April 20, 2024

WDC/Kioxia And The Consolidation Of The NAND Flash Industry

Recently Bloomberg article, citing informed sources said that Western Digital will combine its NAND flash business with Kioxia. WDC and Kioxia share a common NAND roadmap and manufacturing facilities. The report says that WDC would gain control of more than half of the company tied to Kioxia’s management and some people are likely to be acquired from WDC.

The merger agreement is expected by August 2023 with the resulting Japan-based company. Bain Capital, which is a major investor in Kioxia, would receive a special dividend. Kioxia was spun off from Toshiba in 2018 and Toshiba remains a major investor in Kioxia.

Analyst firm TrendForce said Kioxia had a 21.5% share of the NAND memory market in Q1 2023 while WDC had a 15.2% share. Together this represents a 36.7% market share, more than Samsung at 34%. However, storage market share tends to fall with vendor mergers as customers try to rebalance their purchases between the other vendors.

The latest NAND flash industry merger had a 15.3% market share in Q1 2023, with SK hynix acquiring Intel’s NAND flash business (announced in 2020 but to be completed by 2025). share. Other sellers held 3.9% of the combined market.

Looking at the history of related HDD industry consolidation in the time period 2007-2013 we can get some ideas about what could happen in the SSD industry. That consolidation led to less overproduction and wild HDD price swings and greater profitability in the industry. However, it was also a slowdown in the introduction of new technologies and the growth of the density of the HDD area was slower.

If the NAND flash business of WDC and Kioxia come together that would leave 4 major competitors in the NAND flash market: Samsung, Kioxia/WDC, SK hynix/Solidigm and Micron. At this level of consolidation there could be significant changes in the industry in the future. Fewer competitors should lead to more controlled investment in new manufacturing facilities.

However, WDC and Kioxia shared their development and manufacturing facilities so this particular merger may not follow this trend, although centralized management for both operations would result in one less independent decision-making process.

More efficient facility expansion, coordinated by fewer players, could reduce the boom and bust cycles in the NAND flash industry, where players build new production facilities during good years, with profits coming in, and when these online within. about 2 years, production is greater than demand and prices fall, resulting in low or no profit quarters.

This trend has been exacerbated over the past year with rust during the same time as there was a major readjustment in demand after the COVID pandemic (for enterprise and data center users in particular who spent several quarters using excess inventories found when there were supply chains.uncertain).

Fewer players could also reduce the level of price competition in the industry, where players have been aggressively chasing market share, although I expect it will take at least one major NAND flash manufacturer to disappear to significantly reduce this price competition. A more stable and gradual decline in prices, following new higher density storage nodes will be more sustainable and lead to higher profits for the remaining industry players.

However, the actual merger between Western Digital’s NAND flash business and Kioxia has not yet taken place and, as stated in previous articles there are reasons why it should not happen. Time will tell if these latest rumors of a deal to merge these businesses will come to pass.

Rumors continue about a merger of the WDC and Kioxia NAND flash business with a Bloomberg article suggesting a deal could be reached by August 2023. If so, this will impact the rest of the NAND flash business, and further consolidation and maturation of the industry as it results.

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