Consensus-building fails, and the Western Digital-Kioxia merger is doomed.

The planned merger between Western Digital's semiconductor division and Japan's Kioxia Holdings has collapsed in the last stages of negotiations, following more than two years of talks, due to the inability to include a crucial investor.

Executives at Kioxia were shocked to learn late this month that Western Digital had decided to withdraw from negotiations. After getting the go-ahead from SK Hynix, a South Korean company that has an indirect ownership in Kioxia, the two parties were prepared to execute a basic agreement.

However, SK Hynix was unconvinced.

The position of current No. 2 player SK Hynix could be weakened by a combination between the world's third and fourth-largest producers of NAND flash memory, placing the merged company on pace with market leader Samsung Electronics. The South Korean business was also concerned that the transaction would lessen its sway over Kioxia, with whom it hoped to work in the future.

Kioxia had believed that at some point SK Hynix would back down from its concerns. Delaying persuading a significant stakeholder proved to be a mistake, as SK Hynix made it apparent during an earnings call on Thursday that it was against the merger.