Western Digital Corp, the computer hard disk drive manufacturing company, is in advanced talks for a possible merger with Japanese chipmaker, Kioxia, a person familiar with the matter said. The deal is estimated to be valued at more than $20 billion.
The reports of acquisition come amid the chip shortage which has accelerated the consolidation of the semiconductor industry. Furthermore, this has created a massive wave of buyouts and mergers.
The Californias-based manufacturer would likely pay for the deal with its stocks. Both the companies combined would create a NAND memory giant to rival Samsung Electronics.
Besides, the combined company would likely be run by David Goeckeler, Chief Executive Office.
Most of us thought Nvidia purchasing Arm would change the semiconductor landscape. While we weren’t entirely wrong, here we are talking about a $40 billion deal with blueprints for RISC chips.
However, this is the new deal will be way bigger and would mark a major shift in the flash storage industry.
The manufacturers in the storage industry have been under enormous pressure to deliver higher bit densities and faster storage at high volumes and profit-margin-eroding lower prices.
This put the manufacturers in a tight spot and left no space for smaller companies to grow.
While the discussions on the deal have heated up in the past few weeks, Western Digital has had its eyes on the Japanese company for some time now.
Western Digital was willing to pay $18.2 billion when Kioxia spun off from Toshiba, back in 2017, but Toshiba rejected it.
Today, Western Digital is valued at over $19 billion and Kioxia is getting ready for an IPO. The reports say that the companies could reach an agreement as early as mid-September.
However, the chances of Kioxia still opting for an initial public offering, after the agreement with Western Digital, are very thin.
Any transaction between the two companies would require the blessing of the Japanese government and Washington, owing to Kioxia’s significance and the political sensitivities of transferring ownership. Nevertheless, the deal will boost the U.S.A’s chipmaking capabilities and increase competitiveness with China.
In a recent interview, David Goeckeler, Western Digital CEO, said “we have a tremendous partner in Kioxia, and we look forward to making the future happen together.”
If the deal doesn’t materialize, the companies will still hold a strong partnership with their ventures around 3D NAND manufacturing. A merger between Western Digital and Kioxia is looking increasingly worth it, SK Hynix buying Intel’s NAND business.