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Potential Western Digital-Kioxia deals cause chip investors to spit saliva

Generally, both potential buyer and seller stocks, and their rival stocks, do not rise in transaction reports. But that happened after the Wall Street Journal reported that memory chip maker Western Digital was in talks to acquire Japanese competitor Kioxia. Market reaction underlies the logic of trading.

Western Digital shares surged 7% on Wednesday after the journal reported that chip makers could spend more than $ 20 billion to buy Kioxia (formerly Toshiba Memory) soon next month. Toshiba, which owns 40% of Kioxia, rose 1.7% on Thursday. American chip maker Micron, which had previously considered a potential deal with Kioxia but has since chilled outlook, also rose 2.9% on Wednesday.

All-stock trading probably means diluting existing Western Digital shareholders, but you can also rest assured that the company does not have to assume a large amount of debt for the acquisition. Even after Wednesday’s surge, Western Digital’s market value is just above $ 20 billion.

Investors are probably looking forward to a more integrated market for NAND memory chips used for storage. Once the deal is signed, the number of key players in the NAND market will increase from six last year to four. South Korea’s SK Hynix announced in October that it would spend $ 9 billion on the acquisition of Intel’s NAND flash memory business.

Kioxia and Western Digital are already enjoying the benefits of scale as they jointly operate a Japanese manufacturing facility through a joint venture, sharing fixed costs for research and capital investment. But formal combinations may still give them better pricing power. Combined, 34% of the NAND market in 2020 will be slightly higher than Samsung’s 32.6%, according to market research firm TrendForce. It may also mean a more disciplined supply in the market. After years of integration, the DRAM market, the memory chip used for processing, has three major players: Samsung, SK Hynix, and Micron.

Potential Western Digital-Kioxia deals cause chip investors to spit saliva

Source link Potential Western Digital-Kioxia deals cause chip investors to spit saliva

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