Toshiba to Sell Stake in Memory Chip Business

The beleaguered company needs cash to offset an imminent writedown that Japanese media have estimated at $6 billion.
Matthew HellerJanuary 27, 2017
Toshiba to Sell Stake in Memory Chip Business

Toshiba said Friday it would sell part of its semiconductor business as it seeks to shore up its finances ahead of an imminent multi-billion dollar writedown related to its U.S. nuclear business.

The Japanese conglomerate was already reeling from a $1.3 billion accounting scandal when it announced last month it would take the charge due to higher-than-expected cost overruns at U.S. power projects.

In the wake of that decision, Toshiba is now planning to divest just under 20% of its memory-chip business, a move which, according to The Wall Street Journal, could bring in more than $2 billion because of high demand for chips in products such as smartphones and computer servers.

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“We had been thinking of splitting off semiconductors to beef up our finances, and the recent nuclear writedown risk accelerated the discussion,” Toshiba’s chief executive, Satoshi Tsunakawa, at a news conference Friday.

The exact intent of the writedown is to be released on Feb. 14 but Japanese media have estimated it at $6 billion. Company executives said it was possible that Toshiba’s Westinghouse unit would fall into negative net worth as a result of the charge.

Toshiba is the world’s leading NAND flash memory producer after Samsung Electronics and its memory-chip business accounts for most of its operating profit.

“The firm is rushing to complete the sale by the end of the financial year in March as failure to do so will likely mean that shareholder equity — just $3 billion in the wake of the accounting scandal — would be wiped out by the charge,” Reuters reported.

According to the WSJ, the sale “marks another step in the dismantling of a conglomerate once among Japan’s leading companies.” Toshiba already sold its medical-scanner and home-appliance businesses last year, leaving the chip unit as the “main crown jewel” left.

Mark Newman, an analyst at Sanford Bernstein in Hong Kong, said a stake sale would likely only be a short-term fix.

“The NAND business … makes up all of the semiconductor profits,” he told Reuters. “I won’t be surprised if they sell another 20 percent in a few years time and then another 20 percent.”