According to Reuter’s report, the merger negotiations between Western Digital and Japan’s Kioxia Holdings have been terminated as the two companies could not reach an agreement on the terms. This potential merger aimed to create one of the largest memory chip manufacturers globally but faced obstacles in its path.

Notably, South Korea’s SK Hynix, a significant investor in Kioxia, expressed its opposition to the deal, citing concerns about its impact on investment asset value.

TrendForce’s Insights:

While the merger talks between Western Digital and Kioxia faced obstacles, primarily involving a major shareholder, SK Hynix, and disagreements over the acquisition price, it is still anticipated that such acquisitions will eventually materialize. This expectation is rooted in the broader context of the NAND Flash industry.

NAND Flash global demand has seen a decline in its growth rate, shifting from approximately 30% before 2020 to around 20% in recent years. Furthermore, TrendForce’s data reveals that in 2023, all NAND Flash suppliers have experienced their most significant operating losses since 2014. Given these challenges, NAND Flash suppliers are compelled to explore strategies to sustain their competitiveness in a changing industry landscape.

Explore more:

• After a Low Base Year in 2023, DRAM and NAND Flash Bit Demand Expected to Increase by 13% and 16% Respectively in 2024, Says TrendForce

Is the merger between NAND flash memory chipmakers Kioxia and Western Digital (WD) , which was expected to be finalized this month, facing a twist? According to media reports, South Korean memory giant SK Hynix is opposing this merger and is considering a collaboration with Japan’s SoftBank to invest in Kioxia.

As reported by Yomiuri Shimbun on the 18th, insiders reveal that the merger negotiations between Kioxia and WD might be at an impasse. Although both sides aimed to reach a merger agreement this month, SK Hynix, which plans to indirectly invest in Kioxia, doesn’t concur with the merger. In anticipation of negotiations collapsing, SK Hynix considers partnering with SoftBank to invest in Kioxia.

Kioxia, a spin-off from Toshiba’s memory business, was sold in 2018 to a Bain-Capital-lead consortium, including SK Hynix, and Hoya. At that time, regulations stipulated that the largest shareholder, Bain, must secure the consent of contributors like SK Hynix to promote this merger. It’s reported that SK Hynix is apprehensive that WD’s dominance will increase in this merger.

Reports suggest that SoftBank is currently bolstering its AI-related ventures. Therefore, by investing and enhancing relationships, SoftBank may secure a stable memory supply from Kioxia and SK Hynix.

Throne Shift for memory business? Mergers May Reshape Rankings

Nikkei reported on the 17th that SK Hynix does not approve of the Kioxia and WD merger. At this stage, SoftBank is not directly involved in the merger talks between Kioxia and WD. Kioxia and WD aim to secure a financing agreement with financial institutions this week to facilitate the merger. However, the lack of consent from SK Hynix may impact negotiations with financial institutions.

The report points out that in the NAND flash market, SK Hynix is the world’s second-largest manufacturer, trailing only Samsung. If Kioxia, the world’s third-largest manufacturer, and WD, the fourth-largest, were to merge, they would nearly match Samsung’s scale. This would create a significant gap between SK Hynix, which holds the third position, and raise concerns for SK Hynix.

Toshiba, currently holding approximately 40% of Kioxia, will also become a shareholder in the holding company, with Kioxia’s President, Nobuo Hayasaka, assuming the role of President for the holding company. Additionally, Kioxia will have the majority of seats on the board, granting substantial operational authority

According to data from TrendForce, In Q2 2023, Samsung leads the NAND memory market with 31.1% market share, while Kioxia holds 19.6%, and Western Digital has 14.7%. After the Kioxia-WD merger, their combined market share could exceed 34.3%, establishing them as the dominant force in the NAND memory market.

Explore more

• [News] Updates: Kioxia and Western Digital’s NAND Flash Progress towards Merger
• Q2 NAND Flash Revenue Up 7.4%, Anticipated to Exceed 3% Growth in Q3, Says TrendForce

(Image: SK Hynix )

As reported by multiple Japanese media, including Kyodo News, Nikkei, and Asahi Shimbun on the 13th and 14th of this month, negotiations for the merger between NAND flash memory giants Kioxia and Western Digital have reportedly reached the final stages. There is a high likelihood that a merger agreement will be reached within this month, and the newly merged company is expected to be listed on the NASDAQ in the United States. Additionally, the board of the new company will be predominantly controlled by Kioxia.

