SK Hynix gets China approval for NAND deal

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SK Hynix gets China approval for NAND deal

SEOUL South Korea's SK Hynix Inc said on Wednesday it received merger clearances from Chinese antitrust authorities for its acquisition of Intel Corp's NAND memory chip business, clearing the way for the world's second-largest memory chip maker to get regulatory approvals from all eight countries.

In October of last year, the U.S. chip giant agreed to sell its NAND memory chip business to SK Hynix for $9 billion, part of a move to focus on its smaller but more lucrative Optane memory business, which uses more advanced technology.

SK Hynix appreciates the merger clearance of the State Administration for Market Regulation. SK Hynix will increase its competitiveness of the NAND Flash and SSD business by continuing the post-merger integration process, the company said in a statement.

China's market regulator said on Wednesday that it had approved the acquisition deal but with conditions.

The concentration of the PCIe and SATA solid state drive businesses will have a restrictive effect on competition in those markets, so additional conditions are needed, China's State Administration for Market Regulation said in a statement.

Additional conditions are that SK Hynix shouldn't supply PCIe and SATA enterprise-class solid state drive products to China's domestic market at unreasonable prices.

The Chinese regulator said SK Hynix should continue to produce PCIe and SATA enterprise-class solid state drive products within five years of the effective transaction date.

SK Hynix should not force customers in China's market to purchase products from SK Hynix or companies that are controlled by it, nor should it enter into deals with its main competitors in China that exclude or restrict competition.

The Korean firm hopes to increase its pricing power, as well as increase its capacity to build NAND chips, which are used to store data in smartphones and data centre servers.

There is speculation that it will be difficult for SK Hynix to win China's approval for the deal or any approval for the deal, given the complex situation between the United States and China in the semiconductor sector.

The approval could come at the right time without a significant delay, as the deal is beneficial for all three countries, according to SK Hynix.

Analysts said the deal will help SK Hynix narrow the gap with market leader Samsung Electronics Co Ltd.

Park Sung-soon, an analyst at Cape Investment Securities, said that China's approval comes a bit later than what the market expected, but this is in line with the company's goal of getting Chinese regulatory approval within the next year.

This acquisition would likely help SK Hynix expand its NAND solid state drive SSD business for enterprise customers like data centres, as its NAND SSD business has been focused on consumer products such as smartphones and PCs, according to Park.