Bidding begins for Toshiba's flash memory business

SK Hynix has reportedly put in a bid for a 20 percent stake in Toshiba’s spun-off flash memory business. Toshiba announced the sale a few weeks ago and the general consensus put Western Digital as the most likely buyer because the two companies already run a NAND factory together. But SK Hynix has $1.8 billion that begs to differ. And it’s not alone.

The deal was reported by The Korea Herald to have been submitted last Friday for the whole 20 percent stake. SK Hynix has now publicly confirmed the bid but not the size of the stake it is seeking nor its value. Unconfirmed reports also claim that both Micron and Western Digital have submitted their own bids, but no further details are available. Samsung has reportedly not shown any interest.

SK Hynix is, behind Samsung, the world’s number two computer memory maker, but like Micron, it only has about 10 percent market share where flash memory is concerned. Buying into Toshiba’s existing NAND capabilities, which are the second largest in the world behind Samsung, would be a natural fit for either company. As the world’s third largest flash memory producer, Western Digital’s interest is in further insulating it from competition from its smaller rivals.

However, an attempted acquisition by Western Digital, which is both a rival and business partner of Toshiba’s, would likely be subject to time-consuming regulator approval. Analysts speaking to Reuters say the smaller market share of both Micron and SK Hynix may exempt their bids from anti-trust approval.

Considering Toshiba’s tight timeline – the company wants the deal done by March 31 to offset a $6 billion write-down on its troubled nuclear business in the U.S. – Toshiba may have to consider offers based on their ability to be concluded in time rather than on their dollar value or strategic benefits. The Bank of Japan, American private equity firms, China’s Tsinghua Unigroup and Hon Hai Technology Group (Foxconn) have also been named as possible investors.

Demand for flash memory has increased dramatically in recent times, with NAND prices increasing with it, recently pushing SK Hynix’s market capitalization in South Korea ahead of even that of LG. Last month, the SK Group bought a controlling stake in LG’s silicon wafer business LG Siltron and has announced its own plans to build a new $2 billion NAND plant in South Korea irrespective of the Toshiba bid.