Kioxia ends production cutting strategy — 3D NAND prices could stabilize or decline

Kioxia has resumed full production after 20 months of cuts. Improved market conditions are behind the changes, reports Nikkei. This potentially means that the world's fourth-largest maker of 3D NAND is back to competing for market share, which could mean price drops for flash memory. The company has also secured refinancing of ¥540 billion ($3.424 billion) and a new line of credit worth ¥210 billion ($1.332 billion) from its lenders. 

In June, Kioxia increased production to full capacity at its Yokkaichi and Kitakami plants, which produce NAND flash memory, the report says. The production cuts, which began in October 2022, were a response to declining demand for Kioxia's 3D NAND memory designed for smartphones, with reductions exceeding 30% at their peak. Additionally, the launch of a new fab at the Kitakami site has been delayed from 2023 to at least 2025. 

However, demand for 3D NAND began to pick up due to the depletion of memory inventory and the slow recovery of smartphone and PC markets, that began in the second half of 2023. By now, demand for chips used in smartphones and PCs has stabilized, while orders from data centers have increased. As a result, NAND prices are expected to rise by 13% to 18% in the April-June quarter. However, as 3D NAND makers begin to increase production, prices may stabilize and then decrease. 

Kioxia reported a net profit of ¥10.3 billion ($65.284 million) for the January-March quarter, marking its first profitable quarter in six quarters. A profitable quarter and a more favorable business environment prompted creditor banks to refinance significant loans and establish new credit facilities. 

The lending syndicate, including Sumitomo Mitsui Banking, MUFG Bank, and Mizuho Bank, has shown confidence in Kioxia's recovery by refinancing existing loans and providing new credit. They will also support the company in upgrading equipment that will enable migration to next-generation 3D NAND nodes. 

Kioxia and Western Digital plan a combined investment of ¥729 billion ($4.620 billion) to install more advanced production tools into its fabs, with the Japanese government subsidizing approximately one-third of the cost.  

Although Kioxia's plans to list on the Tokyo Stock Exchange were delayed due to trade tensions and market conditions, the company is now focusing on this listing to raise necessary funds, which is a good sign for lenders.