Western Digital and Japan’s Kioxia have officially terminated their discussions aimed at creating one of the world’s largest chipmakers, Nikkei reported on Thursday. The two companies would have failed to reach a mutual agreement on the conditions of the proposed merger. Furthermore, a major shareholder of Kioxia, Bain Capital, also posed a hurdle to the negotiations.
Adding to the complexity of the situation, South Korea’s SK Hynix, a significant investor in Kioxia and a major competitor to both Western Digital and Kioxia, expressed its disapproval of the potential merger. SK Hynix cited concerns over the impact the merger could have on the value of its investment assets.
According to Reuters, the proposed combination of their flash memory businesses had the potential to grant the merged entity a substantial share of the global NAND flash market, rivaling the position of the industry leader, Samsung Electronics. This development posed a significant threat to SK Hynix, which holds the third position globally as a NAND flash memory manufacturer.
The announcement of the termination of merger talks had an immediate impact on Western Digital’s stock, as its shares plummeted by 11.2%. These discussions were initiated in response to the challenges faced by the global chip industry, including a surplus of chips and weakened demand for flash memory chips. These factors had exerted considerable pressure on chip manufacturers, prompting them to explore consolidation opportunities.