According to industry sources cited in a report from Business Korea, Japanese NAND Flash supplier Kioxia is preparing to restart its merger plan with its partner Western Digital (WD). However, SK Hynix, a major shareholder and Korean memory giant, continues to firmly oppose the merger.

The same report citing industry sources also indicates that Kioxia could potentially go public on the Tokyo Stock Exchange as early as October 2024, according to its schedule. Kioxia’s major shareholder, Bain Capital, a U.S. private equity firm, has engaged its creditor banks to review the listing process, with the banks providing over JPY 1 trillion in loans to support this effort.

Despite facing losses of JPY 254 billion from the second to fourth quarters of 2023 and the impending repayment of a JPY 900 billion loan in June 2024, Kioxia has seen improved market conditions in the memory market, leading to higher market quotations and increased revenue to address these financial challenges. This resurgence has prompted Kioxia to restart its merger plans with WD, with the backing of creditor banks supporting this initiative.

However, SK Hynix, which indirectly holds a 15% stake in Kioxia through a KRW 4 trillion investment in Bain Capital, has explicitly stated its opposition to restarting the merger between Kioxia and Western Digital. A representative from SK Hynix cited by the report from Business Korea stated that their position against the merger of Kioxia and WD remains unchanged. However, they are open to discussing potential cooperation under conditions that protect their investment interests.

In 2023, Kioxia and Western Digital had drafted a merger agreement that was blocked due to opposition from SK Hynix. The same report, citing industry sources, suggests that SK Hynix is expected to continue opposing the merger of the two companies. SK Hynix intends to leverage its advantages in the normalization of the NAND Flash market to maximize the gap in market conditions between itself and Kioxia/ WD as much as possible.

For the NAND Flash market, TrendForce’s report in march has indicated that, as of the fourth quarter of 2023, SK Group captures the global market with a share of 21.6%, followed by WD (14.5%) and Kioxia (12.6%).

Read more

• [News] SK Hynix Rumored to Propose Collaboration with Kioxia for HBM Production in Japan
• NAND Flash Industry Revenue Grows 24.5% in Q4 2023, Expected to Increase Another 20% in Q1, Says TrendForce

(Photo credit: Western Digital)

According to a report from Korean media ETNews citing industry sources, it has indicated that Samsung Electronics has recently increased the capacity utilization rate of NAND Flash to over 90%, a further increase from the first quarter’s 80%.

Previously, Korean media including ETNews and The Elec held a relatively optimistic view of Samsung Electronics’ NAND Flash business, reporting that the operating rate of the Xi’an plant had reached 70%. However, the Chosun Daily has a different perspective, suggesting that Samsung Electronics continues to maintain its plan of reducing production by 50%.

According to the same report from ETNews, some NAND Flash fabs of Samsung are currently operating at full capacity, significantly better than the lowest utilization rate of 60% seen in 2023. Reportedly, the capacity utilization rate of the Xi’an plant in China has notably increased, followed by a gradual recovery in the NAND Flash capacity at Samsung’s Pyeongtaek facility in South Korea.

The report further cited another industry source who noted that downstream customers’ inventories of NAND Flash have essentially been depleted, leading to a balanced supply-demand trend. This is reportedly a key driver behind Samsung’s ongoing increase in capacity utilization.

The primary reason for the rise in NAND Flash market demand is attributed to the AI trend driving increased demand for enterprise solid-state drives (SSDs) from related businesses. This includes cloud computing service providers in North America and China increasing their purchases of enterprise storage to meet market demands.

As per TrendForce’s press release in March, it has projected a strong 13–18% increase in Q2 NAND Flash contract prices, with enterprise SSDs expected to rise highest. Despite Kioxia and WDC boosting their production capacity utilization rates from Q1 this year, other suppliers have kept their production strategies conservative. The slight dip in Q2 NAND Flash purchasing—compared to Q1—does not detract from the overall market’s momentum, which continues to be influenced by decreasing supplier inventories and the impact of production cuts.

Read more

• [News] Korean NAND Flash Manufacturers Cautiously Increase Wafer Input, Capacity Utilization Maintains Around 50%
• [News] Western Digital Customer Letter Confirms HDD Supply Shortage! NAND Flash and Hard Drive Prices Continue to Rise

(Photo credit: Samsung)

According to a report from South Korean media The Chosun Daily, Samsung Electronics is set to increase wafer input by approximately 30% this quarter at its NAND Flash production lines in Pyeongtaek, South Korea, and Xi’an, China. However, Samsung remains cautious about further production increases to avoid impacting NAND Flash price trends.

The report indicates that while Samsung’s NAND Flash production lines can exceed 2 million wafers in a quarter at full capacity, internal targets for wafer output in the second to fourth quarters are capped at 1.2 million wafers each, maintaining overall utilization rate at around 50%.

Market expectations cited in the same report suggest that Samsung Electronics will reaffirm its stance on reducing NAND Flash production during the first quarter earnings call later this month. In the previous earnings call, Samsung noted persistent high levels of NAND Flash inventory among major customers, necessitating continued aggressive production cuts.

The same report further indicates that SK hynix has set a quarterly cap of around 600,000 wafers for NAND Flash production, with overall utilization rate ranging between 50% and 60%.

