Japanese Company Kaixia Postpones IPO, US "Ban" Spreads To Global Chip Market

On September 28th, Japanese memory chip manufacturer Kaixia announced that it had decided to postpone its initial public offering (IPO) plan because of concerns about the volatility of the stock market and the global epidemic situation. Nobuo hayasaka, President and chief executive officer of Jiaxia, said in a statement that both the company and the lead underwriters believe that the IPO at this time is not in the best interests of current shareholders and potential shareholders in the future.

Jiaxia is currently the world's second largest manufacturer of flash memory chips (NAND flash). According to Jibang consulting data, in the global NAND flash market, the company's market share in the second quarter of 2020 reached 17.2%, second only to Samsung Electronics (31.4%).

Although in the latest statement, the main reason for the postponement of the IPO was pointed to "concerns about the second wave of epidemic" and "continuous fluctuations in the securities market", it did not mention the US crackdown on its big customer, Huawei, a Chinese technology company. However, industry insiders generally believe that the increasingly tense trade relationship between the United States and China is still the main reason for Jiaxia's suspension of IPO plan.

one side, The U.S. chip ban, which came into effect on September 15, has directly affected the business between Jiaxia and Huawei. On the other hand, Jiaxia is also worried that the US ban will lead to oversupply of global flash memory products, which will lead to a price drop. Especially, if it is superimposed with the temporary "oversupply" situation in the storage market, it may bring some pressure to the global storage manufacturers.

Out of concern about the volatility of the stock market and the global epidemic situation, Jiaxia decided to withdraw from the IPO plan. Photo by Zheng dikun

Us "ban" affects Japanese chip giants

Jiaxia's predecessor is Toshiba storage company (TMC), a subsidiary of Toshiba. In June 2018, Toshiba, an old Japanese enterprise, was forced to "survive" and sell its most profitable business unit to a consortium led by Bain Capital in the United States.

In fact, after the separation from Toshiba, Toshiba storage has been preparing for the listing plan. Its main NAND flash products have a strong cycle, which requires a lot of funds to support technology upgrading and factory construction. However, due to the market downturn and the company's loss, its listing plan has been repeatedly delayed.

In October 2019, Toshiba storage officially changed its name to "kioxia", which is also regarded as one of the preparations for listing. After the change of name, Bain Capital hopes to speed up the pace of Jiaxia's listing. According to the near-term plan, Jiaxia should be listed on the Tokyo Stock Exchange on October 6, 2020 and issue up to $3.2 billion worth of shares, which is expected to be valued at $16 billion by then. It would have been Japan's biggest IPO this year.

Although in the latest statement, the main reason for the postponement of the IPO was pointed to "concerns about the second wave of epidemic" and "continuous fluctuations in the securities market", it did not mention the US crackdown on its big customer, Huawei, a Chinese technology company. The above-mentioned personage made a decision to suppress China's technology enterprises directly, however, they said that it had brought uncertainty to China's enterprises.

Gu Wenjun, chief analyst of xinmou research, believes that the main reason for Jiaxia's suspension of IPO should still be that it is worried that the depressed economic environment will make the IPO price difficult to meet expectations. "That's the main reason." "The second is that this year's storage market is really not very good," he told 21st century economic reporter

However, some industry insiders have analyzed the 21st century economic report that the U.S. ban on Huawei may have a greater impact on the suspension of Jiaxia's IPO plan. As Huawei's main flash memory product suppliers are Japan's Kaixia and Korea's SK Hynix, the export ban of the United States can have a direct impact on its business.

In August 2020, the U.S. Department of Commerce said that non-U.S. enterprises using U.S. technology also need to obtain U.S. permission to supply to China. Jiaxia has also issued relevant early warning in the prospectus before, and said that the business related to Huawei contributes a considerable part of its revenue. On September 15, the U.S. ban on Huawei's "upgraded version" came into effect. According to media reports, Jiaxia has been unable to supply products to China since that date.

More analysts worry that the US ban will not only directly affect the business of Jiaxia and Huawei, but also shake the relationship between the former and other Chinese manufacturers. Although Huawei's business accounts for less than 10% of its revenue, about 20% of its revenue comes from the Chinese market.

On the other hand, the tense trade situation between China and the United States also brings uncertainty to the entire storage market. Jiaxia has also pointed out that in addition to restricting its business with Huawei, the US ban may lead to oversupply and lower prices of flash products.

The storage market is under pressure and is still expected to grow significantly in the whole year

At present, the flash memory chips used in smart phones account for about 40% of the total sales of armored man.

This also makes the outside world worry that if the United States sanctions against Huawei bring about a chain reaction such as "reshuffle" of the global smartphone industry, the core business of armored swordsman may be greatly affected. According to the data previously released by Jibang consulting, Jiaxia is the only enterprise among the six largest NAND flash factories in the world with a negative month on month growth in the second quarter of 2020.

However, Gu Wenjun believes that even if Huawei's smartphone business is greatly affected, the gap left will be filled by other smartphone manufacturers such as Samsung and Xiaomi. (storage vendor) loss orders are temporary. " In the 21st century, he told reporters that the production capacity of major storage plants was still concentrated in the market.

Gu Wenjun pointed out that from the overall perspective of the storage market, there is a "oversupply" in the short term at present, but it is still "hard to say" in the future because of the monopoly pattern of the industry. "We still need to pay attention to the overall situation in the future." He said.

In recent years, although a number of Chinese storage manufacturers have made certain breakthroughs, Gu said frankly that it will be some time before Chinese manufacturers can have influence on the global market level. "They have not yet achieved real economic mass production."

Some analysis institutions pointed out that the increasing tension in the international situation and the fluctuation of the storage market have required memory chip manufacturers to prepare for this. In this context, Jiaxia delayed IPO plan did not surprise the market. Jiaxia also said to the public that it would choose an opportunity to restart the IPO. "We're not in a hurry." According to Nobuo hayasaka, President and chief executive officer of Jiaxia.

That said, Toshiba's stock price, which still holds 40% of Jiaxia's shares, once plummeted by 8.6% in the morning trading of that day. So far, the decline is still close to 4.3% compared with that before the news was announced. Toshiba's share price has fallen 22% in the past three months. This not only reflects the investors' concerns about the storage market, but also reflects the worries about the future of Jiaxia IPO. According to Japanese media, Kaixia is still trying to launch an IPO by the end of 2020 or early 2021, but analysts generally believe that the market environment the company is facing is unlikely to improve in just a few months.

However, in 2020, NAND flash and the entire storage market may still have a good growth momentum. The latest data updated by IC insights, an industry analysis agency, shows that due to the impact of the new crown pneumonia epidemic, under the situation that the growth of the vast majority of the global chip industry segments will be under pressure, the total revenue of NAND flash market is expected to increase by 27% in 2020 (26% in 2019), becoming the only product with a growth rate of more than 10%. The market is also expected to become the second largest chip segment with a market size of 56 billion US dollars.

It forecasts that the DRAM market will also grow by 3% this year, which is in line with the growth rate of the global chip market as a whole. In 2019, DRAM market and overall chip market will decline by 37% and 15% respectively. According to this forecast, DRAM and NAND flash will become the two largest market segments in the chip field with the scale of US $64.56 billion and US $56 billion respectively, and together they will occupy 1 / 3 of the global chip market.