June 4, 2017 9:00 am JST

Likely Toshiba chip-unit sale worries manufacturers, traders

Concerns over short supplies send flash memory prices higher

Toshiba plans to spend more than 300 billion yen in its flash memory chip business this fiscal year. © Kyodo

TOKYO -- The planned sale of Toshiba's flash memory chip business is prompting related companies and trading houses to rethink their procurement strategies.

Uncertainty over supplies of the chips used in peripheral devices is casting a shadow the earnings forecasts of manufacturers. Trading houses, meanwhile, are hoping Toshiba's competitors step up production.

A person involved in the sale of flash memory chips at one trading house predicts a severe shortage of chips if production stalls when Toshiba disposes of its business. Chips from foreign manufacturers have been in high demand since word came out regarding Toshiba's impending sale.

Memory chips are being snapped up, just in case. Rumors are swirling about potential buyers since Toshiba announced in February plans to sell its memory chip operations. Although the business is profitable, market watchers are skeptical about its future.

With Toshiba planning to spend more than 300 billion yen ($2.68 billion) on its NAND flash memory operations this fiscal year, there are no immediate worries about a lack of production capacity. Liu Ko Chen, chairman and CEO of Taiwanese computer maker Advantech, said he is not too concerned because chip plants are still operating.

But some in the industry are nervous. Strong demand for memory chips used in data centers in North America, and for smartphone chips, has created an unprecedented shortage. Concerns over supplies have pushed large-lot prices for the benchmark 64 gigabit multilevel-cell NAND flash memory chips to around $3.80, up 70% on the year.

A sales representative with another trading house hopes sales of U.S. chips will rise, given the uncertainty over Toshiba's ability to supply products in the coming years. Memory chips used in industrial equipment soon become obsolete, necessitating long-term production capacity and maintenance services.

The sale of Toshiba's flash memory business has ramifications for other products as well. Melco Holdings, a Nagoya-based distributor of hard-disk drives sold under the Buffalo brand, did not disclose its earnings forecast at its briefing in April.

Tamio Matsuo, Melco's executive vice president, said he is concerned about the future of Toshiba's hard-disk drive unit.

Hard drives are in demand as storage devices. Prices for Toshiba hard drives have remained stable, even as rivals have raised theirs, Matsuo said. If Toshiba follows its competitors to raise its profit, buyers will feel the pinch.

(Nikkei)

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 10,836.53M
Shares: 4,237.60M

Melco Holdings, Inc.

Japan

Market(Ticker): TKS(6676)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 670.49M
Shares: 22.23M
Asia300

Advantech Co., Ltd.

Taiwan

Market(Ticker): TAI(2395)
Sector:
Industry:
Electronic Technology
Computer Processing Hardware
Market cap(USD): 4,751.47M
Shares: 633.30M

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