Western Digital (WDC) wants to merge with the Japanese group of companies Kioxia. A merger of the US manufacturer of hard drives and memory products with the world’s second largest NAND flash company would reorganize the market positions in the chip industry. Koixia was spun off from Toshiba in 2017. According to media reports, the negotiations are already well advanced and a conclusion could be reached in mid-September.
To Details of the Wall Street Journal the merger of WDC and Kioxia is said to have a total value of over 20 billion US dollars (the equivalent of 17 billion euros). WDC would pay for the company merger in particular with its own shares. WDC boss David Goeckeler would also lead the newly formed company.
Merger instead of an IPO?
Whether there will actually be a merger between WDC and Kioxia depends not only on the shareholders of both companies, but also on the regulatory authorities in Japan and the USA. The People’s Republic of China could also take regulatory action. An IPO of Kioxia is also still conceivable; a first attempt by the semiconductor manufacturer was canceled in autumn 2020.
Kioxia justified the withdrawn stock debut with the coronavirus pandemic and volatility on the stock markets. Sometimes such maneuvers are intended as a “please buy me” signal to third parties. In addition, the Japanese have blamed the US trade embargo against the Chinese technology group Huawei for the suboptimal course of business. Huawei is a major customer of Kioxia.
Together market leader in NAND flash
In addition to WDC, the American memory chip manufacturer Micron was also interested in taking over Kioxia in order to improve its market position. Micron is said to be out of the running. At the end of 2020, Samsung Electronics led the NAND flash market with a market share of 32.9 percent, followed by Kioxia with 19.5 percent, Western Digital with 14.4 percent, SK Hynix with 11.6 percent and Micron with 11. 2 percent. Should Western Digital merge with Kioxia, it would become the flash memory industry leader based on market share.
Kioxia was created in 2017 through Toshiba’s sale of its memory chip division. Since then, the new owner has been a consortium led by financial investor Bain, which paid the equivalent of 15 billion euros. Bain’s group includes the state-supported Innovation Network Corp. of Japan, the Development Bank of Japan, the South Korean chip manufacturer SK Hynix and four US technology groups: Apple, Dell, Kingston and Seagate.
WDC & Kioxia bereits mit Joint-Venture
WDC is already working with Kioxia in a joint venture on research, development and production. This agreement would expire in 2027. The previous cooperation is likely to have tipped the balance for the desired merger in favor of WDC and against Micron, which with a market capitalization of 83 billion dollars could have managed a takeover more easily. In addition, the joint venture could have a positive effect on the approval processes of the regulatory authorities.