According to Reuter’s report, the merger negotiations between Western Digital and Japan’s Kioxia Holdings have been terminated as the two companies could not reach an agreement on the terms. This potential merger aimed to create one of the largest memory chip manufacturers globally but faced obstacles in its path.

Notably, South Korea’s SK Hynix, a significant investor in Kioxia, expressed its opposition to the deal, citing concerns about its impact on investment asset value.

TrendForce’s Insights:

While the merger talks between Western Digital and Kioxia faced obstacles, primarily involving a major shareholder, SK Hynix, and disagreements over the acquisition price, it is still anticipated that such acquisitions will eventually materialize. This expectation is rooted in the broader context of the NAND Flash industry.

NAND Flash global demand has seen a decline in its growth rate, shifting from approximately 30% before 2020 to around 20% in recent years. Furthermore, TrendForce’s data reveals that in 2023, all NAND Flash suppliers have experienced their most significant operating losses since 2014. Given these challenges, NAND Flash suppliers are compelled to explore strategies to sustain their competitiveness in a changing industry landscape.

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• After a Low Base Year in 2023, DRAM and NAND Flash Bit Demand Expected to Increase by 13% and 16% Respectively in 2024, Says TrendForce

SK hynix today reported the financial results for the third quarter ended September 30, 2023. The company recorded revenues of 9.066 trillion won, operating losses of 1.792 trillion won and net losses of 2.185 trillion won in the three-month period. The operating and net margins were a negative 20% and 24%, respectively.

After bottoming out in the first quarter, the business has been on a steady recovery track, helped by growing demand for products such as high-performance memory chips, the company said.

“Revenues grew 24%, while operating losses narrowed 38%, compared with the previous quarter, thanks to strong demand for high-performance mobile flagship products and HBM3, a key product for AI applications, and high-capacity DDR5,” the company said, adding that a turnaround of the DRAM business following two quarters of losses is particularly hopeful.

SK hynix attributed the growth in sales to increased shipments of both DRAM and NAND and a rise in the average selling price.

By products, shipments of DRAM increased 20% from the three months earlier, thanks to strong sales of high-performance products for server applications such as the AI with the average selling price also recording a 10% rise. Shipments of NAND also rose with high-capacity mobile products and solid state drive products taking the lead.

Following a turnaround, an improvement in the DRAM business is forecast to gain speed, backed by popularity of the generative AI technology, while there are looming signs of a steady recovery in the NAND space as well.

With the effect of the production reduction by global memory providers starting to be seen and customers, following efforts to reduce inventories, placing new orders now, semiconductor prices are starting to stabilize, the company said.

To meet new demands, SK hynix plans to increase investments in high-value flagship products such as HBM, DDR5, and LPDDR5. The company will increase the share of the products manufactured from the 1anm and 1bnm, the fourth and the fifth generations of the 10nm process, respectively, while increasing investments in HBM and TSV.

(Image: SK hynix)

SK hynix has introduced LPDDR5T (Low Power Double Data Rate 5 Turbo), a mobile DRAM with a remarkable 9.6Gbps speed. What sets this apart is its compatibility with Qualcomm’s new Snapdragon 8 Gen 3 Mobile Platform.

LPDDR5T features a 16GB-capacity version, delivering data processing speeds of 77GB per second while maintaining low power consumption. Its efficiency and speed are achieved through the incorporation of HKMG (High-K Metal Gate) technology, which reduces power usage and increases processing speed.

“Generative AI applications running on our new Snapdragon 8 Gen 3 enables exciting new use cases by executing LLMs and LVMs on device with minimal latency and at the lowest power,” said Ziad Asghar, Senior Vice President of Product Management at Qualcomm Technologies, Inc. “Our collaboration with SK hynix pairs the fastest mobile memory with our latest Snapdragon mobile platform and delivers amazing on-device, ultra-personalized AI experiences such as AI virtual assistants for smartphone users.”

“We are thrilled that we have met our customers’ needs for the ultra-high performance mobile DRAM with the provision of the LPDDR5T,” said Sungsoo Ryu, Head of DRAM Product Planning at SK hynix.

This collaboration between SK hynix and Qualcomm signals a new era for smartphones, aims to provide on-device, ultra-personalized AI experiences. As smartphones continue to evolve with enhanced DRAM for mobile, the partnership is set to strengthen and drive innovation in this space, positioning the devices as key vehicles for AI applications in the coming years.

(Image: SK hynix)

Is the merger between NAND flash memory chipmakers Kioxia and Western Digital (WD) , which was expected to be finalized this month, facing a twist? According to media reports, South Korean memory giant SK Hynix is opposing this merger and is considering a collaboration with Japan’s SoftBank to invest in Kioxia.

