Blood in the Water
There is fierce competition between global semiconductor companies to buy SanDisk, but Samsung Electronics is just keeping a close eye on the unfolding situation. In 2008, the Korean tech giant tried to purchase the U.S. flash memory maker, but withdrew its offer in the end.
According to industry sources on Oct. 15, SanDisk recently selected an investment bank to organize the disposal of its assets with Micron Technology, Western Digital, and Tsinghua Unigroup showing an interest in the sale. Samsung is also cited as a potential candidate for the buyout, but the company is said to have already reached the conclusion that the M&A deal won’t generate profits.
Samsung’s decision is attributable to its belief that the deal will not create much synergy. The company accounts for around 40 percent of the solid state drive (SSD) market, and it is in an advantageous position in terms of productivity and product performance, owing to its use of 3D NAND and triple-level cell (TLC) technology.
Since the emergence of Universal Flash Storage (UFS), a new flash storage specification, SanDisk’s competitiveness in the memory card and built-in memory markets has been rapidly decreasing. Samsung and SK Hynix are dominating UFS, which performs better and more profitably than embedded Multi Media Cards (eMMCs), a memory card standard used for SSDs and led by SanDisk. The weight of UFS in the mobile built-in memory market is estimated at only 4 percent this year, but it will rapidly increase to reach 37 percent in 2018 and 49 percent in 2019, according to market research firm IHS iSuppli.
One of the biggest reasons for Samsung's previous unsuccessful bids for the acquisition of SanDisk is price. At that time, the Korean company tried to buy the U.S. firm for US$5.85 billion, while proposing the premium to SanDisk at 93 percent of its stock prices. After that, SanDisk’s stock price plummeted, and so Samsung made an attempt to adjust the price of the buyout by lowering the U.S. company's premium per stock. However, SanDisk’s opposition resulted in the breakdown of the deal.
A source in the securities industry explained, “There are at least four contenders for the acquisition, including Micron, Western Digital, Seagate, and Tsinghua Unigroup. Since SanDisk still has a competitive advantage in the memory business, the upcoming M&A transaction is expected to generate a high premium, like the previous one.”