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US-China tensions

Japanese chipmaker Kioxia delays IPO amid US-China tensions

World's No. 2 NAND memory-chip producer braces for impact from Huawei sanctions

Kioxia Holdings, Toshiba's former memory business, will postpone plans for an initial public offering.   © Reuters

TOKYO -- Former Toshiba memory unit Kioxia Holdings, the world's second-largest maker of NAND flash memory chips, behind Samsung Electronics, will postpone plans for an initial public offering, the company announced on Monday.

"While we received significant interest from many investors, the lead underwriters and Kioxia do not believe it is in the best interest of current or prospective shareholders to proceed with the IPO at this time of continued market volatility and ongoing concerns about a second wave of the pandemic," Kioxia CEO and President Nobuo Hayasaka said in a statement.

The announcement confirms Nikkei's earlier report on the postponement.

Tighter U.S. restrictions on China's Huawei Technologies, a Kioxia client, had clouded the outlook for the Japanese company. Investors had also expressed skepticism at the smaller-than-expected size of new shares to be issued -- just over $800 million, according to the initial prospectus -- saying it is a far cry from what is needed to fund its investment plans.

Kioxia, formerly Toshiba Memory Holdings, was planning to announce its offering price on Monday. If the shares had debuted on Oct. 6 on the Tokyo Stock Exchange as scheduled, the company was expected to list at a valuation of 1.5 trillion yen ($14 billion) and would have been Japan's largest IPO this year.

Sources familiar with the matter told Nikkei that the company would not give up its IPO and will try rescheduling it around the end of this year or the beginning of 2021.

But one industry source told the Nikkei Asian Review that "Huawei concerns will hardly be solved in the next three to four months," and questioned whether conditions for an IPO will improve by then.

Flash memory used in smartphones makes up around 40% of Kioxia's sales. The U.S. Department of Commerce's tighter restrictions on Huawei came into force on Sept. 15, and Kioxia has been unable to count on its business with the Chinese company since then. Huawei accounts for less than 10% of Kioxia's sales.

The memory chip market is bracing for further tensions in the U.S.-China relationship. Kioxia set its temporary public offering price range at "between 2,800 yen to 3,500 yen" on Sept. 17, but this was already a downgrade from the 3,960 yen it had envisioned earlier.

Toshiba currently has a roughly 40% stake, with the rest held by a consortium of U.S., Japanese and South Korean investors.

Toshiba sold its memory business in 2018 to the consortium led by U.S. buyout firm Bain Capital for roughly 2 trillion yen. The deal was in response to the massive losses at U.S. nuclear power subsidiary Westinghouse Electric.

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