As reported by Yomiuri Shimbun on the 18th, insiders reveal that the merger negotiations between Kioxia and WD might be at an impasse. Although both sides aimed to reach a merger agreement this month, SK Hynix, which plans to indirectly invest in Kioxia, doesn’t concur with the merger. In anticipation of negotiations collapsing, SK Hynix considers partnering with SoftBank to invest in Kioxia.

Kioxia, a spin-off from Toshiba’s memory business, was sold in 2018 to a Bain-Capital-lead consortium, including SK Hynix, and Hoya. At that time, regulations stipulated that the largest shareholder, Bain, must secure the consent of contributors like SK Hynix to promote this merger. It’s reported that SK Hynix is apprehensive that WD’s dominance will increase in this merger.

Reports suggest that SoftBank is currently bolstering its AI-related ventures. Therefore, by investing and enhancing relationships, SoftBank may secure a stable memory supply from Kioxia and SK Hynix.

Throne Shift for memory business? Mergers May Reshape Rankings

Nikkei reported on the 17th that SK Hynix does not approve of the Kioxia and WD merger. At this stage, SoftBank is not directly involved in the merger talks between Kioxia and WD. Kioxia and WD aim to secure a financing agreement with financial institutions this week to facilitate the merger. However, the lack of consent from SK Hynix may impact negotiations with financial institutions.

The report points out that in the NAND flash market, SK Hynix is the world’s second-largest manufacturer, trailing only Samsung. If Kioxia, the world’s third-largest manufacturer, and WD, the fourth-largest, were to merge, they would nearly match Samsung’s scale. This would create a significant gap between SK Hynix, which holds the third position, and raise concerns for SK Hynix.

Toshiba, currently holding approximately 40% of Kioxia, will also become a shareholder in the holding company, with Kioxia’s President, Nobuo Hayasaka, assuming the role of President for the holding company. Additionally, Kioxia will have the majority of seats on the board, granting substantial operational authority

According to data from TrendForce, In Q2 2023, Samsung leads the NAND memory market with 31.1% market share, while Kioxia holds 19.6%, and Western Digital has 14.7%. After the Kioxia-WD merger, their combined market share could exceed 34.3%, establishing them as the dominant force in the NAND memory market.

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• [News] Updates: Kioxia and Western Digital’s NAND Flash Progress towards Merger
• Q2 NAND Flash Revenue Up 7.4%, Anticipated to Exceed 3% Growth in Q3, Says TrendForce

(Image: SK Hynix )

As reported by The Wall Street Journal today, Taiwan Semiconductor Manufacturing Company (TSMC) is poised to secure an additional one-year exemption from the United States. TSMC’s semiconductor facility in Nanjing, China, is expected to continue operations in the “foreseeable future” as long as significant technical upgrades are not undertaken.

U.S.’s Attitude towards Semiconductor Giants in Asia

The U.S. imposed a ban on chip exports to China in October of the previous year, restricting semiconductor equipment manufacturers using U.S. technology from exporting to China without obtaining a license.

On October 9th, the South Korean government revealed that both Samsung and SK Hynix have earned recognition as “Validated End-Users (VEUs)” by the U.S., granting them the ability to import specific U.S. chip manufacturing equipment into their existing Chinese facilities without further U.S. approval.

The status of TSMC’s designation as a “Certified End-User” remains undisclosed,  and the Taiwanese government has not made any public statements on this issue at this time.

South Korea’s Future Challenges after Secured U.S. Exemption

Over the preceding year, the South Korean government and related companies have been actively engaged in mediation with the U.S. government and will persist in their efforts during the extended one-year exemption. “In reality, we cannot evade political risks and geopolitical uncertainties,” stated Choi Sang-mook, Chief Secretary for Economic Affairs in the South Korean President’s Office.

Through back to September 22th, the U.S. Department of Commerce released the final regulations for the “Chip Act.” The rules indicate that subsidized chip manufacturers will enter into binding agreements with the U.S. Department of Commerce, limiting expansion and collaborative scientific research activities in countries including China. The restrictions for advanced processes and mature processes are set at 5% and 10%, respectively. This implies a severely restricted scope for expansion, and the future prospects for Samsung and SK Hynix’s continued growth in China remain uncertain.

Nevertheless, the U.S. decision to grant Samsung and SK Hynix an indefinite exemption bodes well for the semiconductor industry in China, the United States, South Korea, and the global semiconductor supply chain. As per Samsung’s statement, most of the uncertainties associated with its semiconductor production in China have been resolved. Meanwhile, SK Hynix underscores that this development bolsters the stability of the global semiconductor supply chain.

(Image: TSMC)