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Toshiba sells off a stake in its memory business to WD

Lucas Mearian | Jan. 30, 2017
Toshiba hopes by divesting a portion of its memory business it can gain the financial footing to further expand operations.

"Although there are still many undecided items, such as the assets to be transferred, which are still under review, and while the company is still considering various structures with a view to an injection of third-party capital... the company recognizes that some lead-time is required to prepare" for the meeting, Toshiba stated.

Western Digital Toshiba NAND flash Fab 
Toshiba's and Western Digital's Fab 2 NAND flash manufacturing facility in Yokkaichi, Japan. Credit: Toshiba

Currently, Toshiba and WD together represent 35% of global NAND flash production, according to DRAMeXchange, a division of TrendForce. The leading supplier of NAND flash, Samsung, has a slightly larger share of 36%, while Micron-Intel and SK Hynix account for 17% and 12%, respectively.

Samsung, SK Hynix and Micron are also the three top DRAM suppliers, so their roadmaps for memory products as a whole are much more developed, DRAMeXchange said. By contrast, Toshiba and its ally WD are limited to just the NAND flash industry.

DRAMeXchange said Toshiba's decision to spin off its memory business will give it more operational flexibility and stronger fundraising ability.

Toshiba Western Digital NAND flash fabrication plant 
The clean room in Toshiba's and Western Digital's jointly operated memory fabrication plant in Yokkaichi, Japan. Credit: Toshiba

"For Toshiba and Western Digital, the capital-intensive nature of the memory industry and the volatility of the end market will make their operational challenges more difficult compared with similar issues encountered by their rivals," DRAMeXchange stated.

In the long run the Toshiba-WD alliance will enable an expansion in NAND flash production capacity and increased efficiency in storage product development, according to DRAMeXchange.

"Toshiba wants to put its memory business in a more stable financial position," DRAMeXchange's Yang said. "Facing mounting operational and competitive pressure, the spun-off entity will be more effective in raising cash to stay afloat or expand."

From the financial angle, Toshiba's latest fiscal quarterly report shows that memory sales made up around 15% of the company's total quarterly revenue. However, up to 50% of the company's operating margin for the period also came from the same source, which means memory has become the main profit driver for Toshiba, DRAMeXchange noted.

"The spin-off deal therefore intends to make fundraising less difficult for Toshiba's memory business, which will need a steady stream of capital to develop and compete in the memory industry," Yang noted. "As a separate entity, the memory business will be in a better position to make significant changes to its operation and cost structure, making it more attractive to investors. At the same time, Toshiba's move bolsters its NAND flash partnership with Western Digital."


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