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Toshiba, whose facility in the Japanese city of Kawasaki is seen here, has begun taking bids on its semiconductor business.   © Reuters
Business

SK Hynix says Toshiba wants it to bid for memory chip business

The sale marks consolidation of industry

KIM JAEWON, Nikkei staff writer | South Korea

SEOUL -- SK Hynix said Tuesday that Toshiba had offered it a new plan for the purchase of a controlling stake in its memory chip business which analysts say could change the landscape of the industry.

South Korea's second-largest chipmaker says that Toshiba has asked it to participate in a bidding process for the majority stake in the Japanese tech giant's semiconductor business which it plans to spin off next month. According to some reports, Toshiba's semiconductor business is worth about $9 billion.

"We've got a new suggestion from Toshiba to buy its stake in the firm's memory chip business," said SK Hynix in a public disclosure for investors. "We will notify again when we decide on the bidding."

The announcement comes one month after SK Hynix submitted a non-binding letter of intention to buy a 20% stake in Toshiba's memory chip business. Hynix is aiming to strengthen its NAND flash memory chips in which Toshiba has the competitive edge.

Analysts say that the deal will mean a consolidation of the NAND flash memory chip business by cutting the number of players. For now, South Korea's Samsung Electronics, Toshiba, SK Hynix and U.S.-based IM Flash Technologies and SanDisk are the main players in the $34 billion market.

"Toshiba's sale of its memory chip business is good news to the industry as the number of players will be reduced to four, assuming it is not likely to be bought by a new player," said CW Chung, an analyst at Nomura. "The market will be restructured, becoming similar to that of DRAM which is run by three key players."

The DRAM market, whose shipment value reached $40 billion in 2016, is dominated by Samsung Electronics, SK Hynix and Micron Technology which runs IM Flash.

Toshiba decided to sell the cash cow, following a massive loss at its U.S. nuclear operations. Depending on the bids, Toshiba could sell up to 100% of the chip unit in which case it could reap a profit of more than 1 trillion yen ($8.85 billion).

Competition for the deal is heating up as U.S.-based rivals Western Digital, which acquired SanDisk last year, and Micron Technology have shown interest. Taiwan's Hon Hai Precision Industry, a key Apple supplier also known as Foxconn, is also reportedly considering the deal.

Shares of SK Hynix dropped 1.1% to 48,800 won on Tuesday on the news after hitting a record-high of 54,900 won on Feb. 3. Moody's and UBS have released reports warning of the stock's "overvaluation" as the DRAM market is seen to lose its steam. The benchmark Kospi rose 0.61% to close at 2,094.05 on Tuesday.

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