SK Hynix, Mixed Investor Sentiment Over Intel NAND Acquisition

Stock Prices Fall... Foreigners Sell Off in Large Volume
Individuals Emphasize Long-Term Positive Outlook

[Asia Economy Reporter Song Hwajeong] SK Hynix's stock price is showing weakness amid its decision to acquire Intel's NAND division. Market reactions are mixed. While foreign investors have sold off heavily, individual investors have weighed in on a positive long-term outlook and have started buying.

As of 9:30 a.m. on the 21st, SK Hynix was trading at 84,100 KRW, down 1.29% (1,100 KRW) from the previous day. This marks a second consecutive day of a decline in the 1% range, following a 1.73% drop the day before.

The news of SK Hynix's acquisition of Intel's NAND division led to the stock price decline. The day before, SK Hynix announced it would acquire Intel's NAND flash memory and storage business for 10.3 trillion KRW. This is the largest deal in the history of domestic mergers and acquisitions (M&A), and upon completion, SK Hynix will become the global second-largest player in NAND, following DRAM in the memory semiconductor sector.

Following the large-scale M&A news, foreign investors engaged in massive selling. The previous day, foreign investors sold SK Hynix shares worth 100 billion KRW, ranking it as the top net seller. As of 9:30 a.m. on the same day, foreign investors had net sold about 8.8 billion KRW. In contrast, individual investors actively bought SK Hynix shares, helping to cushion the stock price decline. The day before, individual investors were the largest net buyers, purchasing SK Hynix shares worth 101.5 billion KRW.

It is interpreted that foreign investors are reacting negatively to the large acquisition amount exceeding 10 trillion KRW. On the other hand, individual investors seem to view the acquisition as strengthening SK Hynix's competitiveness and have moved to buy. Choi Doyeon, a researcher at Shinhan Financial Investment, said, "The risk in this deal is the large one-time expenditure," adding, "The NAND market turnaround is somewhat delayed compared to DRAM, so there are some concerns in the market." Choi also noted, "However, as of the second quarter this year, SK Hynix has 3.9 trillion KRW in cash assets and can sufficiently finance the deal through next year's EBITDA," and added, "Acquiring a competitor during a downturn rather than a boom in a cyclical industry is a clever move."

Although the price is burdensome, the outlook for future competitiveness enhancement is positive. Hwang Minseong, a researcher at Samsung Securities, analyzed, "SK Hynix's NAND production capacity is more than twice that of Intel, but their sales are similar because SK Hynix mainly focuses on low-value mobile single products, whereas Intel's product mix is centered on high-priced enterprise solid-state drives (SSD)." In the first half of the year, SK Hynix posted a 15% operating loss, while Intel had a healthy 21% operating profit. Hwang explained, "By acquiring Intel's NAND controller technology and enterprise SSD business, SK Hynix can rise from 5th-6th to 2nd place in NAND semiconductors and from 5th to 1st place in enterprise SSDs, while also improving profitability."

Do Hyunwoo, a researcher at NH Investment & Securities, said, "This acquisition will help strengthen SK Hynix's NAND business by immediately securing Intel's NAND Dalian production facility of about 80K, NAND-related IP, and SSD technology competitiveness."