US Western Digital Accelerates Acquisition of Kioxia... Threat to Samsung

Agreement on Acquisition Possible by September
If Agreement Fails, Kioxia IPO to Proceed
NAND Market Share Approaches Samsung Electronics Upon Merger
Chinese Merger Review Poses Obstacle

[Asia Economy New York=Correspondent Baek Jong-min] The acquisition negotiations between U.S. NAND flash semiconductor company Western Digital and Japan's Kioxia are gaining momentum. If successful, it is expected to cause a major shake-up in the memory semiconductor market, significantly threatening industry leader Samsung Electronics. Following the foundry sector, consolidation through mergers and alliances is beginning in the NAND flash semiconductor industry as well.

On the 25th (local time), the Wall Street Journal (WSJ), citing sources, reported that merger and acquisition discussions between the two companies have intensified recently, and a deal could be reached as early as mid-September.

Previously, U.S. companies Western Digital and Micron each pursued the acquisition of Kioxia. However, as Kioxia began considering an initial public offering (IPO), Micron withdrew from the acquisition race, while Western Digital continued negotiations.

Kioxia was initially expected to launch an IPO on the Tokyo Stock Exchange in September, but it appears to be pursuing both IPO and merger and acquisition (M&A) options simultaneously. WSJ explained that it is unclear whether Kioxia will choose IPO or M&A. Other major foreign media also reported that if Kioxia fails in negotiations with Western Digital, it will proceed with the IPO, according to insiders.

Kioxia was created when Toshiba's NAND flash business, which first developed NAND flash, was spun off. In 2018, Kioxia was sold for $18 billion to a Korea-U.S.-Japan joint consortium including SK Hynix and Bain Capital. SK Hynix holds about a 10% stake.

According to market research firm TrendForce, as of the first quarter, Samsung Electronics leads the NAND flash market with a 33.5% share, far ahead of second-place Kioxia at 18.7%. However, if combined with Western Digital's 14.7%, the merged entity would hold a 33.4% share, rivaling Samsung Electronics.

Although Kioxia possessed the original NAND flash technology during its Toshiba days, it transferred technology to Samsung Electronics to expand its influence, resulting in a decline in market share and losing leadership to the Korean company. However, if it merges with Western Digital, it could reclaim the world’s number one position.

Once SK Hynix completes its merger with Intel's NAND flash division, the NAND flash market is expected to be reorganized into a three-way competition among Samsung Electronics, Western Digital-Kioxia, and SK Hynix.

Given that the U.S. government is strengthening semiconductor supply chains at the national level, Western Digital's acquisition of Kioxia is a deal worth pursuing. Major foreign media also reported that if the two companies merge, they could intensify competition with Samsung Electronics through cost reductions.

The biggest obstacle to Western Digital's acquisition of Kioxia is expected to be approval from Chinese authorities. Kioxia is the last bastion of Japanese semiconductors, but considering the recent strengthening of semiconductor cooperation between the U.S. and Japan, it is unlikely that the Japanese government will strongly oppose the deal.

WSJ analyzed that while there will be pressure from Washington regarding Japanese government approval, China's approval of the merger could be the biggest hurdle. Amid escalating U.S.-China tensions, China could block the transfer of Japan's largest NAND flash company Kioxia to an American firm.

Previously, the acquisition of Dutch automotive semiconductor company NXP by U.S. mobile semiconductor company Qualcomm was blocked by China’s disapproval. SK Hynix’s acquisition of Intel’s NAND business is also awaiting only China’s approval.

This content was produced with the assistance of AI translation services.