Toshiba Memory Business Stake Sale has a New Bidder – SK Hynix: Reuters

Seeing an opportunity to gain on rivals in the booming NAND market, South Korea’s SK Hynix Inc has entered the running for a stake in Toshiba Corp’s memory chip business, reports the media quoting a person familiar with the matter.

Reuters reported that although the size of the stake it wanted to acquire had not been decided, the world’s No. 2 memory chip maker had submitted an initial bid.

Toshiba said it could not comment on specifics of the bidding process and an SK Hynix spokesman declined to comment.

Analysts said that a boost in chip supply would be gained by SK Hynix from the deal and the company would also benefit from Toshiba’s technological know-how in high-end NAND products. NAND flash memory chips are used for long-term data storage and the Japanese firm is the world’s second-largest maker of it.

Amid a surge in memory chip prices, bids have been submitted by several NAND makers apart from several private equity funds, California-based data storage company Western Digital Corp which exhibits the interest in the stake of Toshiba’s chip business.

Chip suppliers are struggling to keep pace with the demand that is persistent in the present global market as smartphones and data servers demand ever more processing firepower.

While the NAND segment is expected to expand by 51.2 percent to reach a value of $51 billion, estimates by Nomura are that the global memory sales industry would grow grow by at least 56.7 percent this year to touch a record volume of $116 billion.

Sources have previously said that from the sale of less-than 20 percent stake in its memory business, more than 200 billion yen ($1.7 billion) is aimed to be raised by Toshiba. To cover multi-billion dollar writedowns stemming from its U.S. nuclear power unit, the company is preparing to make a larger sale off and this chip business sell off is part of the broader program.

Behind Samsung Electronics Co Ltd, the world’s top memory maker, SK Hynix is now South Korea’s second-largest firm by market capitalization and it reported record quarterly revenue in October-December. Hoping to catch up with rivals’ more advanced production technologies, the company announced a 2.2 trillion won ($1.94 billion) investment in a new NAND plant in South Korea in December.

Claire Kyung-min Kim, analyst at Daishin Securities said that SK Hynix’s overall market share was not high enough to trigger antitrust concerns, even while a handful of firms including Samsung, SK Hynix and Toshiba control the memory industry.

She said that investing in Toshiba could allow it to defend its turf against potential Chinese rivals.

Trying unsuccessfully in 2015 to acquire U.S. chip group Micron Technology Inc, Tsinghua Unigroup Ltd, China’s top state chip manufacturer, in January unveiled a plan to build a $30 billion memory chip factory.

“If a Chinese firm buys a stake in Toshiba it would be a risk for all other memory makers,” Kim said.

(Adapted from Reuters)

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