⚠ Fixed Costs Do Not NegotiateHigh threat

Kioxia Holdings (285A) — threat to the moat

The reason six producers all sell below cost at once is that stopping costs more than continuing, which is how a glut becomes a two-year loss.

The most counter-intuitive feature of this industry is that a producer facing prices below cost will usually keep producing, and Kioxia's own history shows why.

Revenue against cost of sales (¥bn)¥1,076.6bnRevenue, yr to Mar 2024¥1,205.9bnCost of sales¥2,337.6bnRevenue, yr to Mar 2026¥1,324.7bnCost of salesKioxia Annual Securities Report FY2024 and FY2025; cost of sales = revenue less gross profit
Revenue more than doubled in two years while the cost base rose about 10%.

Once the fab is built, the incremental cost of another wafer is small relative to the depreciation already being charged. Shutting down saves the variable cost and none of the fixed cost, and restarting is slow and expensive. So the rational move at low prices is to keep running — which is exactly what all six producers do simultaneously, and why gluts in this industry go deeper and last longer than anyone expects.

Kioxia lived the consequence: revenue of ¥1,076,584 million against ¥1,205,927 million of cost of sales in the year to March 20241, and losses in the year before that too2.

What has changed is the balance sheet rather than the mechanism. Net debt to equity went from 1.26 times at March 2025 to a net cash position by June 20263, so the next downturn threatens the profits rather than the company.

The falsifier is gross margin turning negative again. The mechanism has not been repealed; only the ability to survive it has improved.

References
  1. ReportedRevenue of ¥1,076,584M against ¥1,205,927M of cost of sales in the year to March 2024.
    Kioxia Holdings Corporation, consolidated results for the year to 31 March 2024 (reported in the Annual Securities Report for the following year) — revenue ¥1,076,584M against cost of sales of ¥1,205,927M, a gross loss of ¥129,343M, an operating loss of ¥252,698M and a loss for the year of ¥243,728M; the year to 31 March 2023 recorded revenue of ¥1,282,101M, an operating loss of ¥99,015M and a loss for the year of ¥138,141M. — years to 31 March 2023 and 2024 · publ. 2025-06 · source ↗
  2. ReportedThe year to March 2023 was also a loss, of ¥138,141M.
    Kioxia Holdings Corporation, consolidated results for the year to 31 March 2024 (reported in the Annual Securities Report for the following year) — revenue ¥1,076,584M against cost of sales of ¥1,205,927M, a gross loss of ¥129,343M, an operating loss of ¥252,698M and a loss for the year of ¥243,728M; the year to 31 March 2023 recorded revenue of ¥1,282,101M, an operating loss of ¥99,015M and a loss for the year of ¥138,141M. — years to 31 March 2023 and 2024 · publ. 2025-06 · source ↗
  3. ReportedNet debt to equity went from 1.26 times at March 2025 to a net cash position by June 2026.
    Kioxia Holdings, first-quarter FY2026 results for the three months to 30 June 2026, as reported from the company's results presentation and earnings call — revenue ¥1,767.1bn, up 76.2% sequentially and 415.5% year on year; non-GAAP operating profit ¥1,326.2bn at a 75% margin; non-GAAP net income ¥887.0bn; non-GAAP EBITDA ¥1,402.1bn; adjusted non-GAAP gross profit ¥1,405.5bn, an 80% margin. Average selling prices rose about 70% with bit shipments growing a low single-digit percentage; eighth-generation BiCS FLASH exceeded 50% of total output. SSD & Storage ¥1,174.7bn, 66% of sales, with data centre and enterprise more than 60% of that and PC-related drives slightly below 40%; Smart Devices ¥525.7bn; Other ¥66.7bn. Operating cash flow ¥866.3bn, days inventory outstanding 102. Cash ¥791.0bn from ¥470.7bn, ¥407.5bn of senior loans repaid, a net cash position of ¥186.7bn against a net debt-to-equity ratio of 120% a year earlier, and an equity ratio of 51%. Guidance for the September quarter: revenue ¥2,390.0bn and non-GAAP operating profit ¥1,900.0bn, again roughly 70% of the growth from price. Capital expenditure of about ¥470bn a year is planned across the three years from FY2026, with roughly ¥200bn of research spending for the year and concentrated investment in the tenth and eleventh BiCS FLASH generations; the company targets roughly 50% long-term agreement coverage for calendar 2028. A buyback of up to 30 million shares (5.5% of those outstanding) for up to ¥800.0bn was authorised for 3 August to 30 October 2026, alongside a three-for-one share split with a 30 September 2026 record date. Calendar 2026 NAND bit growth is put in the high teens, with demand expected to exceed supply in 2027. — quarter to 30 June 2026 · publ. 2026-08-03 · source ↗
Sources
Generated September 23, 2026