Photo/Illutration Kioxia Corp. is the world’s second largest manufacturer of NAND flash memory with a market share of 18.6 percent. (Asahi Shimbun file photo)

Japanese semiconductor producer Kioxia Corp. and its U.S. partner, Western Digital Corp., are planning a merger that they hope can challenge industry leader Samsung Electronics Co. of South Korea, sources said.

The two companies have already partnered on several projects, including joint investments in manufacturing plants in Yokkaichi, Mie Prefecture, and Kitakami, Iwate Prefecture.

Kioxia and the semiconductor business of Western Digital are expected to reach an agreement on the merger by the end of October after negotiating with financial institutions on loan conditions.

After the merger, the two companies will be under a holding company, KIOXIA Holdings, which will likely be headed by Kioxia President Nobuo Hayasaka.

Although Western Digital will own 50.1 percent of the new company and the rest will be held by Kioxia, the latter is expected to have the final say on how the company is run.

However, the plan still needs to be approved by regulators in relevant countries, so the new company would be launched no earlier than 2025.

Kioxia will also have to win over South Korean chipmaker SK Hynix Inc., which has invested in Kioxia and opposes the merger, before the plan can move forward.

As of 2022, Samsung had the world’s largest market share for NAND memory at 33.7 percent, according to Omdia, a British research firm.

Kioxia had 18.6 percent of the market share, and Western Digital had 13.1 percent, meaning their combined shares will almost equal that of Samsung.

Both Kioxia and Western Digital face a sharp decline in demand for NAND flash memory chips, which are used to store data in smartphones and other devices, as rising living costs force consumers to spend less.

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