Western Digital Set To Merge With Japan's Kioxia, Further Consolidating Chip Market

Japanese chipmaker Kioxia Holdings and its U.S. peer Western Digital Corp WDC are expected to agree on a merger soon.

What Happened: The two companies look to set up a holding company to integrate their operations producing NAND flash memory chips, widely used in devices such as PCs and smartphones.

The combined entity will likely list on the Nasdaq stock exchange, the Japan Times reported.

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Western Digital shareholders will own over 50% of the new company; Kioxia will hold the remaining stake.

Kioxia shareholders include Toshiba Corp TOSYY, which owns about 40% of the chipmaker.

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Why It Matters: The combined market share of Kioxia and Western Digital for NAND memories stood at 35.4% as of March. South Korea's Samsung Electronics Co, Ltd SSNLF accounted for 34.3%.

Previous reports indicated combining their flash memory businesses could boost competitiveness against rivals like Samsung.  Activist investor Elliott Management had pushed the U.S. company to split off its flash-memory business from its hard-drive division.

Megabanks, including MUFG Bank and the state-backed Development Bank of Japan, are considering providing loans of up to about ¥1.9 trillion ($12.7 billion) to help consummate the deal.

Currently, Kioxia and Western Digital jointly operate plants in Iwate and Mie prefectures.

Japan is becoming a destination to set up chip plants like Taiwan Semiconductor Manufacturing Company Ltd TSM amid growing geopolitical tensions between the U.S. and China.

The Japanese government overhauled its chip strategy to triple sales of domestically produced semiconductors to over 15 trillion yen ($108 billion) by 2030.

Price Action: WDC shares traded higher by 0.48% at $45.84 on the last check Friday.

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