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Western Digital to merge with Japanese semiconductor Kioxia

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Western Digital (WD) has entered into final negotiations to acquire Japanese semiconductor maker Kioxia Holdings for about $20 billion. The combined market share of Western Digital, the third largest player in the global NAND flash semiconductor market, and Kioxia, the second largest, will be 33.4 percent. A fierce fight for the top spot can be expected, since it will be on par with Samsung Electronics (33.5%), the global leader in NAND flash market share.

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According to the Wall Street Journal (WSJ) on the 25th (local time), the two companies have been negotiating for a long time, and negotiations have reportedly intensified in recent weeks.

WD is expected to pay the merger price by exchanging its treasury stock for Kioxia stock, and WD CEO David Geckler will lead the merger.

According to the WSJ, Micron Technology also partnered with WD before acquiring Kioxia, but Micron pulled out as Kioxia focused on negotiations with WD as the preferred bidder.

Kioxia, a maker of NAND flash memory used in smartphones, servers and other electronics, has become a valuable commodity due to the global semiconductor shortage.

Kioxia may explore a merger with a company other than WD, or pursue an IPO if negotiations are not yet finalized.

Sources say discussions between the two companies are accelerating, so a deal could be announced as soon as the middle of next month.

Currently, the global semiconductor industry is experiencing mergers and acquisitions (M&A) turmoil.

A U.S. semiconductor company, Advanced Micro Devices (AMD), has agreed to buy Nasdaq-listed Xilinx for $35 billion.

Furthermore, Analog Devices has agreed to acquire Maxim Integrated Products (MIP) for $20 billion.

Despite this, mergers and acquisitions between companies are not as smooth as they used to be. A number of countries oppose mergers of semiconductor companies because of competition concerns. Moreover, there is concern about foreign countries obtaining semiconductor technology, which has put a halt to the merger.

As a result of the COVID-19 pandemic last year, semiconductor shortages have intensified, resulting in stricter regulations in each country.

China, which is tightening regulations on monopolies, thwarted U.S. Qualcomm’s plan to acquire Dutch NXP Semiconductors for $44 billion in 2018. Due to opposition from China, the merger between the two companies was called off.

China only recently approved a merger between Analog and MIP, a merger between American companies. Dark clouds now hang over Nvidia’s acquisition of ARM. The U.K. competition authority has issued a report saying it has serious concerns about reducing competition, and the U.K. is also considering issues such as national security. Nvidia’s plans to complete the merger this year have already been delayed.

WD’s acquisition of Kioxia could also be halted by the Japanese government, as the company plays an important role in the Japanese economy.

The U.S. is unlikely to oppose WD’s acquisition of Kioxia, since it will contribute to the administration’s policy of expanding semiconductor production in the U.S.

The same day, WD’s stock price soared after the Kioxia acquisition was announced. The stock rose 7.8 percent to $65.50.

Toshiba Semiconductors has changed its name to Kioxia from Toshiba Semiconductors.

Bain Capital, Apple, Dell, Kingston Technologies, and Seagate formed a consortium in 2018 to acquire it for $18 billion.

The name was changed to Kioxia in 2019, the year after the acquisition. Toshiba still holds a 40% stake in the company.

For MetaNews.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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