the move would lead to industry consolidation,” said Lee Seung-woo, an analyst at Eugene Investment & Securities.

SK Hynix said Intel would sell all of its NAND business including its solid-state drive business, NAND component and wafer operation, and its factory in Dalian, China.

Intel would keep its advanced Optane memory technology, developed in partnership with Micron Technology, which makes the Optane chips for Intel under a supply agreement.

The Intel division, which includes its NAND and Optane businesses, posted a fourth consecutive annual loss in 2019, although it swung to a profit in the first half of this year. SK Hynix has also posted losses in its NAND business.

Analysts said US-China tensions may have influenced Intel’s decision to sell its NAND flash memory factory in China. The moves comes a month after Kioxia cancelled a planned initial public offering amid market uncertainty.

Intel’s Dalian factory makes chips that compete in the cut-throat commodity memory business where prices cycle through booms and bust that can eat profits.

“This transaction will allow us to further prioritise our investments in differentiated technology,” Intel CEO Bob Swan said in a statement.

Swan has told investors he plans to divest non-core businesses. The company earlier sold its 5G modem business to Apple.

SK Hynix said the companies aimed to obtain government approvals in late 2021, and close the deal in March 2025.

The Nand Flash industry grew in the April-to-June quarter thanks to robust demand for PCs and servers as the COVID-19 pandemic forces millions of people to work from home, according to market researcher Trendforce.

SK Hynix, which counts Apple and Huawei Technologies Co Ltd as customers, is a distant fourth in the NAND memory chip market, although it ranks second after Samsung Electronics in DRAM memory sales.

Samsung is the leader in the NAND flash market with a 31.4% share, followed by Kioxia with 17.2%, SK Hynix with 11.7%, and Intel and Micron with 11.5% each.

With the acquisition, SK Hynix, part of South Korean conglomerate SK Group, will have a market share of 23.2%.

“Although the competitive environment surrounding us is not easy, we have made a bold decision to pave the way for our leap toward securing a firm position in the NAND business as in DRAM,” SK Hynix President and CEO Lee Seok-hee said in a statement.

Meanwhile, ConocoPhillips on Monday agreed to buy US shale oil producer Concho Resources for $9.7 billion, as the energy sector continued to consolidate amid lower fuel prices and demand. The low-premium, all-stock deal comes as many US shale companies have been mired in losses due to weak crude prices and, unlike in past downturns, have struggled to raise new capital to restructure heavy debts.

The deal swaps 1.46 shares of ConocoPhillips for each Concho share, an about 1.5% premium over its Friday price. Concho shares on Monday morning were up a fraction at $48.65. They sold for as much as $93 a share in January before the COVID-19 pandemic cut oil demand and prices.

“Size, Scope and scale” has become more important,” said Concho Chief Executive Timothy Leach, who once the deal closes will run the combined company’s US production excluding Alaska. “This combination with ConocoPhillips was the best thing for our shareholders.”

Reuters