In conjunction with its October investor call, Western Digital ( WDC ) said it plans to spin off its flash memory business as a separate business unit as a pure-play NAND company backed by a joint venture with Kioxia. This decision appears to have ruled out the WDC NAND flash business and Kioxia merger that had been rumored for several months.
We’ve written before about a rumored merger between Kioxia and WDC’s flash memory business. To this author, such a synthesis seems more relevant to Kyoxia than to WDC. Rumors of a merger have been swirling for over a year, but now it seems unlikely that such a merger will happen.
This cycle started in 2010. It is targeted for completion in the second half of 2024. Below is an announcement slide summarizing the company’s driving plans.
As shown below, the company has offered some color on the HDD and flash business.
According to WDC, the HDD business is forecast to be around 25B in calendar year 2025, with a compound annual growth rate (CAGR) of 12% between 2022 and 2025. The company said its HDD market share in CY21 was 38%, 39%. CY22 and 40% in the first half of 2023.
WDC’s HDD business is second only to Seagate with Toshiba as the third largest HDD manufacturer. WDC has indicated plans on HAMR HDDs. Seagate currently qualifies HAMR high-capacity HDDs for the enterprise and data center markets.
WDC reports that the NAND flash industry is expected to reach $89B by 2025 (estimated at $59B by 2022), with a CAGR of 15% between 2022 and 2025. The company estimates its NAND flash market share to be 14% in the first half of 2023 and 14% and 13% in calendar 2021 and 2022, respectively.
WDC’s flash business with manufacturing partner Kyoxia’s market share is about 31% by 2022. The partnership with Kyoxia will continue to drive the flash company out of WDC.
According to WDC, shareholders will acquire stock in both HDD and NAND flash companies, with both companies focusing on their respective markets and needs. In addition to news of the company’s planned drive for the company’s flash business, WDC reported that flash memory bitloads increased 25% and 49% year-over-year, respectively, and plans to transition customer SSDs to BiCS6 in QLC flash by 2024.
The 26TB UltraSMR HDD will make up half of the latest Excite HDD shipments, and WDC said its 28TB UltraSMR drive capabilities were happening and had a roadmap to 40+TB HDDs. Last quarter, total revenue was $2.7B with non-GAAP earnings per share (EPS) of -$1.76. Flash gross margins were -10% and HDD gross margins were around 22%. HDD exabyte shipments were down $112 in HDD ASPs from last quarter.
What impact will driving the WDC flash memory business have? Target Analytics analyst Jim Handy said the decline could benefit shareholders, who now get returns from two companies instead of one. But he thought, otherwise, there would be little impact on the market, because there are no more or less flash memory suppliers than there were before the disappearance.
WDC has decided to spin off its flash memory business to another company by the end of 2024. This puts an end to the rumors of a business merger between Kioxia and WDC Flash, at least for the time being. Shareholders may benefit, but this may have little effect on the market.
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