February 1, 2023

Intel (INTC) Set to Close the Sale of NAND & SSD Business

Intel INTC recently announced that the first phase of the sale of its NAND and SSD Business to Seoul-based SK Hynix has been completed.

The first transaction includes the sale of its SSD business and transfer of certain NAND and SSD-related intellectual property, employees and the Dalian NAND memory manufacturing facility in China.

In exchange for the transfer of business, SK Hynix will pay Intel $7 billion. The final closing is expected to take place by March 2025.

However, until the final closing, Intel will continue to manufacture NAND wafers at SK Hynix’s Dalian memory manufacturing facility and retain certain intellectual property related to the manufacture and design of NAND flash wafers.

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Divestiture to Boost Long-Term Prospects

Intel’s sale of its manufacturing facility in China is in accordance with its long-term strategic goals. The company is gradually reducing its dependence on the PC-centric business by transitioning into data-centric businesses such as AI and autonomous driving.

In the third quarter of 2021, Data Center Group’s (“DCG”) (32.9% of total revenues) revenues increased 10% year over year to $6.50 billion. This reflects the fact that the company’s data-centric businesses are helping it generate revenues close to what it generates from the PC business. Client Computing Group or CCG (50.4% of total revenues) revenues were down 1.9% year over year to $9.66 billion. PC volumes fell 6% on a year-over-year basis.

However, Intel derives a significant proportion of revenues from outside of the United States (79% of total revenues in 2020), which makes the company susceptible to exchange rate volatility. Per a CNBC report, high inflation globally would cause major currency volatility.

Moreover, Intel has a leveraged balance sheet. As of Sep 25, 2021, the company’s net debt was $28.4 billion compared with $10.5 billion as of Jun 26, 2021. Total debt to total capital of 28.3% indicates higher liability in repaying debt.

Undoubtedly, Intel’s sale of its manufacturing plant in China will help it deleverage its balance sheet.

Competitive Scenario

Intel, which currently carries a Zacks Rank # 3 (Hold), is up 3.8% on a year-to-date basis compared with the Computer & Technology Sector’s rally of 26.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-performing stocks in the Semiconductor-General industry are NVIDIA NVDA, Advanced Micro Devices AMD and Texas Instruments TXN, which returned 126.4%, 59.2% & 15.4%, respectively.

NVIDIA is a dominant name in the Data Center, professional visualization and gaming markets where Intel and Advanced Micro Devices are playing a catch-up role.

NVIDIA’s partnership with almost all major cloud service providers (CSPs) and server vendors is a key catalyst.

Advanced Micro Devices has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider.

AMD has emerged as a strong challenger to NVIDIA’s dominance in the graphic processing unit or GPU market based on its Radeon technology.

Texas Instruments has been benefiting from growth in the personal electronics market owing to the coronavirus-induced increasing work-from-home trend.

Additionally, solid momentum across the Analog segment, courtesy of robust signal chain and power product lines, has been contributing to the top line.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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