Amid Difficulties in Western Digital's Acquisition Talks with Japan's Kioxia... SK Hynix 'Closely Watching'

Japanese Media "WD-Kioxia Faces 'Challenges' Due to China's Antitrust Authority Approval"
Monitoring Impact on Kioxia Stake Investment and Intel NAND Business Acquisition

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] SK Hynix is closely monitoring the situation as U.S. semiconductor company Western Digital and Japanese company Kioxia face difficulties in merger and acquisition (M&A) discussions due to approval issues with Chinese antitrust authorities. Since SK Hynix invested in Kioxia three years ago, the matter is linked to its asset management, and with the approval for Intel's NAND flash business unit in China still pending, the negotiation process between the two companies is expected to impact SK Hynix's business strategy.

According to the Nihon Keizai Shimbun on the 8th, the acquisition negotiations between Western Digital and Kioxia are facing obstacles. News of the negotiations first surfaced in the media in April, and talks have continued since then, but no agreement has been reached as of now, with the year-end approaching. A Kioxia executive stated after a board meeting on the 26th of last month, "China will not remain passive," citing the presence of Chinese antitrust authorities as a major cause of the deadlock in negotiations.

China has declared a 'semiconductor rise' and actively invested, but realistically has encountered limits in expanding its market share. In this context, the industry views that China would not welcome semiconductor cooperation between the U.S. and Japan. A Chinese semiconductor industry official said, "Memory semiconductors are a field where China is trailing," adding, "Unless there are political reasons, Chinese authorities are unlikely to approve the integration of U.S. and Japanese companies."

As the acquisition discussions between the two companies are delayed, SK Hynix is drawing attention. In 2018, SK Hynix invested about 4 trillion won in Kioxia through a consortium led by the U.S. private equity firm Bain Capital. During the Q1 earnings conference call in April, SK Hynix explained, "Two-thirds of the investment in Kioxia was made in the form of limited partner (LP) contributions to Bain Capital's fund, and one-third was a separate equity stake," adding, "According to the original plan, after the initial public offering (IPO), the LP-form investments were to be gradually sold off in the market." Kioxia has been preparing for an IPO simultaneously with acquisition talks with Western Digital, but due to the current unfavorable market conditions, an IPO within this year is realistically unlikely. Considering this situation, SK Hynix is likely adjusting its fund management plans.

At the same time, SK Hynix is awaiting only China's approval for the acquisition of Intel's NAND business unit. Once approved by Chinese antitrust authorities, SK Hynix has completed most preparations to establish a new corporation centered in the U.S. to expand the NAND business. However, China's approval is taking longer than expected, and given China's history of repeatedly obstructing M&As in the semiconductor industry, SK Hynix cannot help but be vigilant about the ongoing negotiations between the two companies, which are mindful of Chinese approval. An SK Hynix official said, "Our goal is to obtain China's approval and complete the acquisition process within the fourth quarter."

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