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:WDC) 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 https://www.reuters.com/technology/japan-sees-peril-us-chip-hub-counter-china-2021-08-17 to preserve the remnants of its semiconductor industry, an area where it once led the world but has since been eclipsed.
"We shouldn't allow everything to be taken away to the United States," Amari said in an interview on Thursday.
"If Kioxia ties up with a foreign company, in particular an American company, then at the very least it will be necessary to have equal bases of operations in both countries."
Asked if he specifically meant production facilities, Amari declined to comment, saying the issue is linked to Japan's strategy.
Kioxia, previously known as Toshiba (OTC:TOSYY) Memory Corp, and Western Digital are in advanced talks for a possible $20 billion stock merger amid intensifying global rivalries over semiconductors.
Amari said he thought the two companies joining hands was not a bad idea. A combined Kioxia-Western Digital would control a third of the NAND flash market, putting it on par with South Korea's Samsung Electronics (OTC:SSNLF).
"It is important to have mass scale," said Amari, who leads the LDP's task force on semiconductors. "A larger scale allows more power in research and development and a quicker grasp of changes in client needs."
Amari's view is in line with Japan's trade ministry. Ministry sources have said it is ready to back https://www.reuters.com/world/asia-pacific/exclusive-tokyo-ready-back-western-digital-kioxia-deal-if-key-tech-stays-japan-2021-09-03 Western Digital's bid to merge with Kioxia provided control of cutting-edge technology stays in Japan.
Kioxia, sold by Toshiba Corp in 2018 to a consortium led by Bain Capital for $18 billion, shelved plans for an initial public offering last year after U.S-China trade tensions slammed Huawei, one of Kioxia's biggest clients. Kioxia has said it is still considering an IPO.
Toshiba, which retains about 40.6% of Kioxia, is separately in talks with at least four global private equity firms about its strategic options. That is also a potential issue of concern for Japan's government which sees the conglomerate as a strategic asset because it makes defence equipment and nuclear reactors.
Asked about the possibility that Toshiba could be taken private, an option that some shareholders are pressing the firm to consider, Amari said Toshiba's stakeholders should first think about how the firm's management structure should look.