As per TrendForce’s data, it has projected a strong 13–18% increase in Q2 NAND Flash contract prices, with enterprise SSDs expected to rise highest. Despite Kioxia and WDC boosting their production capacity utilization rates from Q1 this year, other suppliers have kept their production strategies conservative. The slight dip in Q2 NAND Flash purchasing—compared to Q1—does not detract from the overall market’s momentum, which continues to be influenced by decreasing supplier inventories and the impact of production cuts.

Read more

• [News] Memory Manufacturers’ Price Hikes Prompt Backlash, Module Suppliers Hesitate to Follow
• [News] Micron Expects 4-6% Quarterly DRAM Supply Impact Post Taiwan Earthquake

(Photo credit: Samsung)

Amid the memory market’s gradual recovery, memory manufacturers are aggressively increasing prices back to pre-reduction levels and achieve profitability. According to a report from TechNews, however, module suppliers are reportedly resisting these price hikes and considering ways to negotiate with manufacturers, potentially through non-purchasing actions.

With the continued growth in demand for AI and high-performance computing, memory prices are on the rise. According to TrendForce, Kioxia and WDC have increased capacity utilization since Q1 2024, while others maintain low production strategies. Although NAND Flash procurement slightly decreased in the second quarter compared to the first quarter, the overall market sentiment continues to be influenced by reduced supplier inventory and production cut effects. As a result, NAND Flash contract prices for the second quarter are expected to see a strong increase of approximately 13-18%.

Apart from NAND Flash, in the realm of DRAM, although suppliers’ inventories have decreased, they have not yet returned to healthy levels. Moreover, in the context of improving losses, suppliers are increasing capacity utilization.

However, due to unfavorable overall demand prospects for 2024 and significant price hikes by suppliers since the fourth quarter of 2023, the momentum for inventory replenishment is expected to weaken gradually. Therefore, TrendForce predicts that the second-quarter contract price increase for DRAM will converge to 3% to 8%.

Despite the continuous rise in memory prices driven by applications in artificial intelligence and high-performance computing data centers, demand in the consumer market remains subdued. Manufacturers persist in strong pricing strategies, prompting backlash from module suppliers.

Additionally, it is reported that Micron is preparing to increase second-quarter quotes by over 25%, which is putting pressure on module suppliers and potentially leading to a standoff with manufacturers.

On the other hand, module suppliers are showing a lukewarm response to the price increases and are particularly hesitant to accept price increases themselves.

However, with the three major memory manufacturers facing constraints on adding new capacity in the short term, whether module suppliers will be forced to accept significant price increases remains to be seen.

Read more

• [News] Micron Expects 4-6% Quarterly DRAM Supply Impact Post Taiwan Earthquake
• [Insights] The Spot Price of DRAM Continues to Decline, Weak Trading Volume for NAND Flash

A glimmer of hope for the once-failed engagement between NAND flash memory giants Kioxia and Western Digital (WD) may emerge again. According to a report from Japanese media Asahi News, the two parties may restart merger negotiations in late April.

 It’s reported on February 23rd that Kioxia and WD are expected to resume merger talks in late April. Although their merger negotiations hit a snag last fall, both companies are facing pressure to expand their scale for survival. However, whether they can ultimately reach a merger agreement remains uncertain.

According to the report, both Kioxia and WD manufacture NAND Flash products. If they merge, their scale will rival that of the global market leader, Samsung Electronics. The Japanese government reportedly views the Kioxia/WD merger as a “symbol” of Japan-US semiconductor cooperation and has provided support. However, the merger negotiations hit an impasse last fall, reportedly due to opposition from SK Hynix, indirectly invested in Kioxia.

As per TrendForce’s  data for 3Q23, Samsung maintained its position as the top global NAND flash memory manufacturer, commanding a significant market share of 31.4%. Following closely, SK Group secured the second position with a 20.2% market share. Western Digital occupied the third position with a market share of 16.9%, while Japan’s Kioxia held a 14.5% market share.

Asahi News’ report further indicates that WD declared in October of last year that “all discussions had ended.” To avoid insider trading, as per the report cited sources, WD is expected to wait for a certain period before the negotiation can be resumed. Therefore, once this waiting period concludes, merger talks are set to resume in late April.

Per a report from Jiji Press on February 17th, regarding the merger proposal involving Kioxia and WD, Kioxia has proposed a collaboration with SK Hynix, which opposes the merger. Kioxia has reportedly approached SK Hynix and plans to utilize the jointly operated Japanese plants of Kioxia and WD to manufacture semiconductors for SK Hynix.

The report notes that SK Hynix and Kioxia are competitors in the NAND Flash industry. However, since 2018, SK Hynix has indirectly invested approximately 15% in the predecessor of Kioxia, “Toshiba Memory,” through the American investment fund Bain Capital. SK Hynix has consistently sought to strengthen its relationship with Kioxia since then.

Kioxia’s proposed acceptance of SK Hynix’s request to “strengthen the relationship” is seen as a gesture to persuade SK Hynix to agree to the merger proposal. The goal, as per the report, is to restart the stalled merger negotiations between Kioxia and WD.

Read more

• [News] Kioxia and Western Digital Resume Merger Negotiations? Rumors of Bain Negotiating with SK Hynix Surface

(Photo credit: Kioxia)