Hard disk giant Western Digital and Japan-based Kioxia Holdings are said to be in advanced talks to merge in a deal that could be valued at over $20 billion.
WD (Western Digital) is suggesting a merger with its NAND joint-venture partner Kioxia following that company’s withdrawal of its IPO. The IPO was dropped due to US-China trade tensions affecting future Kioxia sales to Chinese customers. Kioxia desired an IPO to help its owners, such as the Bain consortium and Toshiba, generate cash from their holdings.
The merger would give Western Digital access to top flash memory and SSD technologies, even more than it has now. Don’t forget, WD bought SanDisk a few years ago. The two companies already have a flash joint venture and Kioxia would give WD sole ownership. This means there is a good chance Kioxia customers will throw a fit much like Arm licensees are objecting to the Nvidia merger.
WD’s proposal would involve WD paying some $20 billion for Kioxia shares. Reuters reports that Akira Amari, a former Japanese government economy minister and lawmaker in the ruling Liberal Democratic Party (LDP), heads up his party’s task force on semiconductors. In an interview, he said: “We shouldn’t allow everything to be taken away to the United States. If Kioxia ties up with a foreign company, in particular an American company, then at the very least it will be necessary to have equal bases of operations in both countries.”
A Japanese governing party politician has said that a WD-Kioxia merger would provide desirable mass scale and should have at the very least “equal bases of operations in both countries,” meaning the USA and Japan. All the existing Kioxia-WD joint-venture foundries are in Japan. Is this a de-facto seal of approval?
That suggests that WD could set up a NAND foundry in the USA if it wishes, so long as the least half of the combined company’s foundry operations remained in Japan. That should be easy enough to accommodate, as none of Kioxia and WD’s foundries are in the USA at present.
The deal would also benefit WD at a time when the US government and the IT industry are both looking at ways to reduce reliance on overseas suppliers. Granted Kioxia is based in Japan, but the US has a much friendlier relationship with Japan than China.
According to the most recent figures from TrendForce, the memory-market analyst firm, Kioxia has an 18.3% share of the NAND flash market, while Western Digital has 14.7%. The merged company would be right behind market leader Samsung, which currently has a 34% share.
Western Digital Long (Buy)
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