(i) the names of the merger parties;
a. SK Hynix Inc. (“SK Hynix”)
b. Intel Corporation (“Intel”)
(collectively, the “Parties”).
(ii) a description of the transaction;
The application relates to the acquisition by SK Hynix of the NAND and Solid State Drive (“SSD”) Business of Intel (the “Target Business”), (the “Proposed Transaction”).
(iii) a description of the business activities of the merger parties worldwide and in Singapore;
SK Hynix is a multinational company, headquartered in South Korea, active in (i) memory semiconductors, such as NAND flash memory and Dynamic Random Access Memory (“DRAM”), (ii) storage solutions such as SSDs, and (iii) system semiconductors, such as Complementary Metal Oxide Semiconductor (“CMOS”) image sensors. SK Hynix has a sales subsidiary located in Singapore, SK Hynix Asia Pte. Ltd. which conducts marketing and sales activities and supports multinational enterprise customers in Southeast and Southwest Asia.
Intel is active in the design and manufacturing of essential technologies that power the cloud in an increasingly smart, connected world. Intel is transforming from a PC-centric company to a data-centric company, with workload-optimised solutions designed to help a broad set of customers process, move, and store ever-increasing amounts of data.
The Target Business is active in developing, designing, manufacturing, assembling, testing, marketing and selling products utilizing the NAND flash memory technology. The Target Business is also active in developing, designing, manufacturing, assembling, testing, marketing and selling SSDs that utilize NAND flash memory technology. The Target Business does not include Intel® Optane™ business, which is based on 3D XPoint technology.
(iv) a description of the overlapping goods or services, including brand names;
SK Hynix and the Target Business produce NAND flash memory products (that are essential components in SSD storage devices) as well as SSDs. SSDs are largely categorized as (i) client SSDs; and (ii) enterprise SSDs; the merger parties are active in the manufacture and distribution of both client and enterprise SSDs.
(v) a description of substitute goods or services;
The substitutes to the NAND flash memory of SK Hynix and the Target Business include competing manufacturers of NAND flash memory. Likewise, the substitutes to the SSDs of SK Hynix and the Target Business include competing manufacturers of SSDs.
(vi) the Parties’ views on:
a. definition of the relevant market(s);
The Parties submits that the relevant markets are:
i. the worldwide market for manufacturing and supply of NAND flash memory (“NAND Flash Memory Market”); and
ii. the worldwide markets for manufacturing and supply of enterprise SSDs and client SSDs (“SSD Markets”).
b. the way in which competition functions in this market;
The Parties submit that the nature of competition in the NAND Flash Memory Market and the SSD Markets is largely based on price and innovation.
In relation to NAND flash memory, the technological developments achieved by NAND competitors illustrate the intensity of innovation and aggressive competition that characterizes the NAND segment. NAND suppliers are constantly racing to develop new products.
In relation to SSDs (and SSDs subsegments), the SSD segment is a dynamic and highly competitive segment characterized by significant leapfrog innovation. Competitors constantly attempt to differentiate their offerings through the development and release of new products and technologies in this space. Every SSD supplier needs to devote efforts to develop new and better products so as to place itself in a better position in the fierce competition for the next business opportunity.
c. barriers to entry and countervailing buyer power; and
There are limited to no barriers to entry, whether regulatory or otherwise, for the supply of NAND flash memory in Singapore. The raw materials and infrastructure necessary to produce and sell NAND flash memory are available in the market, e.g. substrate material, wafers, deposition and etching equipment etc. NAND flash memory is fairly commoditized and any differentiation that exists is related to capacity, performance and endurance, which are largely independent of the technologies that would be protected by IP rights.
There are limited to no barriers to entry, whether regulatory or otherwise, for the supply of SSD in Singapore. The raw materials and infrastructure necessary to produce and sell SSDs such as, NAND flash memory and controllers are available in the market. It is not necessary for an SSD manufacturer to be vertically integrated (i.e. have the capability to manufacture NAND flash memory or controllers in-house) as these components are available on the merchant market.
The customers of SK Hynix and the Target Business are, by and large, powerful hyperscale cloud service providers and sizeable, sophisticated OEMs, ODMs or distributors with significant technical understanding and expertise. Contracts are mostly negotiated bilaterally with regular price negotiations and it is not unusual for customers of SK Hynix and the Target Business to multi-source not only for security of supply purposes but also to obtain a stronger bargaining leverage. It is not difficult, therefore, for such customers to switch between suppliers.
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The Proposed Transaction will not result in a substantial lessening of competition in Singapore.
Given the market share of the merged entity post-merger, the presence of a number of well-resourced competitors (including new entrants) and, overall, the intensity of competition in the relevant markets and countervailing buyer power, the Proposed Transaction will not lead to non-coordinated effects.
The Proposed Transaction will not give rise to coordinated effects either, taking into account the number of actual credible competitors and countervailing buyer power, it would not be possible for the competitors to monitor compliance with any hypothetical coordination. Moreover, the relevant markets are characterized by intense innovation. This, coupled with the aggressive competition that characterizes the NAND Flash Memory Market will make any coordination impossible.
Last, the Proposed Transaction will not result in vertical effects as SK Hynix and the Target Business neither have the incentive or the ability to engage in a hypothetical antitrust foreclosure strategy.
For NAND, input foreclosure concerns are unrealistic, given the merged entity’s low combined shares and the ample alternative sources of NAND supply. Similarly, the merged entity’s modest combined shares in SSDs pre-empt any concerns with respect to customer foreclosure.