Western Digitalis in advanced talks for a possible $20 billion stock merger with Japanese chipmaker and partner Kioxia, a person familiar with the matter said, a move that would create a NAND memory giant to rival Samsung Electronics.

The companies could reach an agreement as early as mid-September, and Western Digital CEO David Goeckeler would run the combined firm, the person said, requesting anonymity to discuss confidential matters.

The Wall Street Journal reported the talks earlier on Wednesday. Kioxia Holdings Corp and Western Digital both told Reuters they do not comment on speculation about mergers.

A combination of the two would rewrite the competition to capture robust demand for memory chips that has been driven by 5G expansion and a pandemic-fueled rise in work from home.

While Samsung dominates with over a third of the NAND market, according to research firm TrendForce, Kioxia has a nearly 19% share and Western Digital 15%. South Korea's SK Hynix Inc and U.S. firms Micron Technology Inc and Intel Corp are the other large players.

"Such a deal would be a defensive, but prudent, move by Western to reinforce its competitive position in the swiftly consolidating chip market," Morningstar analyst William Kerwin said in a research note.

"In the long term, we expect the NAND market to consolidate down to about three leading players for a largely commodity-like product," Kerwin said.

The memory chip industry is already consolidating, with Hynix agreeing to buy Intel's NAND business for $9 billion last year, a deal still awaiting anti-trust clearance.

While Samsung dominates with over a third of the NAND market, according to research firm TrendForce, Kioxia has a nearly 19% share and Western Digital 15%. South Korea's SK Hynix Inc and U.S. firms Micron Technology Inc and Intel Corp are the other large players.

"Such a deal would be a defensive, but prudent, move by Western to reinforce its competitive position in the swiftly consolidating chip market," Morningstar analyst William Kerwin said in a research note.

"In the long term, we expect the NAND market to ... consolidate down to about three leading players for a largely commodity-like product," Kerwin said.

The memory chip industry is already consolidating, with Hynix agreeing to buy Intel's NAND business for $9 billion last year, a deal still awaiting anti-trust clearance.