Western Digital in merger talks with former Toshiba chip subsidiary Kioxia

Deal to join Kioxia could create a manufacturing giant in the NAND flash storage market

Components for a flash drive

US manufacturer Western Digital is reportedly in advanced talks for a $20 billion stock merger with Japanese chipmaker Kioxia.

If initial reports are correct, it could create a new chip manufacturer to rival the likes of Samsung, according to details revealed by Reuters, which cited a person familiar with the matter.

It's thought that the companies could reach an agreement by the middle of September, with Western Digital CEO, David Geockeler, taking charge of the combined entity.

Kioxia, a Tokyo-based computer memory manufacturer, came to exist in its current form after Toshiba spun off its majority stake in the firm in June 2020. The founders of the company were credited with inventing flash memory in the 1980s, while it was still a part of Toshiba, and by 2018 it was estimated to have 19% of the global revenue share for non-volatile storage technology (NAND) flash solid-state drives.

By combining with Western Digital designs, which manufactures and sells storage hardware, the two companies could become a dominant force in the market for memory chips. Samsung currently has over a third of the NAND market, according to estimates by research firm TrendForce, whereas Kioxia and Western Digital have 19% and 15%, respectively.

The potential effect of the merger on the market is likely to draw attention from antitrust regulators in the US, China, and a number of other territories. Trade conflicts between the US and China have squashed deals before, such as Qualcomm's proposed $44 billion acquisition of NXP Semiconductors, which failed to secure Chinese approval in 2018.

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Similar issues are currently undermining Nvidia's $40 billion takeover of UK chip giant Arm, with the UK's Competition and Markets Authority concerned it will hamper other chip manufacturers and allow Nvidia to restrict access to Arm products.

"We're concerned that Nvidia controlling Arm could create real problems for Nvidia's rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets," said CMA chief executive, Andrea Coscelli.

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