Kioxia announced the end of production cuts. Has NAND finally survived its hard times?

Japanese memory chip maker Kioxia Holdings ended 20 months of production cuts amid a recovering market, with lenders agreeing to provide new credit lines, Nikkei reported.

Kioxia increased the production line operation rate of its Yokkaichi plant in Mie Prefecture and Kitakami plant in Iwate Prefecture to 100% in June. Both plants produce NAND flash memory. As business improves, creditor banks have agreed to refinance a 540 billion yen ($3.43 billion) loan due in June. They will also establish a new credit line totaling 210 billion yen.

The company (formerly Toshiba Memory) cut production in October 2022 to cope with sluggish demand for its flagship smartphone products, with the scale of production cuts once exceeding 30%.

The start of production at the new Kitakami plant has been postponed from 2023 to at least 2025.

Now market conditions are improving. Kioxia reported a net profit of 10.3 billion yen in the January-March quarter - its first profit in six quarters.

Demand for chips for smartphones and personal computers bottomed out, while data center-related orders grew.

NAND prices in the April-June quarter are expected to rise 13% to 18% from the previous quarter, according to Taiwan research firm TrendForce.

A lending group led by Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ Bank and Mizuho Bank has eased its stance on Koxia in light of improved earnings. It has agreed to refinance 540 billion yen of loans that are about to mature and provide 210 billion yen in new credit lines. The banks will also help provide the funds needed to replace outdated equipment with the latest machines.

Kioxia and Western Digital plan to invest a total of 729 billion yen to mass-produce advanced memory products. Japan's Ministry of Economy, Trade and Industry will provide subsidies of up to 243 billion yen, or one-third of the total, but the rest will be borne by the partners.

Kioxia was approved to list on the Tokyo Stock Exchange in 2020, but the plan was delayed due to subsequent Sino-US trade frictions and deteriorating market conditions.

In 2023, Kioxia held business integration talks with Western Digital's memory business, but the talks were canceled in October of that year. Kioxia has stated that it currently prioritizes going public.

Kioxia has explained its listing plans to the bank consortium and intends to raise the necessary funds from the market. This also seems to have cheered the lenders. Currently, as a private company, Kioxia relies heavily on bank loans.

Major overseas memory suppliers such as Samsung Electronics and SK Hynix produce DRAM chips for temporary data storage in addition to NAND products. The DRAM market has been boosted by growing demand for high-performance products used to generate AI.

Kioxia, which focuses on NAND, is more vulnerable to changes in market conditions.

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