Kioxia proposed to produce NAND flash memory for SK Hynix

Since 2021, Western Digital and Kioxia have engaged in intermittent negotiations to merge their NAND flash memory production operations, aspiring to create the world’s largest NAND flash memory manufacturer. However, as the parties were on the verge of finalizing their plans, they encountered strong opposition from Kioxia’s significant indirect shareholder, SK Hynix, prompting Western Digital to halt the negotiations. Subsequently, Western Digital announced its intention to split into two independently listed companies, each focusing on hard disk drives and NAND flash memory businesses, respectively, with the separation expected to commence in the second half of 2024.

According to media reports, Kioxia has proposed a deal to SK Hynix, offering to produce NAND flash memory at its Japanese wafer fabrication plant for them, in hopes of altering their stance on the merger between Western Digital and Kioxia’s NAND flash memory production operations.

From SK Hynix’s perspective, the merger of Western Digital and Kioxia’s NAND flash memory production businesses would result in a direct competitor larger than itself, making their opposition understandable. Kioxia’s proposal carries a certain allure for SK Hynix, as it implies an increase in NAND flash memory capacity without the need for additional investments in production lines or new wafer fabrication plants. This proposal appears economically beneficial, though it remains unclear whether SK Hynix is interested.

Indeed, the merger of Western Digital and Kioxia’s NAND flash memory production operations faces other challenges, such as previous disagreements over merger terms by Kioxia’s main shareholder, Bain Capital, which have prevented the finalization of deal details and led negotiations to a deadlock. Furthermore, the financial terms of this transaction remain completely undisclosed.