Western Digital and Kioxia, a Japanese company, are engaged in discussions over a potential merger in the field of memory chips.

According to sources, Western Digital, a prominent chip manufacturer based in the United States, is now in the process of finalising its strategy to separate its semiconductor memory division and merge it with Kioxia Holdings, a Japanese company. This strategic move is aimed at enhancing its competitive edge in the industry.

Western Digital is collaborating with financial institutions to conclude the negotiation of loan terms and other associated circumstances.

The objective is to achieve a comprehensive consensus within the current month, although it encounters resistance from SK Hynix, a South Korean semiconductor manufacturer, which holds an indirect stake in Kioxia.

Kioxia, previously known as Toshiba Memory, holds the position of the third-largest flash memory company globally, with Western Digital ranking fourth. The merged entity would pose a significant challenge to Samsung Electronics, the dominant player in the market.

In order for any agreement to be approved, it will be necessary to obtain clearance from antitrust authorities. The level of acceptability it can attain in China is uncertain.

The proposed merger aims to consolidate the memory operations of Kioxia and Western Digital into a unified entity, operating under a single holding company. Based on their respective valuations, Kioxia would possess a majority ownership stake of 63%, while Western Digital would hold a minority ownership stake of 37%. The presidency of the merged business would be assumed by Nobuo Hayasaka, the current President of Kioxia. Additionally, a majority of the board members would be representatives from Kioxia.

The prospective organisation is intended to be formally incorporated within the United States, with its primary administrative centre being in Japan. The company's objective is to pursue listings on both the Nasdaq and the Tokyo Stock Exchange.

Lenders, such as the leading banks in Japan and the Development Bank of Japan, are currently contemplating the provision of a financial package ranging from 1.5 trillion yen to 1.9 trillion yen (equivalent to $10 billion to $12.7 billion).

NAND flash memory is widely employed as a means of persistent data storage in many computing devices, including personal computers, cellphones, and data centres, among other applications. The two corporations have established joint production facilities in Japan, with each company holding an equal 50% stake in the operations. According to Omdia, the total market share of the two entities in the NAND market amounts to 32%, which is in close proximity to the leading market share held by Samsung at 34%.