The agreement between the manufacturer of memory chips, Western Digital Corporation and the japanese Kioxia Holdings Corp. It seems to be on the right track and everything indicates that it could close in September of this year. If this union of forces takes place, a dual listingdivided between the United States and Japan.
The economic slowdown that especially affects the technology sector has led to the price of SSDs falls to historical figures, becoming high-performance economic solutions for users in front of HDDs. If the merger between the two companies takes place would control a third of the NAND flash marketmaking the new conglomerate a fierce competitor of South Korea’s Samsung Electronics.
Both Kioxia and Western Digital jointly produce NAND chips in Japan, so do not need external power to retain data, being possible its application in smartphones, televisions, data center servers and public announcement display panels. Both companies are still discussing the terms of the deal, but it has been reported that Western Digital would be willing to spin off its flash business to merge it directly with Kioxia.
Kioxia, which is one of the world’s largest producers of flash memory and solid-state storage, is currently a key supplier to Western Digital. However, it should be noted that 40.6% of the shares of the Japanese are in the hands of another technological giant; Toshiba. Therefore, Kioxia is nothing more than the storage business division of Toshiba. Similarly, it should be remembered that Western Digital has recently acquired SanDiskso that a conglomerate without precedents or competition in the market could finally be closed.
A possible double listing
In this way, if the agreement is consummated, Western Digital would end its flash business and merge it with Kioxia, although this would mean that the company would be listed on both the United States stock market and the Japanese stock market, although in this second case it would eventually.
The conversations between both Kioxia and Western Digital began a couple of years ago with the intention of carrying it out by 20 billion dollars, but finally they were stagnant and it was not possible to carry out the union. Now, in September 2023, it is expected that it will finally be carried out for the same economic amount.
Although neither of the two companies has wanted to make public statements, although it is true that after the announcement the shares of Western Digital rose by 8%. In addition, already in June WD declared that it was looking for new strategic alternatives such as the separation of its flash memory and hard drives division.
The worrying situation of the storage market
The SSD segment has become very competitive by presenting an infinite number of possibilities. With the merger of Kioxia and Western Digital, a large base of intellectual property and patents by being able to produce 3D NAND flash memories and continue to manufacture HDDs.
The big problem that both companies face to carry out their merger are the antitrust regulatorswho will analyze first-hand how this affects legal competition in the market, since it would mean that both would take control of more than a third supply of memories for SSD and manufacturing of HDDs.
There are precedents in which these international regulatory bodies (from the United States, Japan, the United Kingdom, China and the European Union) have stopped mergers, for example, by preventing NVIDIA acquire ARM. Nevertheless, SK Hynix has been done with the division of SSD and 3D NAND memories of Intelalthough Intel’s strength in this market was not very high.
