The deal will allow SK Hynix to overtake Japan's Kioxia in the NAND memory market, and narrow the gap with market leader Samsung Electronics as the shift to work-from-home boosts demand for chips used in tablets and servers.
SK Hynix said Intel would sell all of its NAND business including its solid-state drive business, NAND product and wafer business, and its factory in Dalian, China. Intel would keep its Optane business, its advanced memory technology.
The deal would allow Intel to focus on its remaining memory business, Optane, a person familiar with the matter told Reuters.
Intel did not immediately respond to Reuters' requests for comment.
The Nand Flash industry grew in the April-to-June quarter thanks to robust demand for PCs and servers as the COVID-19 pandemic forced millions of people to work from home, according to market researcher Trendforce.
Hynix, which counts Apple Inc and Huawei Technologies as customers, is a distant fourth in the NAND memory chip market, although it ranks second after Samsung Electronics in DRAM memory sales.
Samsung is the leader in the NAND flash market with a 31.4% share, followed by Kioxia with 17.2%, SK Hynix with 11.7%, and Intel and Micron with 11.5% each.
With the acquisition, SK Hynix, part of South Korean conglomerate SK Group, will have a market share of 23.2%, narrowing the gap with cross-town rival Samsung Electronics.
The Wall Street Journal reported earlier that the deal was imminent. Intel's shares were up nearly 3% after the report.