If WD and Kioxia Merge... Impact on the Korean NAND Industry

Countdown to the Birth of US-Japan NAND Alliance
Likely to Burden Samsung and SK
Need to Closely Monitor Japan's Semiconductor Strengthening Moves

A wind of change is blowing through the global NAND market. The birth of a 'NAND alliance' is imminent as Japan's Kioxia and the US's Western Digital (WD) prepare to merge. Although the success of the merger remains uncertain, if it happens, it could pose a burden to Korean semiconductor companies. Reports have also emerged that SK Hynix opposes the merger of the two companies. Some experts point out that Japan's aggressive moves to strengthen its semiconductor competitiveness should be closely monitored.

On the 18th, Nihon Keizai Shimbun reported that SK Hynix is opposing the integration of memory semiconductor NAND flash manufacturers Kioxia and WD's semiconductor division. This is because if the two companies merge, it is expected that SK Hynix will find it difficult to raise its current global market share, which is around third place.

Kioxia factory in Kitakami, Iwate Prefecture, Japan.
[Photo by Kioxia website]

SK Hynix is known to have secured about a 15% stake in Kioxia in 2018 through a Korea-US-Japan joint special purpose company led by Bain Capital (BCPE Pangea Intermediate Holdings Cayman). Although SK Hynix does not have voting rights on Kioxia's shares, it holds veto power over the merger of the two companies.

The merger issue between Kioxia and WD first surfaced in 2021. However, disagreements over share valuation and financial capacity prevented the merger from progressing quickly. But due to the ongoing downturn in the NAND market since last year, the two companies have resumed merger discussions. As the NAND market downturn has prolonged, making it difficult to survive independently, the merger has gained momentum. Analysts also note that the long-standing cooperative relationship between the two companies plays a significant role in increasing the likelihood of the merger. WD processes the NAND flash produced by Kioxia into data storage devices (SSDs) and sells them.

If the two companies succeed in merging, Samsung Electronics will have to relinquish its position as the world's number one NAND supplier. In the second quarter of this year, the global NAND market shares were Samsung Electronics (31.1%), Kioxia (19.6%), SK Hynix (17.8%), and WD (14.7%) respectively. (According to market research firm TrendForce) Simply adding the shares, Kioxia and WD's combined market share would be 34.3%, surpassing Samsung Electronics.

World's tallest 238-layer 4D NAND and solution products mass-produced by SK Hynix.
[Photo by SK Hynix]

The establishment of a joint venture between Kioxia and WD is also expected to strengthen the semiconductor alliance between the US and Japan, which is another source of concern. Amid intensifying semiconductor hegemony competition between the US and China, the US and Japan are likely to reorganize a stable supply chain. The industry is paying close attention to whether Japan will aggressively strengthen its semiconductor competitiveness and signal the revival of its memory kingdom.

However, it remains uncertain whether the merger can pass antitrust reviews in major countries. To prevent market monopolies, mergers and acquisitions (M&A) between semiconductor companies must be approved by competition authorities in major countries such as the US, China, Japan, and the European Union (EU). After the integration agreement, approvals from regulatory authorities in each country must be obtained within about two years, but fierce opposition from China is expected. China, which is competing with the US for advanced industry hegemony, is unlikely to approve the strengthening of cooperation between the US and Japan.

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