SK Hynix, one of the world’s major semiconductor suppliers, has bought Link_A_Media Devices (LAMD) for $248 million in cash. The deal is expected to close in August, when LAMD will join Hynix as a business unit focused on customised NAND-based flash memory solutions.
The deal is Hynix’s first acquisition in the US, and also the first time that it has hired Morgan Stanley as financial adviser on an M&A transaction. To complete a trio of firsts, it is also Morgan Stanley’s debut Korean cross-border outbound advisory mandate for a target in the technology sector.
No valuation details were disclosed, but Hynix is expected to pay for the acquisition from its own resources.
Solid-state flash memory drives are the preferred type of data storage for most of the latest generation of mobile devices, from smartphones and tablet PCs to netbooks — and Hynix urgently needs to make a breakthrough in this market, according to an industry analyst.
Vertical integration continues to drive acquisitions in the sector. Examples include Apple and Anobit, SanDisk and Pliant, and EMC and XtremIO.
In May, Hynix withdrew a bid for Tokyo-based Elpida Memory, but said last week that it had established a research and development centre after buying Italian NAND flash developer Ideaflash.
The purchase of LAMD should link the Korean firm’s investment in NAND flash development with the California-based firm’s expertise in semiconductor system-on-chip (SoC) solutions for the data storage market. LAMD, which was set up in 2004, is backed by Seagate, Lightspeed Ventures, NEC and SunAmerica Ventures.
SoCs, or controllers, connect to processors to increase the speed and reliability of flash memory. Its mixed signal processing and iterative data recovery technologies enable manufacturers of hard-disk and solid-state drives (SSDs) to increase storage capacity and cut production costs — according to people who understand these things.
Basically, the growing popularity of mobile devices and cloud computing has helped the flash memory market evolve from USB sticks and memory cards to value-added products equipped with controllers, such as the iPad and Microsoft’s new Surface tablet.
“The role of the NAND controller in premium products such as e-MMC (embedded multimedia card) and SSDs has become increasingly important to meet the high memory densities and improved interface speeds required by end users,” according to statement released by Hynix.
Hynix is a leading global semiconductor supplier offering DRAM, NAND Flash and CMOS image sensors. The company has a market capitalisation of about $14 billion, generating $9 billion in revenue in 2011 with more than 21,000 worldwide employees and manufacturing facilities in Incheon and Cheongju, Korea, and Wuxi, China, and with 30 sales offices across 16 countries.
But the company has posted losses in recent quarters as sales have fallen.
“We expect our NAND flash competitiveness will be further strengthened by the acquisition of LAMD, which has extensive expertise in controller technology and excellent engineering resources. SK Hynix will leverage this acquisition and continuously develop value-added NAND solutions and respond to our customers’ needs,” said Oh Chul Kwon, president and CEO of Hynix, in the statement.
Hynix’s shares closed 4% higher yesterday, compared with a 0.65% gain for the benchmark index, Kospi.
