Memory chip maker SK Hynix, a shareholder of Kioxia, opposes a merger with Western Digital

A long-expected merger of two of the world’s biggest memory chip companies — Western Digital and Japan’s Kioxia — may be hampered by one of Kioxa’s shareholders, SK Hynix. The South Korean chipmaker said during its earnings call today that it would not agree to a combination of the two players. 

“SK Hynix is not agreeing on the deal given the overall impact on the value of the company’s investment in Kioxia,” chief financial officer of SK Hynix, Woohyun Kim, said on the call. The remark was notable not least because Western Digital and Kioxia have yet to confirm any merger talks officially, and so this gives more velocity to the negotiations. Kim continued: “We cannot elaborate on further specific reasons and the progress of the merger due to confidentiality, but one thing is clear: we [SK Hynix] will make a decision for all stakeholders, including shareholders and Kioxia.” 

A deal — which would create potentially the world’s biggest NAND flash memory makers — would also help the combined business compete more squarely with China, but also Samsung and SK Hynix.

Western and Kioxia have been working together in a joint venture since 2022. A deeper tie-up has allegedly been in the works for some time, with reports dating back to 2021. The results of the pair’s latest efforts to combine were set to be announced as early as this month, according to reports.

The comments come about a week after the Korean memory chip maker denied a report by Nikkei that it had sounded out Japan’s SoftBank for a partnership were a Western Digital and Kioxia merger to fall through. 

Western Digital and Kioxia allegedly have been talking to top Japanese banks to secure 1.9 trillion yen (nearly $13 billion) to finance the deal. Sumitomo Mitsui Financial, Mizuho Financial, Mitsubishi UFJ Financial and the Development of Bank of Japan are among the names floated as lenders. According to a recent media report, Kioxia has also approached Japan Investment Corp (JIC) for financial support.

The two memory chipmakers need approval from both companies’ shareholders to move forward with the merger. 

Kioxia, previously called Toshiba Memory, produces NAND flash memory chips. It was acquired by a Bain Capital-led consortium in 2018 for $18 billion. That Bain Capital-led group included SK Hynix, Apple, Dell and Seagate, among others. 

Back in 2020, the Japanese memory chipmaker had been due to go public with a listing in Tokyo, although those plans were cancelled. Reports of a renewed pursuit of a public listing for Kioxia again surfaced last year. However, with demand for memory chips continuing to slump — SK Hynix’s revenues this quarter were down 17% on a year ago — Kioxia and Western Digital resumed merger talks earlier this year. 

Even if investors agreed to a merger of the two companies, it’s unclear if they could obtain approvals from regulators across different markets, including China. 

We have reached out to Western Digital and Kioxia and will update this post if we hear back.

Key issues you should consider before signing an international merger deal