This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Chipmaker Intel Corporation’s multi-billion dollar sale to Korean memory manufacturer SK Hynix received approval from Chinese authorities earlier this month after rumors indicated that it would close by the end of this year. Intel and SK Hynix announced the $9 billion sale in October last year and the transaction will not fully close until 2025, when Intel will transfer its intellectual property to the Korean memory manufacturer in a deal that will significantly transform the industry amidst the chipmaker’s push to introduce new semiconductor manufacturing processes in the market.
Intel’s Memory Spinoff To See New U.S. Entity Dubbed Solidigm Operate Out of California
Since the first stage of the deal has cleared regulatory scrutiny all over the globe, Intel will receive the bulk of the sales proceeds, amounting to $7 billion, from SK Hynix. The remainder, or $2 billion, will make its way into the Santa Clara, California chip giant’s pockets in 2025, when all aspects of the sale have been completed.
As part of the transaction, a new SK Hynix subsidiary has been established in San Jose, California, and it will be managed by executives from both companies. This subsidiary, dubbed as Solidigm, will be headed by SK Hynix’s co chief executive officer (CEO) Mr. Lee Sook-hee as its chairman and Rob Crooke, a former Intel senior vice president as its CEO.
Intel plans to use the proceeds from the sale to invest in new products and fund its long term growth strategy. A chunk of this strategy involves setting up new chip manufacturing plants in the United States. Through these, the company aims to make chips for its own needs and other companies, in what is dubbed as contract manufacturing. Contract manufacturing involves a chip designer, such as the San Diego firm Qualcomm Incorporated, submitting its designs to a third party such as Intel who then fabricates the semiconductors.
Intel’s push into contract manufacturing was revealed earlier this year, and it came as the Taiwanese Taiwan Semiconductor Manufacturing Company (TSMC) became the world’s largest and leading pure play foundry. TSMC’s customers, such as Apple Inc and Advanced Micro Devices, Inc (AMD) have successfully used the company’s manufacturing technologies in their latest technology products such as central processing units (CPUs), smartphones and notebooks. Apple has worked with TSMC to launch its own Arm-based processors capable of computing, graphical and neural computations for the Macbook lineup.
The intellectual property that Intel will transfer to Solidign will include manufacturing the NAND memory wafers. Additionally, the company’s former memory division’s research and development teams along with the workforce of a Chinese memory manufacturing plant will also be transferred to Solidigm. As opposed to Intel, who manufactures both CPUs and GPUs, SK Hynix limits itself to memory chips, which not only store data in devices but aid its main processing units for their tasks.