The primary objective of this business merger is to prepare for the uncertain conditions in the storage market. By expanding their scale and positioning for future investment competition, they aim to fortify their competitive edge.

Specifics of the Agreement are Still under Review

According to the reports, Kioxia and Western Digital will establish a holding company, KIOXIA Holdings. Western Digital’s storage business and Kioxia will be incorporated under this holding company, focusing on the research and production of NAND Flash. It’s worth noting that Western Digital’s hard drive business will remain an independent entity and will not be part of this transaction.

In terms of the merger’s enterprise value-based breakdown, Kioxia will hold 63%, and Western Digital will hold 37%. However, after considering capital adjustments, the final investment ratio in the holding company will be 50.1% for Western Digital shareholders and 49.9% for Kioxia shareholders.

Toshiba, which currently holds around 40% of Kioxia, will also become a shareholder in the holding company. The President of Kioxia, Nobuo Hayasaka, will assume the role of President of the holding company. Furthermore, the majority of seats on the board will be under Kioxia’s control, granting Kioxia substantial operational authority.

Factors and Potential Roadblocks in Kioxia and Western Digital Merger

Previously, it was reported that the headquarters of the holding company would be located in Japan. However, in order to facilitate fundraising for equipment investments, they plan to be listed on the NASDAQ in the United States. Furthermore, there are future plans for a listing on the Tokyo Stock Exchange. When Kioxia and Western Digital merge, Japan’s three major banks, including Mitsubishi UFJ, and the Japan Policy Investment Bank are considering providing financing in the range of 1.5 to 1.9 trillion Japanese yen.

However, the reality of this merger presents challenges, as influential industry competitors may potentially interfere. The finalized agreement will be subject to antitrust reviews in various countries, and the outcome of scrutiny by Chinese antitrust authorities remains uncertain.

According to data from TrendForce, in the Q2 of 2023, in the NAND memory market, Samsung leads with a market share of 31.1%, while Kioxia holds 19.6% and Western Digital maintains a 14.7% market share. Following the merger of Kioxia and Western Digital, their combined market share may exceed 34.3%, positioning them as the dominant force in the NAND memory market.

Read more:

• Q2 NAND Flash Revenue Up 7.4%, Anticipated to Exceed 3% Growth in Q3, Says TrendForce

The growth of the NAND Flash market in 3Q21 was primarily driven by strong demand from the data center and smartphone industries, according to TrendForce’s latest investigations. More specifically, NAND Flash suppliers’ hyperscaler and enterprise clients kept up their procurement activities that began in 2Q21 in order to deploy products based on new processor platforms. Major smartphone brands, on the other hand, likewise expanded their NAND Flash procurement activities during the quarter as they prepared to release their new flagship models. As such, clients in both server and smartphone industries made significant contributions to the revenue growth of the NAND Flash industry for 3Q21. At the same time, however, suppliers also warned that orders from PC OEMs began showing signs of decline. On the whole, the industry’s quarterly total NAND Flash bit shipment increased by nearly 11% QoQ for 3Q21, and the overall NAND Flash ASP rose by nearly 4% QoQ for the same quarter. Thanks to rising prices and expanding shipments, the quarterly total NAND Flash revenue increased by 15% QoQ to a new record high of US$18.8 billion in 3Q21.

Moving into 4Q21, the impact of the ongoing component gaps has widened to numerous application segments of the NAND Flash market as the capacity crunch in the foundry market remains unresolved. Currently, NAND Flash components are in abundance relative to other kinds of key components. For OEMs and ODMs, the differences between the NAND Flash inventory level and the inventory levels of other components have been growing over the past several months. Therefore, they have to scale back orders and reduce stock for NAND Flash. As inventory adjustments are happening, NAND Flash contract prices will start to drop and thus bring about an end to the several quarters of strong revenue growth enjoyed by suppliers.

