Kioxias banks plan to refinance 2 trillion yen ($13.5 billion) in loans to support its potential merger with Western Digital’s flash memory business. The lenders will likely submit a commitment letter for the refinancing next month, Bloomberg News reported on Wednesday, citing unnamed sources. Part of the loan will be used to pay special dividends to Kioxias shareholders. The combined company would rank third in the global NAND market and come within a few percentage points of Samsung, the top NAND vendor.
The companies first discussed a merger in 2021, but talks stalled due to a steep decline in chip demand. Now, with both weighed down by weak market conditions and deteriorating valuations for their respective NAND businesses, they have renewed talks.
NAND is a crucial type of memory chip used in smartphones, tablets, and data center servers. In a recent report, British research firm Omdia said the combined Western Digital-Kioxia operation would rank third in the global NAND market with sales of $11 billion in 2022. That’s nearly a quarter of the $20 billion sales at Samsung, the world’s top NAND chips supplier.
A combined Western Digital-Kioxia would be one of the world’s largest producers of NAND, with the company expected to produce more than 360,000 wafers per month in 2022, up from about 295,000 a year ago, according to Bloomberg News. During the same period, Samsung is expected to produce more than half of all NAND chips worldwide.
After the merger, both companies are expected to continue operating their existing NAND production facilities in Japan. Kioxia is also expected to expand its fab in Yokkaichi, bringing total capacity to 80,000 wafers per month by the end of this year. The expansion will help the company cope with an oversupply in the NAND market, which has exacerbated trade tensions between the United States and China.
Shares of Western Digital jumped about 4% in premarket trading on Monday after a Bloomberg News story reporting that the company is holding advanced talks for a merger with Japanese chip maker Kioxia Holdings Corp. The companies are discussing a spinoff of Western Digital’s flash memory business to merge with Kioxia and create a dual stock listing in the United States and Japan. Western Digital executives would run the combined company, the news agency reported.
A combined Western Digital-Kioxia is expected to compete more effectively with South Korean SK Hynix and Intel, which ranked second and fourth in the global NAND market last year. The two companies are also battling to retain their positions in the NAND market as the trade war between the United States and China has raised concerns over supply chain disruptions. This could lead to further price cuts in the industry, which are already underway. NAND prices have plunged over the past year due to the trade dispute.
