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Toshiba had threatened to block Western Digital's access to jointly run chipmaking facilities in Yokkaichi, Mie Prefecture.
Business

Toshiba backs off from chip plant lockout threat

Talks with Western Digital continue, but no resolution in sight

| Japan

TOKYO -- Toshiba decided Tuesday not to shut partner Western Digital out of their jointly run semiconductor plants, keeping a spat over the Japanese company's memory unit from escalating while the two sides try to talk out their differences.

In a letter dated May 3, Toshiba threatened to block online access for Western Digital engineers to chip fabrication facilities in Yokkaichi, Mie Prefecture, unless the American company stopped interfering with the Toshiba Memory auction by May 15. This would have prevented Western Digital employees from connecting to joint memory design systems.

Toshiba said Tuesday it would defer its decision, citing continued talks toward resolving the dispute. This concession was likely in part a response to the arbitration request Western Digital filed Monday in a bid to halt the sale. Toshiba probably feared that making good on its threat would lead to a cycle of retaliation.

Japan's government, which seeks closer cooperation with Washington, likely also influenced the decision. "I hope to see close communication without any pointless conflict," Hiroshige Seko, the trade and industry minister, told reporters Tuesday.

Major lenders have encouraged Toshiba to mend fences with its American partner as well.

Toshiba had an amicable relationship with flash memory maker SanDisk, its partner on the Yokkaichi facilities since 1999. SanDisk was acquired by Western Digital just last year, and top Toshiba officials are less than pleased about how the dynamic has changed.

The planned sale of Toshiba Memory "poses no conflicts" with joint venture agreements, Toshiba President Satoshi Tsunakawa said Monday. "Western Digital has no basis for stopping the procedure."

The U.S. company, which insists that the Toshiba Memory spinoff and sale are in violation of the agreements, cannot afford to back down. Though Western Digital is the world's top maker of hard drives, personal computers and data centers increasingly use memory chips for data storage instead. The company has invested massively in an effort to adapt, shelling out $17 billion for SanDisk.

Should the relationship between Toshiba and Western Digital deteriorate further, the Toshiba Memory auction undoubtedly would be affected. This could dent Toshiba's hopes of fetching a high price for the unit and endanger the troubled conglomerate's turnaround plan.

(Nikkei)

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