Would A Western Digital Merger Hurt Samsung?
Manufacturing storage has always been a tough gig especially in the Micro SD market with scale and volume playing a key part over the years, now US company Western Digital are looking at merging with Japan’s Kioxia Holdings in a move that could put pressure on Samsung.
The merger of the world’s No. 2 and No. 4 NAND flash suppliers will create a major competitor to Samsung if it goes ahead.
Western Digital Corporation is a US computer drive manufacturer and data storage company, headquartered in San Jose, California. It designs, manufactures, and sells data technology products, including data storage devices, data centre systems and cloud storage services.
Back in 2016 Western Digital acquired SD Card manufacturer SanDisk forUS$19 billion.
According to Reuters the plan being drafted, would see Kioxia take 43 percent of the shares of the merged entity while Western Digital will own 37 percent, according to sources.
The move comes as a severe downturn in the global chip industry impacts the supply chain.
as a result of the speculation surrounding the potential merger of the two market leaders the big question is what impact it will have on South Korea’s two memory chipmakers Samsung Electronics and SK Group, who currently stand at No. 1 and No. 3 in the market.
Recently Samsung reported a major downturn in profits.
According to the market analysis firm TrendForce, Samsung Electronics topped global sales of NAND flash chips in 2022, taking the market share of 33.3 percent, while Kioxia followed at 18.9 percent. SK Hynix, combining the sales of its affiliate Solidigm, ranked third, taking 18.3 percent of market share, while Western Digital posted 12.7 percent.
In the event of a Kioxia-Western Digital merger, their combined market share of 31.6 percent would beat that of SK Hynix and follow closely on the heels of Samsung.
Song Myung-sub, an analyst at Hi Investment and Securities, said it could work in Korean firms’ favour, reducing the number of competitors from the current four to three.
“Now, Kioxia and Western Digital are making investments as two separate companies, but when they merge, the investment volume for equipment could decrease,” Song said.
“When combined, the market share of Kioxia and Western Digital would follow closely on Samsung’s heels. But considering the companies’ production capacity and financial performance, their merger would not have such an impact to shake Korean memory chipmakers,” an industry official said under the condition of anonymity.
As memory chip makers compete to increase layer counts, Samsung kicked off mass-production of 236-layer NAND flash memory — the industry’s current top capacity. The tech giant also plans to develop a 1000-layer V-NAND by 2030.
According to Reuters, the drive for the merger comes amid efforts by Western Digital to spin off its split memory business from its hard drive division. Since making an initial stock investment in 2022, Elliott Management, the activist investor owning convertible preferred shares in the American chipmaker, has been pushing for the spinoff.
At the same time, Kioxia and Western Digital appear to be seeking to join forces after their initial attempt failed in 2021, as they continue to face losses in operating income.
In the January-March period this year, Kioxia reported an operating loss of US$1.24 billion, while Western Digital witnessed a loss of $470 million.