Kioxia’s TSE IPO: Boon for SK Hynix, bane for Samsung Electronics?

TOKYO – The planned initial public offering (IPO) of Japanese memory chipmaker Kioxia Holdings Corp. is expected to affect its bigger South Korean rivals — Samsung Electronics Co. and SK Hynix Inc. — as global chipmakers strive to gain the upper hand in renewed demand for memory chips amid an AI boom.

Kioxia, the world’s No. 3 NAND flash memory maker, on Friday applied to list its shares on the Tokyo Stock Exchange, possibly in October, in what is expected to be Tokyo’s biggest IPO this year.

The IPO is Kioxia’s second attempt after its bid to go public in 2020 went awry amid a chip industry downturn and an escalating US-China trade conflict.

The listing application comes after Kioxia and its US peer Western Digital Corp. decided to halt merger talks late last year due partly to opposition by SK Hynix, which indirectly owns a sizable stake in Kioxia.

Encouraged by the rebound in the NAND flash memory market, the Japanese firm is reviving its IPO bid to raise fresh funds for R&D and facility investments and catch up with Samsung and SK Hynix, the world’s No. 1 and No. 2 NAND players, respectively.

BOON FOR SK HYNIX, BANE FOR SAMSUNG?

Analysts said Kioxia’s IPO could negatively affect Samsung and SK Hynix.

With proceeds from its share sale, Kioxia plans to expand its NAND flash production capacity to meet growing demand for advanced storage device chips from AI clients.

Kioxia recently raised the operating rates at its plant in Yokkaichi, Mie Prefecture, and another in Kitakami, Iwate Prefecture, to 100%. The company is also investing in converting its production lines to produce advanced 8th- and 9th-generation products from earlier 6th-generation products.

At the same time, the company is expected to invest in the enterprise solid-state drive (eSSD) segment, demand for which is growing in the AI era.

“With the investment, Kioxia’s product competitiveness and chip supply volume will increase. This is bad news for Samsung and SK,” said an industry official.

Kioxia posted an operating loss to the tune of billions of dollars last year. However, it swung to a profit this year, posting record quarterly sales of 428.5 billion yen ($3 billion) in the April-June period, up 70.6% from a year earlier. Robust demand for chips used in data centers on the back of the recent AI boom drove the profit growth.

SK HYNIX MAY SELL DOWN STAKE IN KIOXIA

The Japanese chipmaker was spun off from Toshiba Corp. in 2017, acquired by a consortium led by US private equity firm Bain Capital in 2018 and renamed Kioxia.

SK Hynix, the microchip unit of SK Group, invested about 4 trillion won ($3.37 billion) in the consortium, of which 1.3 trillion won was used to buy convertible bonds (CBs) to secure up to a 15% stake in Kioxia.

The Bain-led consortium currently holds a 56.2% stake in Kioxia. Toshiba owns a 40.6% stake and Hoya holds a 3.1% stake.

SK Hynix’s stake in Kioxia, through the Bain-led consortium, is 19%. If its CBs are converted into shares, SK’s total stake would rise to 34%.

Analysts said Kioxia’s IPO could also mean a boon for SK Hynix as Kioxia’s listing offers the Korean chipmaker an opportunity to exit from its investment.

According to media reports, Kioxia aims to raise at least $500 million through its IPO, achieving a market capitalization of over 1.5 trillion yen ($10.3 billion)

As of the first quarter, Samsung is the world’s largest NAND flash maker with a 36.7% market share, followed by SK Hynix (22.2%) and Kioxia (12.4%).

Write to Jeong-Soo Hwang and Il-Gue Kim at hjs@hankyung.com
In-Soo Nam edited this article.