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Toshiba’s NAND Business: Broadcom’s Next Acquisition Target

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Broadcom eyes Toshiba’s NAND business

Broadcom (AVGO) is close to completing its acquisition of Brocade Communications Systems (BRCD) in 3Q17. This has enabled Broadcom to look at other acquisition targets.

Recently, there have been media reports surrounding Toshiba’s (TOSBF) NAND (negative-AND) Flash business, which is up for sale. The company is desperate to sell the unit, as it needs the money before March 2018 to avoid bankruptcy. Toshiba is the second-largest NAND Flash vendor in the world after Samsung, making it an ideal acquisition target for Broadcom.

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Broadcom among the top bidders for Toshiba’s NAND business

Bloomberg is filled with reports and updates on the bidding process of Toshiba’s NAND business. In the second round of bidding, the company received four bids as reported by Japan’s newspaper Nikkei:

  • US chip supplier Broadcom and private equity company Silver Lake made a joint bid of $23 billion.
  • KKR & Co., Japanese government–backed (EWJ) Development Bank of Japan, and Innovation Network Corporation of Japan made a joint bid of $16.4 billion.
  • Western Digital (WDC) made a joint bid of $17.8 billion, as reported by The Japan Times.
  • South Korea’s memory chip maker SK Hynix and private equity company Bain Capital made a joint bid of $13.4 billion.

Some sources stated that Apple’s (AAPL) Taiwan-based assembly arm, Hon Hai Precision Industry, would join Bain, increasing the bid to $27 billion.

Why is Broadcom interested in Toshiba?

The memory market currently has a favorable demand and pricing environment. The NAND industry is transitioning to 3D technology, which will be used in SSDs (solid state drives) and other storage products. Several research companies expect the 3D NAND market to grow double digits in the coming years.

Broadcom offers SSDs and server storage products that complement Toshiba’s 3D NAND offerings. The addition of Toshiba in Broadcom’s enterprise storage segment would make the latter one of the leading players in the memory market and significantly boost its position in the network storage market. It would also enable Broadcom to enjoy strong growth in the NAND industry without the hassle of research and development.

However, there are several hurdles in this acquisition. We’ll look into them in the next article.

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