Western Digital (WDC), the US data storage manufacturer, is currently in talks with Japan’s Kioxia Holdings, a leading memory chips manufacturer, regarding a potential merger. Eat or be eaten seems to be the mantra in the semiconductor chips industry right now as a number of players in the sector have been on the M&A train over the past few years – AMD’s (AMD) $35b purchase of Xilinx and Nvidia’s (NVDA) $40b buyout of Arm Holdings, for instance.
While companies experience a global chip shortage due to higher than usual demand from consumer electronics and unexpected factory closures during Covid-19, mergers like Kioxia and WDC’s give manufacturers the route of pooling resources and increasing production capacity. Post-merger, Western Digital and Kioxia’s combined market share in the smartphone memory chips segment would come to 34% — giving them a significant edge over competitors. The merger is estimated to buy out Kioxia, which is privately owned, by a group of investors (including Bain Capital and Toshiba) at a $20b price.