Squeezed Toshiba wants funds not rivals to buy stake in chip business
Toshiba favours private equity bidders in the sale of a stake in its chip business, as suitors including rivals SK Hynix and Micron Technology vie with financial investors such as Bain Capital, sources say.
Toshiba needs to raise funds by the end of March to offset an imminent multibillion-dollar writedown on its US nuclear power business, meaning there may not be enough time to conclude a deal with another chip maker, said one of the sources with direct knowledge of the company’s strategy.
That plan, initially at least, would confound attempts by other chip makers to buy a slice of a business that may provide an edge in the booming market for NAND flash memory chips.
NAND flash memory is a non-volatile technology that does not require power to retain data and that is used for long-term data storage.
Another of the sources said Toshiba could eventually seek investment from other chip makers once its financial crisis had passed.
On Tuesday, South Korea’s Hynix, the world’s number two chip maker, said it had submitted a nonbinding bid although it gave no details on the size of the stake it wanted to acquire.
SK Hynix and Bain Capital declined to comment and Toshiba said it could not comment on specifics of the sale process. US chip group Micron Technology was not immediately available for comment.
Toshiba’s chip rivals would benefit from the Japanese firm’s know-how in high-end NAND products and a boost in chip supply, analysts said. Toshiba is the world’s second-largest maker of flash memory.
Interest in the stake is heating up, with sources telling Reuters that bids had also come from investment funds, Californiabased data storage company Western Digital and Micron Technology, amid a surge in memory chip prices.
The world’s biggest maker of flash memory, Samsung Electronics, was not among the bidders, the sources said.
As smartphones and data servers demand ever more processing firepower, chip suppliers are struggling to keep pace with demand. Nomura estimates global memory sales will grow 56.7% this year to a record $116bn and the NAND segment will expand 51.2% to $51bn.
Toshiba aims to raise more than ¥200bn ($1.8bn) from the less-than 20% stake in its memory business, said sources.
Selling the stake to an investment fund could speed up the process by eliminating antitrust concerns surrounding other chip makers.
While a handful of firms including Samsung, SK Hynix and Toshiba control the memory industry, SK Hynix’s overall market share was not high enough to pose an antitrust hurdle, said Claire Kyung-min Kim, analyst at Daishin Securities.
Investing in Toshiba could allow the South Korean firm to defend its turf against potential Chinese rivals, she said.
In January, Tsinghua Unigroup, China’s top chip manufacturer, unveiled a plan to build a $30bn memory chip factory. In 2015, it tried unsuccessfully to acquire Micron Technology.
“If a Chinese firm buys a stake in Toshiba, it would be a risk for all other memory makers,” Kim said.
SK Hynix reported record quarterly revenue in October to December and is now South Korea’s second-largest firm by market capitalisation.
In December, it announced a 2.2-trillion won ($1.9bn) investment in a new NAND plant in South Korea, hoping to catch up with rivals’ more advanced production technologies.
SK Hynix shares rose 0.3% on Tuesday, while Toshiba’s were down by 0.3%.
AS SMARTPHONES AND DATA SERVERS DEMAND EVER MORE PROCESSING FIREPOWER, CHIP SUPPLIERS ARE STRUGGLING TO KEEP PACE WITH DEMAND