Western Digital and Kioxia Scrap Memory Chip Merger Talks

Negotiations to merge Western Digital's semiconductor memory business and Japan's Kioxia Holdings have been terminated, Nikkei reported Thursday. From the report: The companies were aiming to reach an agreement by the end of October. U.S.-based Western Digital by Thursday had notified Kioxia that it would exit the talks after the merger failed to secure approval from SK Hynix, an indirect shareholder in Kioxia. The companies were also unable to agree on the merger's conditions with Bain Capital, Kioxia's top shareholder. Kioxia, formerly known as Toshiba Memory, and Western Digital have both suffered a downturn in earnings amid headwinds in memory chips. They are each seeking capital infusions and other measures to help bolster operations.

Kioxia ranks third in global market share for NAND flash memory, while Western Digital ranks fourth. The proposed merger would have resulted in an entity that rivals market leader Samsung Electronics, and the companies had hoped the larger scale would lead to greater profits and growth. But SK Hynix officially declared its opposition to the deal on Thursday. SK Hynix had invested about 400 billion yen ($2.67 billion at current rates) in the Bain-led consortium that acquired what is now Kioxia from Toshiba. The South Korean company is now second only to Samsung in NAND memory, and was worried that the Western Digital-Kioxia merger would hurt its position while derailing partnerships it had been exploring with Kioxia.