There is going to be another gigantic acquisition in the IT industry. Toshiba, which has been in financial trouble for some time, has been selling the complete memory chip business for months. So far, two big consortiums are bidding for one of the most valuable divisions. The Cupertino based company together with SK Hynix, had offered about 15.1 billion euros. Western Digital is now a member of its consortium, currently offering $17-18 billion for Toshiba’s memory chip division.
In addition to Western Digital, the consortium consists of a Japanese government fund, the Japanese development bank and the US private equity company Bain Capital. The Japanese government is a major shareholder of the government fund, with an aim keep its production in Japan. It also takes into account the strategic value of chip production for future Japanese technology.
According to media reports, this week, mostly claiming Wednesday, may decide which consortium will get possession of Toshiba’s business. The acquisition would amount to a total of more than EUR 15 billion. The deal must be completed by March 2018, as Toshiba may otherwise see high financial costs, which could ultimately lead to a departure from the Japanese stock exchange in Tokyo.
Apple is allegedly concerned about losing pricing power, so it has threatened Western Digital that, if it clinch a deal for Toshiba’s chip business, it will no longer buy NAND flash memory chips from the company. The iPhone maker reportedly warns WD to remain a smaller investor, and in return, Apple will provide $460 million in its consortium budget, and on the other hand, will continue to buy from it.
Apple threatens so hard, because if Western Digital gets a significant stake in Toshiba’s business, a stand-alone memory maker is virtually disappearing from the market. As a result, Apple will be in a much worse bargaining position when it comes to negotiating the price of chips used in the iPhone and other products, and will be less able to compete against potential suppliers.
Toshiba has split its NAND memory production on April 1 into a separate company called Toshiba Memory, which sells this component because it is in financial hard weather after a series of setbacks at the Toshiba’s Westinghouse. After Samsung, Toshiba is currently the world’s largest manufacturer of flash memory.