Toshiba has to sell its lucrative NAND Flash Memory unit in order to avoid going into bankruptcy due to losses from its American nuclear power division. Toshiba, together with joint venture partner Western Digital, is the second-largest flash memory producer, after Samsung.
Toshiba has said that it will choose a winner in the bidding for its NAND Flash Memory unit by this Thursday, June 15. There are currently four bids for the unit. Depending upon which bid is chosen by Toshiba, there are a number of outcomes that will impact the future of memory and storage for years to come. Let’s look at some of these possibilities.
One of the bidders is Western Digital (WD). Its SanDisk division has a joint venture with Toshiba in the NAND Flash factories which Toshiba wants to sell. Western Digital has sought to purchase more of the Toshiba NAND flash facility since Toshiba originally offered a minority stake in their share in early 2017. Western Digital has claimed that the JV agreement requires Toshiba to include WD in any sale decision. Toshiba has rejected this claim and tried to move its share of the JV assets out of the WD/Toshiba JV. WD has said that they would take Toshiba to International Arbitration Court if they were not given preferential treatment in the unit sale.
Western Digital has created a joint bid using Japanese government money (the state-backed Innovation Network Corp of Japan—INCJ and the Development Bank of Japan—DBJ) and KKR & Co LP, resulting in a continued majority Japanese ownership of the NAND flash fabs. The Japanese government has indicated that it wishes the advanced NAND flash technology to stay in Japan and under Japanese control. It has also expressed concern over companies buying Toshiba’s NAND flash assets that have strong connections with China, where several entities are building their own NAND flash factories.
Toshiba has indicated that it has concerns with a sale to WD because of potential antitrust actions from joining the Toshiba and WD fabs to create the second-largest flash memory production facility under one company's control in the world. Toshiba is under significant pressure to finish this sale without complications in order to stay solvent. This could be a significant negative factor in selling to the WD conglomerate.
The highest announced bid so far is from chip manufacturer Broadcom, which partnered with US private equity firm Silver Lake to offer 2.2 trillion yen for the Toshiba memory fab.
Taiwan’s Foxconn (in a consortium with its Japanese unit Sharp Corp) has also made an offer to purchase Toshiba’s NAND flash fab. Announcements late last week indicate that Foxconn NAND flash customers Apple and Dell have joined its bid. Kingston Technology, a maker of NAND flash products is also said to have joined this consortium and Amazon.com was close to joining. Alphabet Inc’s Google, Microsoft Corp and Cisco Systems may also be participating in a new bid for Toshiba’s NAND flash fab. The Foxconn consortium has not said what its bid would be, but obviously its partners have deep pockets.
Japan has been uncomfortable with having Foxconn as the purchaser of the Toshiba NAND flash fab because of its connections with China. Foxconn said that their consortium of NAND flash customers has no Chinese capital and could avoid potential antitrust issues from other Toshiba bids. It is reported that Foxconn (and its Sharp Corp unit) would not have more than a 40% stake if its offer is accepted.
Korean-based SK Hynix (which is working with Bain Capital) is the final bidder for Toshiba’s NAND flash factories. SK Hynix, a Korean NAND flash manufacturer, is probably the smallest in market share of the largest NAND flash fabs and if its offer were accepted it would probably not raise antitrust concerns. However there has been little news recently on their offer and it is likely not as large as the other offers on the table.
The sale of Toshiba’s NAND flash factories will be one of the biggest memory and storage stories of 2017. Depending upon the winning bid the WD consortium could become the second-largest flash maker in the world or a large group of NAND flash customers could get ready access to much needed NAND flash. Or an electronic chip maker could suddenly have a significant share of NAND flash capacity, or a smaller NAND flash maker could become a lot more significant. Perhaps we will know this week what it will be.
