SK hynix opposes Kioxia, Western Digital merger plans

[Photo by Yonhap]

SK hynix is opposing the proposed management integration between Kioxia (formerly Toshiba Memory) and Western Digital, both of which are major players in the NAND flash memory production industry, according to media reports in Japan.

Western Digital is in the process of spinning off its semiconductor memory business to establish Kioxia Holdings, with the goal of merging the two companies’ operations. For this, they need approval from SK hynix, an indirect investor in Kioxia. Notably, Kioxia’s largest shareholder is a consortium comprising South Korea, the United States, and Japan. South Korea’s SK hynix invested about 4 trillion won in this consortium back in 2018.

Kioxia has been working towards securing a 2 trillion-yen loan commitment from Japanese financial institutions this week as part of its merger plans with Western Digital. But the failure to gain SK hynix’s approval could potentially impact the ongoing negotiations with financial institutions.

The Nihon Keizai Shimbun reported that “SK hynix is the second-largest player in the NAND market after Samsung Electronics, and SK hynix is reluctant to allow Kioxia to integrate with third parties, as it sought a future partnership with Kioxia.

In the NAND market, Samsung Electronics held the top position last year with a market share of 33.7 percent. Combining Kioxia, which held third place with an 18.6 percent market share, and Western Digital, in fourth place with 13.1 percent, their collective market share of 31.7 percent would put the combined entity just below with Samsung Electronics.

The Yomiuri Shimbun reported that “SK hynix seems concerned that the proposed merger could strengthen Western Digital’s leadership in the industry,” adding that the negotiations can easily change due to external variables as both the U.S. and Japanese governments are involved.

If the merger talks fail, SK hynix is reportedly exploring alternative options. According to the Nikkei, SK hynix is considering collaboration with SoftBank Group led by Masayoshi Son. SoftBank has a strong focus on artificial intelligence and holds stakes in companies such as Arm, a British semiconductor design company. By collaborating with SK hynix and Kioxia, SoftBank could secure the high-performance memory chips crucial for data centers in AI deployment, thus enhancing its AI business.