Japanese 3D NAND maker Kioxia has proposed a deal to its investor SK Hynix (which also happens to be its rival 3D NAND maker from South Korea), offering it to produce non-volatile memory at Kioxia's fabs in Japan, Reuters reports citing Jiji news agency. This move aims to make SK Hynix change its mind regarding Kioxia's merger plan with Western Digital. Meanwhile, it remains to be seen whether SK Hynix gets interested.
The negotiations between Kioxia and Western Digital had come to a halt last year when SK Hynix, a South Korean company, expressed opposition to forming a large 3D NAND memory chip conglomerate between the American and Japanese companies. SK Hynix had reasons to stop the merger because Kioxia and Western Digital would create a player massively larger than SK Hynix.
To overcome this obstacle and secure SK Hynix's support, Kioxia has suggested allowing SK Hynix to use its Japanese 3D NAND fabs operated jointly by Kioxia and Western Digital for chip production. This strategic offer is intended to pave the way for the merger's approval, ultimately creating a large player in the global 3D NAND memory chip market.
With some extra capacity from Kioxia, SK Hynix could significantly boost its 3D NAND memory output without investing in expanding its fabs or building new ones, which seems like an attractive deal in general. Meanwhile, the financial terms of such a deal are entirely unknown.
The combined company between Kioxia and Western Digital would control roughly one-third (31.4%) of the global 3D NAND market by revenue, according to Q3 2023 market shares tracked by TrendForce. This is significantly higher than SK Hynix's share of 20.2% and is comparable to Samsung's share of 31.4%. Meanwhile, even if part of Kioxia's (or instead the merged entity's) production capacity goes to SK Hynix, the new company will likely be larger than the South Korean memory giant, which is why the latter may still consider it a significant threat.
It should be noted that neither Kioxia nor SK Hynix have confirmed talks about capacity, so the information should be taken with a grain of salt.
