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Seagate Technology in Component Supply Agreement with Toshiba

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Seagate part of consortium that bid for Toshiba chip business

Seagate Technology (STX) is part of the consortium that acquired Toshiba’s (TOSYY) memory business. The other companies in the consortium are Apple, Bain Capital, and Dell Technologies (DVMT). The bid for the acquisition was $18 billion. That means that Seagate and Toshiba have entered into a long-term NAND (negative AND) supply agreement that will provide a continuous NAND supply for the former’s expanding product portfolio.

Seagate will pay ~$1.3 billion of the $18 billion to acquire the chip business. The NAND supply agreement will also expand margin contributions across Seagate’s silicon storage products.

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Seagate is not a major player in the NAND flash memory space. The agreement with Toshiba could help it gain traction in NAND. According to Statista, Samsung leads the NAND flash memory market with a share of 37.2%. Other top players include Western Digital, Toshiba, Micron Technology (MU), Intel, and SK Hynix with shares of 17.5%, 17.5%, 12.9%, 6.6%, and 9.9%, respectively, at the end of 3Q17.

NAND market starting to normalize

The global NAND market has started to stabilize after a constrained supply scenario last year. That has historically led to a fall in memory chip prices. Western Digital (WDC) and other storage companies estimate that the NAND average selling price will decline later this year. Many companies expect the first half of 2018 to see a seasonally lower demand with demand picking up in the second half of the year. WDC expects the NAND market to grow between 35% and 45% this year.

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