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Any Kioxia-Western Digital deal should ensure equal hubs in Japan, U.S.


© Reuters

By Makiko Yamazaki, Kaori Kaneko and Ritsuko Shimizu

TOKYO (Reuters) – Any merger of Japanese chipmaker Kioxia Holdings and U.S. rival Western Digital Corp (NASDAQ:) should ensure critical operations are split equally between the two countries, a senior member of Japan’s ruling party told Reuters.

The comments from Akira Amari, a former economy minister and influential lawmaker in the ruling Liberal Democratic Party (LDP), underscore Japan’s desperation to preserve the remnants of its semiconductor industry, an area where it once led the world but has since been eclipsed.

Amari, speaking in an interview Thursday said that “we shouldn’t let everything be taken away from the United States.”

Kioxia could tie up with any foreign company or company in America, but at the most it would be essential to have equivalent bases of operations in both nations.

When Amari was asked if Amari meant production facilities specifically, he declined to answer, stating that the matter is tied to Japan’s strategic plan.

In the midst of intensifying international rivalries in semiconductors, Kioxia (OTC: Memory Corp) and Western Digital have been discussing a potential $20 billion stock merger.

Amari indicated that the combination of both companies is a smart idea. The combined Kioxia/Western Digital control would account for a third the NAND flash industry, which puts it in line with South Korea’s Samsung Electronics.

Amari is the task force leader for semiconductors at LDP. A bigger scale means more research and development, and can better understand client requirements.

Amari shares the same view as Japan’s Trade Ministry. Ministry sources have said it is ready to back Western Digital’s bid to merge with Kioxia provided control of cutting-edge technology stays in Japan.

After U.S.-China tensions made it difficult for Kioxia to sell in 2018, Toshiba Corp sold Kioxia to Bain Capital, a group led by Bain Capital, for $18billion. Kioxia stated that it still considers an IPO.

Toshiba (which retains approximately 40.6%) is in separate talks with four international private equity firms regarding its strategic options. Japan’s government sees this conglomerate as an important strategic asset, since it produces nuclear reactors and defence equipment.

Amari responded to a question about whether Toshiba might be privatized. This is something that shareholders want the company to think about.

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