Samsung

Owing to procurement demand from hyperscalers and smartphone brands, the NAND Flash market generally remained in shortage in 3Q21, thereby driving up Samsung’s ASP by 10% QoQ. Even so, Samsung’s NAND Flash bit shipment increased by only about 5% QoQ due to weakening demand from PC OEMs and low inventory levels of certain other components carried by Samsung’s clients. Samsung’s NAND Flash revenue for 3Q21 reached US$6.51 billion, a 16.5% QoQ increase.

Kioxia

Although orders from PC OEMs began to wane, Kioxia still benefitted from orders from its major smartphone and data center clients in 3Q21, during which Kioxia’s NAND Flash bit shipment underwent a major QoQ increase exceeding 15%. As the NAND Flash market remained in a shortage situation, Kioxia’s ASP increased by about 4% QoQ, resulting in a revenue of US$3.64 billion, which represents a 20.8% QoQ increase and the highest single-quarter revenue in Kioxia’s history.

SK hynix

Among all NAND Flash suppliers in 3Q21, SK hynix registered the highest growth in bit shipment at more than 20% QoQ. This performance can be attributed to several reasons: the cyclical upturn in procurement activities from smartphone brands, persistently strong demand from the data center segment, and inventory-clearing by SK hynix in anticipation of weak demand in the upcoming off-season. Thanks to an ASP increase of about 5% QoQ, SK hynix’s NAND Flash revenue for 3Q21 reached US$2.54 billion, a 25.6% QoQ increase.

Western Digital

Although Western Digital’s PC OEM clients reduced their SSD orders due to supply chain disruptions, and demand from the retail end also remained weak, Western Digital was able to increase its NAND Flash bit shipment by 8% QoQ in 3Q21 due to enterprise SSD demand from the data center segment and NAND Flash demand from smartphone brands for the release of new smartphone models. Nevertheless, Western Digital’s ASP fell by 3% QoQ because the company increasingly focused on major clients and high-density products. Western Digital’s NAND Flash revenue for 3Q21 reached US$2.49 billion, a 2.9% QoQ increase.

Micron

Demand from the data center segment remained strong, and clients continued to adopt Micron’s 176L products. However, Micron’s shipment share in the smartphone market lagged behind that of other NAND Flash suppliers. Furthermore, its PC OEM clients were starting to be affected by the uneven supply of semiconductor chips. In light of these factors, Micron’s NAND Flash bit shipment increased by a modest 4% QoQ. On the other hand, the NAND Flash market remained in a severe shortage in 3Q21, thereby driving up Micron’s ASP by about 5% QoQ. Hence, Micron’s NAND Flash revenue for 3Q21 reached US$1.97 billion, an 8.8% QoQ increase.

Intel

Although persistently strong demand from the data center segment led to a massive price hike for enterprise SSDs and a nearly 6% increase in Intel’s ASP in 3Q21, the company was unable to fully meet its client demand since it could not procure sufficient upstream components. This lack of upstream components resulted in a severe decline of about 5% QoQ in Intel’s NAND Flash bit shipments and offset the upward momentum generated by an increase in Intel’s ASP. Intel’s NAND Flash revenue for 3Q21 reached a mere US$1.11 billion, a slight 0.6% QoQ increase.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

NAND Flash suppliers’ Clients in the data center segment were gradually stepping up enterprise SSD procurement after finishing inventory adjustments, according to TrendForce’s latest investigations. Moreover, the adoption rate of 4/8TB products in the enterprise SSD market increased substantially on account of the releases and adoption of the new server processor platforms from Intel and AMD. Although the recent wave of COVID-19 outbreaks that struck Southeast Asia weakened smartphone sales in 2Q21, the quarterly total NAND Flash bit shipments rose by nearly 9% QoQ, as PC OEMs still had plenty of component orders in 2Q21 due to the fairly robust notebook demand during the period. On the other hand, the shortage of controller ICs became more severe during the period, and the winter storm that battered Texas this February affected the operation of Samsung’s foundry fab Line S2 in Austin. As demand for NAND Flash products rose, the overall ASP also rose by nearly 7% QoQ, and the quarterly total NAND Flash revenue rose by 10.8% QoQ to US$16.4 billion in 2Q21.

