World’s No. 1 Samsung Electronics threat possible through mergers and acquisitions
Expected to conclude a 33 trillion won contract in late spring
Industry leading “virtually impossible to take over” analysis
Micron, WD’s lack of cash holdings
“Even if it takes over, it will only be part of the stake”
The restructuring of the NAND flash industry is ongoing
SK Hynix’s acquisition of Intel is a prime example
Chinese companies’ entry degree variables
“Companies also want to be narrowed down to 3~4 companies”
Samsung Electronics Vice Chairman Lee Jae-yong (second from right) is inspecting the NAND flash semiconductor production plant in Xian, China in May of last year. News 1
On the 1st, the leading US economic newspaper’The Wall Street Journal (WSJ)’ threw nuclear bomb-level news on the global semiconductor industry. WSJ cited officials and reported that “US Micron and Western Digital (WD) are considering acquiring Kioxia in Japan, respectively.” WSJ predicted that “a deal could be concluded in the late spring.”
Kioxia is the world’s second largest NAND flash company. As of the fourth quarter of last year, the market share was 19.5%. Micron in the US has a market share of 11.2%, 5th in the world, and Western Digital 3rd in the world with 14.4%. If either Micron or Western Digital takes Kioxia, its market share will quickly rise to a level similar to that of Samsung Electronics (32.9%), the world’s number one.
For this reason, the domestic semiconductor industry is analyzed that “if it is true that Micron or Western Digital is promoting the acquisition of Kioxia, the breath of the US government aiming for’semiconductor supremacy’ would have worked.” US President Joe Biden also recently announced that he will invest 50 billion dollars (about 56 trillion won) to foster the US semiconductor industry. An analysis showed that the NAND flash industry, where Korea is in the first place, cannot be an exception.
Domestic industry “Unable to take over as micron and WD hold little cash”
However, in the global semiconductor industry, the evaluation that “It is virtually impossible for US Micron or Western Digital to take over a large stake in Kioxia and take control” is predominant. This is because Micron and Western Digital do not have enough cash.
According to WSJ, Kioxia’s corporate value was $18 billion (about 20.3 trillion won) at the time of its sale in 2018, but has now risen to $30 billion (about 33.96 trillion won). It would cost $30 billion to acquire it.
As of the end of the fiscal year 2020 (end of October 2020), Micron’s cash and cash equivalents (including short-term investment products) amounted to $8.14 billion (about 9.2 trillion won). Micron’s immediate mobilization is only 27.1% of the expected acquisition ($30 billion).
Western Digital’s money is more scarce. As of the end of the fiscal year 2020 (end of June 2020), Western Digital’s cash and cash equivalents amounted to only $3,488 million (approximately 3.4 trillion won). It is not enough to acquire Kioxia.
Of course, it is possible to try to acquire shares through alliances with multiple investors, but it is analyzed that the possibility is not high. Some stake acquisitions are mentioned as a realistic scenario. An official from a domestic semiconductor company said, “Micron and Western Digital are companies that don’t have enough money.”
Kioxia is the’last pride’ of Japanese semiconductors
Even though Kioxia is actually the last remaining Japanese memory semiconductor company, the acquisition by US companies is unlikely to be easy. Toshiba, which suffered from business difficulties in 2017, put a stake in the memory division on the market. In 2018, the Korea-US-Japan consortium led by Bain Capital took 49.9%. I also changed the name to Kioxia. SK Hynix participated in the consortium of Korea, the United States, and Japan. Currently, it has a convertible bond of Kioxia worth 4 trillion won (worth 15% stake).
Toshiba gave up the stake, but it didn’t even threw management control. With the sale in 2018, Toshiba’s stake in Kioxia fell to 40.2%. However, Hoya, a Japanese company evaluated as a friendly stake, owns 9.9%. The Japanese family owns a 50.1% stake and exerts influence over management.
Moreover, each country is in fierce competition for’semiconductor hegemony’. The Japanese government may not be pleased with the sale of Kioxia. Recently, Japanese media pointed out that “The Japanese government should not only attract overseas semiconductor companies such as TSMC, but also strive to strengthen the competitiveness of the semiconductor industry.” This means that the Japanese government must actively promote its own companies in order to regain lost semiconductor competitiveness.
For this reason, the situation is putting more weight on the reports refuting the WSJ article. Bloomberg, a news agency specializing in economy, quoted four well-known sources and reported that “Kyoxia is focusing on promoting IPO this summer rather than consulting with overseas acquirers.” “Kioxia sees IPO as the most promising path for realizing the value of shareholders, including Bain Capital,” he added.
Kioxia also said, “I will not comment on speculation (on WSJ’s report). We will continue to look for the right time for the IPO.”
Joint venture between NAND companies is expected to take off in earnest
Reports on the acquisition of Kioxia by Micron and Western Digital in the US are in the mood to be summarized as’the possibility of realization is low. However, in the semiconductor industry, the prospect that “the restructuring of the NAND flash industry will continue” is predominant.
Unlike the DRAM market, which has a’clear three-point structure’ such as Samsung Electronics, SK Hynix, and Micron, NAND flash is showing a’confusion’ pattern. Samsung Electronics holds the 1st place with 32.9% market share, but from 2nd place Kioxia (19.5%) to 3rd place WD (14.4%), 4th place SK Hynix (11.6%), 5th place Micron (11.2%), 6th place Intel (8.6%) is in fierce competition. Excluding the 1st and 2nd places, the 3rd and 6th places are fluctuating every quarter.
It is also a variable that Chinese memory semiconductor maker YMTC is expected to become a major player in the NAND flash market someday. Currently, due to COVID-19 and regulations on semiconductor exports in the United States, China’s strategy to advance semiconductors has recently stalled. However, because NAND flash has a relatively lower technical barrier than DRAM, YMTC is expected to enter the market within a few years with the support of the Chinese government on its back. YMTC announced last year that it has succeeded in developing a 128-layer NAND flash.
As competition among companies is fierce, the situation of’oversupply of NAND flash’ has continued for several years. The price of the product is also in the same position. According to market research firm DRAMeXchange, the price of the 128Gb 16GX8 MLC product, a general purpose product for NAND flash, is $4.2 as of the end of March, which has not changed since November 2020. The price, which went downhill after hitting $4.68 in March last year, is seldom successful in rebounding.
128-layer 3D NAND flash developed by YMTC in China
For this reason, NAND flash companies are also in the mood for’industry reorganization’. This is because, like the DRAM market, the number of competitors must be compressed to three levels, so that it is possible to adjust supply to meet demand and maintain product prices at an appropriate level. There is also movement. SK Hynix’s decision to acquire Intel’s NAND flash division last year for $9 billion (about 10 trillion won) is considered a representative example. An official in the semiconductor industry predicted that “the demand for NAND flash is increasing due to the advancement of technologies such as 5G and AI (artificial intelligence).”
Reporter Hwang Jeong-soo [email protected]