Kioxia and Western Digital's looming merger may threaten Korean chipmakers Samsung Electronics and SK hynix's lead in the flash memory market.

Japanese NAND chipmaker Kioxia is ranked second in the global market, while San Jose-based Western Digital is ranked fourth.

They account for 21.5 percent and 15.2 percent of the market share, respectively, according to market tracker TrendForce.

Samsung Electronics tops the market with 34 percent, and SK hynix is ranked third with 15.3 percent.

The Kioxia-Western Digital merger is likely to occur between Western Digital’s NAND flash spin-off and Kioxia, according to Bloomberg.

The merger corporation will be based in Japan, with Kioxia executives taking the wheel most of the time alongside Western Digital executives.

“Joining forces would help them take on Samsung Electronics,” Bloomberg reported on July 14.

If the U.S.-Japanese chipmaker alliance materializes, its combined market share of 36.7 percent will eclipse Samsung Electronics.

Unlike the DRAM chip market where three major players — Samsung Electronics, Micron and SK hynix — dominate the scene with 43.2 percent, 28.2 percent and 23.9 percent market shares apiece, multiple contestants are fighting for hegemony in the NAND flash market.

“The DRAM race in the past had companies dropping out through chicken games, but all NAND competitors have a footing in the market,” a senior official in the semiconductor industry told the JoongAng Ilbo on condition of anonymity.

Governments are likely eyeing measures to support their national NAND flash companies despite mounting losses because they are the chip powerhouses of their respective countries, the source added.

Samsung Electronics’ Device Solutions division in charge of the semiconductor business logged an operating loss of 4.58 trillion won ($3.62 billion) in the first quarter of this year and is anticipated to bleed another 4 trillion won for the April-June period.

SK hynix is expected to shed 6.3 trillion won in operating loss for the first half of this year.

Market watchers forecast flash chips to account for up to 80 percent of the duo’s losses.

NAND prices are set to drop again in the third quarter by between 3 and 8 percent according to TrendForce due to a supply glut. Nevertheless, chipmakers are refusing to cut production and taking a do-or-die stance in hopes that the relatively volatile NAND prices will bounce back to profitability.

More participants jumping into the game pose another threat to the Korean chipmakers on top. NAND chips have lower entry barriers compared to other semiconductor sectors.

According to a Korea Institute for International Policy report released last month on the Chinese effort to localize semiconductors, it will take two years for Chinese companies to narrow their technological gap with global leaders in NAND. A five-year gap exists in the DRAM and foundry businesses.

The Kioxia-Western Digital merger has antitrust hurdles to overcome. Even if the Japanese and U.S. chipmakers reach an agreement, they need nods from their respective antitrust regulators to forge the alliance.

U.S. chipmaker Nvidia called off efforts to acquire the U.K.-based chip designer Arm in February due to regulatory challenges.

“A merger will not immediately raise the technological prowess of a No. 4 company to rank No. 1,” said Park Jea-gun, a semiconductor professor at Hanyang University.

Maintaining technological competitiveness is key, he added.

By: DocMemory
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