Moving into 3Q21, clients in the data center segment will gradually become the main growth driver as they expand procurement of high-density enterprise SSDs. Furthermore, notebook demand is expected to remain at a fairly high level in 3Q21, thereby sustaining NAND Flash demand bit growth and the ongoing rise in contract prices of NAND Flash products. Hence, TrendForce currently forecasts that the quarterly total NAND Flash revenue will not only again register a QoQ increase but also hit a record high for 3Q21.

Samsung

For 2Q21, Samsung’s bit shipments grew by around 8% QoQ thanks to the strong demand from PC OEMs and hyperscalers aggressively building up their enterprise SSD inventories. The energetic stock-up activities and the shortage of controller ICs also caused Samsung’s ASP to rise by about 5% QoQ. As a result, Samsung’s NAND Flash revenue went up by 12.5% QoQ to US$5.59 billion in 2Q21.

SK hynix

Smartphone storage solutions account for the largest portion of SK hynix’s sales mix. Nevertheless, SK hynix’s sales performance during 2Q21 still benefitted from hyperscalers’ rising demand and the brisk flow of orders related to notebooks. Hence, SK hynix grew its bit shipments by 3% QoQ. Its ASP also rose by about 8% QoQ because of the general tightening of NAND Flash supply and the shortage of controller ICs. All in all, SK hynix’s NAND Flash revenue went up by 10.8% QoQ to US$2.025 billion for 2Q21.

Kioxia

Kioxia benefitted from strong notebook demand and resurging procurement activities from its enterprise clients in 2Q21. In addition, Kioxia’s major clients in the smartphone segment once again kicked off their NAND Flash procurement during the quarter. As a result, Kioxia’s bit shipment grew by about 7% QoQ in 2Q21, while its ASP entered an upward trajectory for the first time in four quarters with a QoQ growth of more than 10%. However, in light of the trailing performance of its SSSTC subsidiary (formerly Liteon’s SSD business) as well as the impact of unfavorable exchange rates, Kioxia’s revenue for 2Q21, when converted into USD, reached a mere US$3.011 billion, an 8.5% QoQ increase.

Western Digital (WDC)

Western Digital put up a remarkable revenue performance for 2Q21 thanks to robust demand from the notebook segment, an upswing in enterprise SSD demand, and the shipment of its second-gen NVMe enterprise SSD, which resulted in a 39% QoQ increase in Western Digital’s enterprise SSD revenue. On the other hand, while products related to Chia cryptocurrency mining gained significant media spotlight at the end of April, they made limited contributions to Western Digital’s quarterly bit shipment, which underwent a mere 4% QoQ increase in 2Q21, though its ASP increased by 7% QoQ. All in all, Western Digital’s NAND Flash revenue reached US$2.419 billion, an 11.2% QoQ increase, in 2Q21.

Micron

Owing to strong demand from the data center and notebook segments, Micron grew its quarterly bit shipment by nearly 7% in 2Q21. In particular, Micron’s QLC client SSDs enjoyed a growing penetration rate in the PC segment. With the shortage in the SSD market leading to a 3% QoQ increase in Micron’s ASP for 2Q21, its NAND Flash revenue reached US$1.812 billion, a 9.8% QoQ increase.

Intel

Intel’s quarterly bit shipment for 2Q21 underwent a near 10% QoQ decline in spite of strong enterprise SSD demand from the data center segment. This decline can primarily be attributed to the shortage of such key components as controller ICs and PMICs. Compared to other major NAND Flash suppliers, Intel mainly procures some of these components from a single source, thereby exacerbating the impact of the component shortage on its operations, including the shipment of enterprise SSDs. Nevertheless, its ASP still grew by about 9% QoQ on the back of persistently strong demand from clients. Intel’s quarterly revenue from its NAND Flash business reached US$1.098 billion, a 0.8% QoQ decline, in 2Q21.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com