Kioxia Ends 20-Month Cuts, Secures New Bank Loans

In response to improving market conditions, Japanese memory chip manufacturer Kioxia has ended production cuts after 20 months and secured new credit lines from lenders. The company has increased the operating rate of its production lines to 100% at its Yokkaichi plant in Mie Prefecture and Kitakami plant in Iwate Prefecture, both of which produce NAND flash memory.

As business conditions improve, creditor banks have agreed to refinance a ¥540 billion ($3.43 billion) loan maturing in June and have established a new credit line totaling ¥210 billion. Kioxia, formerly Toshiba Memory, had implemented production cuts in October 2022 due to weak demand for its flagship smartphone products, with reductions exceeding 30% at one point. The start-up of the new Kitakami plant has been delayed from 2023 to at least 2025.

Kioxia reported a net profit of ¥10.3 billion for the January-March 2024 quarter, marking its first profit in six quarters. Demand for smartphone and PC chips has stabilized, while orders related to data centers have increased. Research firm TrendForce predicts that NAND prices will rise by 13% to 18% in the April-June quarter compared to the previous quarter.

A lending consortium led by Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ Financial Group, and Mizuho Bank has relaxed its stance on Kioxia due to the improved profitability. They have agreed to refinance the ¥540 billion loan and provide a new ¥210 billion credit line. Additionally, the banks will assist in funding the replacement of outdated equipment with the latest technology.

Kioxia and Western Digital plan to invest ¥729 billion in the mass production of advanced storage products. The Japanese Ministry of Economy, Trade and Industry will provide a subsidy of up to ¥243 billion (one-third of the total amount), with the remainder covered by partners.

Kioxia was approved for listing on the Tokyo Stock Exchange in 2020, but the plan was postponed due to subsequent US-China trade friction and deteriorating market conditions. In 2023, Kioxia engaged in business integration talks with Western Digital’s storage division, but the negotiations were canceled in October of that year. Kioxia has stated that it now prioritizes its public listing.

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

Unlike major overseas memory suppliers such as Samsung Electronics and SK Hynix, which produce both NAND and DRAM chips, Kioxia focuses solely on NAND. This makes Kioxia more susceptible to market fluctuations. DRAM demand has been bolstered by the growing need for high-performance products for generative AI.