Could Western Digital Win Toshiba’s Chip Business?
Spin-off of Toshiba’s Semiconductor segment
Japan-based (EWJ) Toshiba invited several companies to bid for the spin-off of its Semiconductor segment. Toshiba’s Semiconductor business includes manufacturing flash memory chips used in the production of cameras and smartphones.
Western Digital (WDC) was initially the front-runner to acquire Toshiba’s Memory segment. WDC is looking to aggressively lead the storage market after it closed the SanDisk acquisition in 2016.
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IHS Markit reported that the top players in the flash memory space are Samsung (SSNLF), Toshiba, and WDC. These companies have respective market shares of 35%, 20%, and 15%.
Several companies bid for Toshiba’s Chip segment
Earlier this year, Toshiba had valued its Chip segment at $19 billion. While Korea’s SK Hynix was willing to acquire 50% of the business at a valuation of $18 billion, Foxconn bid $27 billion to acquire it. Equity investor Silver Lake had also bid $18 billion for the business.
Recently, US-based private equity company Bain Capital and undisclosed Japanese investors bid 2.1 trillion yen (or $19 billion) for Toshiba’s Semiconductor business. Semiconductor company Broadcom (AVGO) has partnered with Silver Lake and recently offered 2.2 trillion yen.
Western Digital (WDC) and Toshiba have partnered in the memory space for the last 17 years, and this joint venture (or JV) has invested more than $13 billion since then. WDC stated that this JV has created long-term value for shareholders and believes that it’s perfectly positioned to take over Toshiba’s Semiconductor segment.
WDC also raised its offer in partnership with a Japanese government fund. WDC offered $25 billion in capital expenditures to fund two fabrication plants at the JV’s Yokkaichi facility. WDC further pledged $39 billion to invest in R&D (research and development) and plans to expand the domestic workforce by 5% over the next two years.
Western Digital filed a court injunction seeking to prevent Toshiba from selling the business without WDC’s consent.