Toshiba sells chip business to Apple-backed group

By Neelabja Adkuloo 

On the 20^th of September 2017, financially struggling Japanese company Toshiba Corp agreed to sell its prized memory chip unit to a group led by private equity firm Bain Capital (based in the United States of America) for $18 billion. The group comprises of US tech giants Apple and Dell. The deal marks the end of a long bidding process that stretched over eight months.

Toshiba’s bankruptcy woes

Toshiba sold off its chip business in order to start paying for billions of dollars in losses which it has been suffering in its U.S. nuclear unit Westinghouse, which filed for bankruptcy earlier this year. The company needs to boost its finances by March next year to avoid being delisted from the Tokyo Stock Exchange. With this deal, Toshiba aims to pull itself out of a negative net worth.

Legal challenges

The auction had been complicated by legal action from Western Digital against its joint-venture partner Toshiba, on the grounds that Toshiba had moved to invest in a new memory production line without its help. Western Digital asserted that it had the right to co-invest and the Japanese company had breached their agreement. Toshiba disputed that and sued Western Digital for more than $1 billion for obstructing the bidding process. It is unclear what impact the investigations will have on the completion of the sale.

Competitive market

Apple’s interest in the chip unit is unsurprising, to say the least. The costs of the chip have risen dramatically in recent years to compensate for the growing demand of fast memory in computers and smartphones, the iPhone included. The chip in an iPhone is used to store all photos and videos. Last week, Apple unveiled three brand new iPhones, all of them shipping with 64GB of storage. That amounts to double the storage of last year’s cheapest iPhones. Samsung Electronics Corporation, the world’s second-largest chipmaker, controls about 40% of the market for memory chips. Apple’s investment in Toshiba will certainly make the market for the vital chip component more competitive.

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