June 12, 2017 9:41 pm JST  (Updated June 13, 2017 9:31 am JST)
Interview

Foxconn says Dell, Kingston to join its bid for Toshiba chip unit

Tycoon Terry Gou says Foxconn will pass anti-trust test

DEBBY WU, Nikkei staff writer

Foxconn’s headquarters in suburban Taipei (photo by Debby Wu)

TAIPEI -- Key iPhone assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, said that PC giant Dell and memory maker Kingston Technology will join Apple and Amazon in backing his company's bid for the memory chip unit of embattled Japanese conglomerate Toshiba.

Chairman Terry Gou told Nikkei Asian Review about the arrangements in an exclusive interview, a week after he said that Apple and Amazon were financially backing Foxconn's efforts in vying for Toshiba's memory chip unit.

"Dell joined us today and Kingston will also be in our consortium team," he said in his office in the gritty Taipei suburb of Tucheng.

Gou did not reveal the contributions from each company, but said Foxconn, together with its Japanese subsidiary Sharp, will own a stake of 40% or less in Toshiba's memory chip unit if the deal goes through.

Gou also revealed that the bidder with the highest price and which was able to complete an anti-trust review all over the world to close the deal by March 31, 2018 will be awarded the deal. The Nikkei previously reported that Foxconn was the highest bidder offering more than 2 trillion yen ($18.18 billion).

"It is easier for us than anyone else to pass the anti-trust review," Gou said. "We don't have a semiconductor business and we are confident we can complete the anti-trust review in six months."

Gou said he would also consider setting up memory chip facilities in the U.S. if Foxconn wins the bid.

"If we win Toshiba's memory business and we want to explore building an overseas memory chip plant in the future, we will prioritize the U.S. because demand in the U.S. market has not been met [domestically]," he said, adding that only 14% of the total memory chips required by U.S. companies were now made in America.

Toshiba wants to complete the sale of its memory chip unit as soon as possible as it faces substantial losses at Westinghouse, its U.S. nuclear subsidiary.

Toshiba's NAND flash memory chip is used in many electronics including PC, server and smartphone. It is a major memory supplier for iPhones.  

Foxconn is bidding against Western Digital, Broadcom together with private equity firm Silver Lake, and U.S.-based private equity firms Bain Capital and Kohlberg Kravis Roberts for Toshiba. Tokyo-backed Innovation Network Corp. (INCJ) has also indicated it may join the fray.

Toshiba is expected to choose a buyer for its memory chip unit soon. 

With Japanese media speculating that Foxconn was lagging others in the bid, Gou accused the director-general of the commerce and information policy bureau in Japan's Ministry of Economy, Trade and Industry, Hisayoshi Ando, of undermining Foxconn's bid for Toshiba.

"He is unhappy that I didn't take his suggestion [last year] that I work with INCJ on the Sharp deal and he is now trying everything to undermine our efforts to acquire Toshiba's memory business," Gou said, slamming his fist on the table a couple of times in anger.

Foxconn eventually bought Sharp last year without any input from INCJ.

Gou brushed off concerns in some sectors in Japan that Foxconn was too closely linked to China, saying that he had not received any money from Beijing. Conversely, he pointed to private equity firms competing in the deal of being loaded with Chinese funds.

He also said that over 50% of Hon Hai was held by major international institutional investors.

"If they use this reason to reject me and say I am taking technology to China, then would they dare say KKR, Silver Lake [and Bain Capital] don't have Chinese funds? If any say that they don't have any Chinese-linked funds, then I'll withdraw from the bid tomorrow," Gou said.

Apple, Bain Capital, Silver Lake and Toshiba and Japan's Ministry of Economy, Trade and Industry declined to comment.

Amazon, Dell, Kingston, and Kohlberg Kravis Roberts did not immediately respond to an email seeking comments.

Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 61,328.98M
Shares: 17,328.73M

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 11,991.59M
Shares: 4,237.60M

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