Kioxia revenues rising, demand wind stronger: No news yet on IPO or acquisition

NAND and SSD supplier Kioxia is reporting a rise in revenues and underlying profitability as market demand strengthens, but there is no news on either a resumed IPO or an acquisition.

The company filed for an IPO in August last year but the US-China trade dispute derailed it. Market speculation about Western Digital and Micron acquisition bids for Kioxia surfaced in April.

In Kioxia’s fourth quarter fy21, ended 31 March, showed a 10.2 per cent Y/Y revenue rise to ¥294.7bn ($2.7bn), with a loss of ¥21bn ($190m), contrasting with the year-ago ¥9.8bn ($90m) profit. Kioxia sold more SSDs into data centres and for use as desktop/notebook drives, which drove a topline rise. This was despite a seasonal decrease in smartphone NAND sales.

Full year revenues rose 19 per cent, in line with the market, for fiscal 2021 ended 31 March, hitting ¥1,178.5bn (c $10.79bn) as the NAND glut eased throughout the year.

Full year net income was a loss of ¥24.5bn ($22m), a great improvement on the ¥166.7 bn ($1.53 bn) prior year loss. A company statement said profitability improved significantly, with a return to positive operating income due to cost reductions from OPEX management. There was also a move to 96-layer 3D NAND (BiCS 4) production with a lower cost/TB than the previous 64-layer product.

Shipments and builds

It has seen high single-digit per cent average selling price (ASP) declines in both Q3 and Q4 fy20. Quarter-on-quarter bit shipments gave grown from a low single-digit increase in Q34 to a mid single-digit increase in Q4, however. If the ASP decline can be lowered further, or halted, and bit shipments rise at the same or a higher rate Kioxia can move into profit.

The company is expanding its NAND manufacturing capacity by building a seventh fab at its Yokkaichi facility.

Kioxia is developing its sixth generation (BiCS 6) 162-layer 3D NAND products to lower manufacturing cost further. It sees data centre and client SSD demand staying strong. It predicts smartphone NAND demand will rise as 5G models become popular. Kioxia will be hoping this means more NAND and SSD sales with stronger pricing, enabling the firm to make a profit.

IPO, acquisition and amalgamation

A report in Japanese biz daily the Asahi Shimbun said Kioxia’s majority shareholder, Bain Capital Private Equity, had no plans to sell its holding. Yuji Sugimoto, who heads Bain ops in Japan, said Kioxia’s IPO will be brought forward ASAP.

He believes there will be an amalgamation of NAND producers. He also said governments will have to be involved to help make it happen.

There are are six major NAND producers: Intel, Kioxia, Micron (the industry leader), Samsung, SK Hynix, and Western Digital. SK Hynix is buying Intel’s NAND foundry and and SSD operations, which will bring the number down to five.

Kioxia and Western Digital have a joint flash foundry venture. Potential Kioxia buyers appear to be Micron and Western Digital, and Samsung, as SK Hynix already has Intel NAND and SSD interests in its grasp. It may be easier for Japan, where Kioxia is based, to agree an acquisition by a US company than a Korean one. This is patly due to historical enmity between Japan and Korea based in events in the Second World War.

Bain Capital may be thinking that a bidding for Kioxia could generate a better price in the open market following an IPO than private sale bids before any IPO takes place.

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