Toshiba on Wednesday confirmed that it is studying the possibility of splitting its NAND flash business into a separate company. While nothing has been decided as this point, the Japanese tech firm needs money and it may sell a stake in its memory business to Western Digital or another investor, based on unofficial reports.

In the recent months, Toshiba ran into a new accounting scandal that may require it to write down as much as 4 billion dollars because of cost overruns at its U.S. nuclear power business. The exact number has not been finalized, but the company is already studying various possibilities to offset the massive loss, which would anger its investors after the company already faced an accounting scandal in 2015. Nikkei reports that Toshiba is mulling to spin off its semiconductor business into a separate entity and then sell a 20% in the new company to someone like Western Digital for about $2.7 billion, while retaining 80% stake as well as operational control of the unit.

Toshiba confirmed that it is studying the possibility of its memory business spin-off, but noted that no decision has been made and that the in-house NAND production is a focal business.

Toshiba and Western Digital already operate the world’s largest NAND flash production complex in Yokkaichi, Mie prefecture, Japan. Formally, the manufacturing facilities belong to joint ventures between the two companies and WD buys wafers from Toshiba. It is not completely clear how the spinoff would work in this case and which parts of Toshiba’s business will be up for sale.

For Toshiba, NAND flash production is indeed strategically important because it enables it to produce all types of storage devices in-house. Today, Toshiba makes HDDs, SSDs as well as various types of removable storage at its own fabs using its own components. The only other company that can manufacture all types of storage products using its own media is Western Digital, while companies like Samsung and Seagate lack either HDDs or NAND flash.

One of the important things to note is that production joint ventures owned by Toshiba and Western Digital are unlikely to make a lot of money directly because they sell wafers at near-cost to their owners who then earn profits by selling SSDs, memory cards, bulk NAND flash and other devices to their customers. Therefore, if Toshiba is to sell a stake in its semiconductor production business, it needs to sell it to a company that can then use the chips to build products and make some money. Obviously, Western Digital would be a perfect investor because it already has everything needed to produce actual storage devices, but a rumor has it that it is not the only investor considered by Toshiba.

Meanwhile, Toshiba’s plan to spin off its NAND flash business into a separate company may have a significant impact on the market of storage devices in general. Nowadays, Toshiba and Western Digital jointly invest in the development of NAND flash as well as manufacturing process technologies. Changes of the ownership may alter Toshiba’s investments not only in terms of money, but also in terms of R&D spending by the company. In any case, according to reports, no decision has been made.

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Sources: Toshiba, Nikkei, Reuters.

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  • dgingeri - Thursday, January 19, 2017 - link

    I guess they've had enough of having an actual decent and reliable product on their books.
  • Michael Bay - Thursday, January 19, 2017 - link

    They`ve been caught cooking books massively twice in a row. They need dat paper yesterday.
  • Bullwinkle J Moose - Thursday, January 19, 2017 - link

    Did Toshiba engineers spin off and start OCZ?
    Got caught screwing everyone and then brought back into the fold?

    By the way, how come the advertised read speeds on toshiba flash are always double the actual tested speeds regardless of whether they are branded PNY, Mushkin or whatever?

    What a bunch of SKUMBAGS!!!!!!!!!!

    Spork toshiba!
  • BrokenCrayons - Thursday, January 19, 2017 - link

    I'm going to have to ask you to post a warning or some kind of disclaimer ahead of a post like that so I can put down my drink before reading to ensure my keyboard continues working.
  • ddriver - Thursday, January 19, 2017 - link

    They are prepping/grooming for a take over. Monopolies are consolidating, mergers, takeovers. That's "free market" for you. The end game has been predicted for a long time.
  • vladx - Thursday, January 19, 2017 - link

    Western Digital already owns enough NAND fabs now, Seagate is the one who is in dire need and the more likely buyer.
  • iwod - Thursday, January 19, 2017 - link

    NAND is, and will be enjoying a fruitful 2017 as prices continue to rise, and increase of profits, but things will looks grim in 2018 once the Chinese Step in, pouring billions of billions into Fabs for NAND, likely causing an oversupply by 2019 or 2020, and reshuffle will happen after that.
  • Yojimbo - Friday, January 20, 2017 - link

    If ASML's recent comments at their earning conference are to go by, Chinese memory fab construction is much slower than people have been passing around. ASML doesn't see the big numbers people have been mentioning, saying that the volume is nothing beyond "good business". They implied that plans and discussions are disconnected from actually following through on those plans, and many Chinese fabs are showing no indication of actually taking deliveries in the foreseeable future.
  • flgt - Friday, January 20, 2017 - link

    We're talking about the Chinese here. They talk big and then order just enough to get units they need for reverse engineering your technology. Although I imagine the advanced technology from ASML is difficult to replicate.
  • StrangerGuy - Friday, January 20, 2017 - link

    They are the true geniuses of economic warfare: First they acquire manufacturing capability, then kill off the foreign competition through state-backed price dumping, and finally come back around to buy out entire foreign companies who are more than willing to sell themselves out thanks to greedy execs and corrupt/inept governments. This system can't work any better.

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