According to Kyodo News, Kioxia and Western Digital Corp. The merger process, which is expected to be completed this month, is about to be completed. This alliance is poised to make the combined company the world’s largest manufacturer of NAND flash memory.

The proposed ownership structure of the new holding company was carefully planned. Western Digital shareholders are expected to hold a majority stake of more than 50%, while the remaining ownership will belong to Kioxia shareholders, including a significant contribution from Toshiba Corp. Initially, the Kioxia team is expected to be dominated by management and executive functions, but this is expected to change over time.

The strategic collaboration envisages the establishment of a holding company that will combine their experience in the production of NAND flash memory chips, with the aim of listing the new holding on the Nasdaq stock exchange in the USA. Western Digital aims to own 51% of the new company. The remaining 49% will be distributed among Kioxia’s shareholders, including Toshiba, which owns 40% of Kioxia. As a result, Toshiba is expected to own approximately 19.6% of the new company.

In the competitive arena of NAND memory production, this merger represents a tremendous change. Together, Kioxia and Western Digital are preparing to overshadow the current leader, Samsung Electronics, by taking a large share of the market. According to TrendForce, total NAND capacity is expected to reach approximately 34.3%, surpassing Samsung’s 31.1% share by the second quarter of 2023. At the same time, the new company will be significantly larger than SK Hynix, which holds a stake in Kioxia. The South Korean company controlled 17.8% of the NAND market in the second quarter, so establishing a larger player could be challenging for SK Hynix.

Navigating the regulatory environment is a major challenge for merger success. Global focus on the role of semiconductors in economic security has intensified, creating a shadow of uncertainty regarding regulatory approval. In particular, the position of the Chinese authorities remains an important factor, considering the geopolitical and economic implications of the 3D NAND memory market.

A consortium of major Japanese banks, including MUFG Bank and the Development Bank of Japan, is considering a robust financing package. The package, which could potentially reach ¥1.9 trillion (US$12.7 billion), aims to facilitate the merger. While reports of Western Digital’s plans to merge its NAND memory business with Kioxia have been circulating for months, neither company has commented on the potential transaction for obvious reasons.