WD to Face Shortage of Core Parts Supply

As it is decided that Toshiba memory will be sold off to the Korea-US-Japan Alliance, which includes SK Hynix, Western Digital (WD) is losing ground in the NAND flash market. WD received most of its semiconductor (NAND flash) products from its Yokkaichi factory in Japan jointly invested with Toshiba. However, Toshiba Memory will fall into the hands of Korea-US-Japan Alliance, raising a red flag for WD in stably securing parts.

In the NAND market, Samsung's market share was 35.6 percent higher than that of Toshiba (second with 17.5 percent) and WD (third with 17.5 percent) combined, according to DRAMeXchange. SK Hynix took fifth place (9.9%) after fourth-ranked Micron (12.9%). The share of the SK and Toshiba alliance will rise to 27.4% when the acquisition is completed. The takeover will also narrow the alliance’s gap with Samsung to 8.2 percentage points, solidifying its second place. WD which trailed Toshiba closely fell to third place.

A bigger problem torturing WD is how to stably secure component supply and demand. WD specializes in storage devices such as hard disk drives (HDDs) and solid state drives (SSDs).

NAND flashes are the most important part for these products. WD jointly invested with Toshiba in the Yokkaichi plant to secure a stable NAND supply. This is the same as the way Apple and Dell invested in the Korea-US-Japan Alliance for a stable supply of parts. WD is said to be receiving most of its semiconductors from the Yokkaichi plant.

"WD will not be able to use a card to shut down the plant or discontinue production at the plant now that WD is receiving parts from the Yokkaichi factory," an industry official said. The WD is also having a legal battle over its stake in its Yokkaichi factory, which is its the last bastion but it is said that even this card will hardly work for WD as the Korea-US-Japan Alliance made a proposal to compensate Toshiba for its loss.

Toshiba decided to invest in new line facilities at Yokkaichi factory last month on its own. WD has shown its willingness to escape interference. If the new major shareholder of the Korea-US-Japan alliance comes to power, WD will look for a new parts supplier in the future, industry experts say.

"The Korea-US-Japan Alliance will gradually reduce WD’s power of influence by scaling up its investment in Toshiba," said an analyst at a Korean securities firm. “However, since there still is a possibility of attracting WD to the Korea-US-Japan Alliance, we have to wait and see until the final completion of the takeover."