According to Bloomberg News, after months of negotiations, Western Digital and Kioxia are close to reaching an agreement. The deal would involve spinning off and merging Western Digital’s NAND flash business.
Details of the merger are still being kept under wraps, but sources say Western Digital shareholders will control slightly more than half of the combined company. This is contrary to the previous Kyodo News Agency in Japan, which previously stated that Kioxia will lead the new company after the merger.
However, the source also mentioned that during the negotiations between the two parties, it was suggested that Kioxia’s executive team would lead the daily management of the merged company, but Western Digital executives would also play an important role.
▲ Source: Kioxia
As far as the current situation is concerned, although the negotiations between the two sides are progressing smoothly, it may take some time before the final agreement is finalized, during which they may change their minds, and may even end in failure to reach any agreement.
It is said that the new company after the merger will adopt a dual board representation system, and both chipmakers will be members. The new company will be based in Japan and will be listed on Nasdaq and Tokyo; at the same time, Kioxia’s main investor, Bain Capital, will also receive a special dividend.
Previously, Reuters also reported that Kioxia will contribute 43% of the merged company, Western Digital 37%, and the remaining 20% will be held by existing shareholders such as Toshiba. The new merged company plans to list on the Tokyo Stock Exchange in the future. listed.
Note: Kioxia was born out of Toshiba, the “father of flash memory”. Although both Western Digital and Kioxia fabs are producing 3D NAND, each maintains a different business strategy. Kioxia’s main focus is memory chips, while Western Digital tends to supply NAND-based products, that is, SSD products.
As of the first quarter of 2023, Kioxia has a 21.5% share of the NAND memory market, while Western Digital holds a 15.2% share. Samsung, on the other hand, held a 34% market share during the same period. Therefore, the potential entity after the combination of Kioxia and Western Digital’s flash memory business would become the leading supplier in the global NAND memory market, with a market share of more than 36.7%.
It was previously reported that the revenue scale of the new company after the merger is expected to surpass Samsung and become the world’s largest NAND memory manufacturer. Due to the deteriorating market conditions and sluggish performance of storage products used in smartphones and other uses, the two parties hope to merge to improve operational efficiency. The report quoted people familiar with the matter as saying that the merger will be further negotiated on details such as the proportion of capital contribution under the condition that Kioxia has the dominant power.
▲ Source: Kioxia
According to data from the research organization Omdia, Kioxia and Western Digital will rank third and fourth in terms of market share in 2022. The combined NAND memory revenue scale is expected to reach 2.5 trillion yen, surpassing Samsung Semiconductor, the leader in the NAND industry.
