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Japanese chipmaker Kioxia delays IPO amid US-China tensions

Written by Nikkei Asia Published on 

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World’s No. 2 NAND memory-chip producer braces for impact from Huawei sanctions.

Former Toshiba memory unit Kioxia Holdings, the world’s second-largest maker of NAND flash memory chips, behind Samsung Electronics, will postpone plans for an initial public offering, the company announced on Monday.

“While we received significant interest from many investors, the lead underwriters and Kioxia do not believe it is in the best interest of current or prospective shareholders to proceed with the IPO at this time of continued market volatility and ongoing concerns about a second wave of the pandemic,” Kioxia CEO and President Nobuo Hayasaka said in a statement.

The announcement confirms Nikkei‘s earlier report on the postponement.

Tighter US restrictions on China’s Huawei Technologies, a Kioxia client, had clouded the outlook for the Japanese company. Investors had also expressed skepticism at the smaller-than-expected size of new shares to be issued — just over USD 800 million, according to the initial prospectus — saying it is a far cry from what is needed to fund its investment plans.

Kioxia, formerly Toshiba Memory Holdings, was planning to announce its offering price on Monday. If the shares had debuted on Oct. 6 on the Tokyo Stock Exchange as scheduled, the company was expected to list at a valuation of 1.5 trillion yen (USD 14 billion) and would have been Japan’s largest IPO this year.

Read more: Huawei enters a new world: How the US ban will affect global tech

China digest

Sources familiar with the matter told Nikkei that the company would not give up its IPO and will try rescheduling it around the end of this year or the beginning of 2021.

But one industry source told the Nikkei Asian Review that “Huawei concerns will hardly be solved in the next three to four months,” and questioned whether conditions for an IPO will improve by then.

Flash memory used in smartphones makes up around 40% of Kioxia’s sales. The US Department of Commerce’s tighter restrictions on Huawei came into force on Sept. 15, and Kioxia has been unable to count on its business with the Chinese company since then. Huawei accounts for less than 10% of Kioxia’s sales.

The memory chip market is bracing for further tensions in the US-China relationship. Kioxia set its temporary public offering price range at “between JPY 2,800 to JPY 3,500” on Sept. 17, but this was already a downgrade from the JPY 3,960 it had envisioned earlier.

Toshiba currently has a roughly 40% stake, with the rest held by a consortium of US, Japanese, and South Korean investors.

Toshiba sold its memory business in 2018 to the consortium led by US buyout firm Bain Capital for roughly JPY 2 trillion. The deal was in response to the massive losses at US nuclear power subsidiary Westinghouse Electric.

This article first appeared on Nikkei Asian Review. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei

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