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Troubled Toshiba ponders selling chips to save its flash bacon

Spinning out disk business ... or shrinking it, maybe

Toshiba, recovering from a self-caused $1.3bn accounting scandal, could exit peripheral chip businesses while concentrating on its NAND core – with exit from the disk business a possibility too.

Reuters and Japan’s Nikkei reported loss-making parts of Toshiba's chip business lines, such as systems LSI (Large Scale Integration), microcontrollers, analogue semi-conductor chips, and discrete chips used in industrial machinery, vehicles, and domestic appliances, are all up for sale. One interested party is the Development Bank of Japan Inc.

In the NAND area, Toshiba’s operations are profitable and it is second in the market behind Samsung. Selling the non-core businesses could generate $1.68bn and this cash could be re-invested in its flash business. It has to develop 3D NAND products to increase chip capacity, and mass production is planned to start in March, with a new chip plant being brought online by fiscal 2018.

The Nikkei report suggests Tosh could shrink its disk drive manufacturing interests, where it is a poor third in revenue and unit production terms, compared against Western Digital Corporation (WDC) and Seagate. As part of the competition authorities’ fall-out from Western Digital buying HGST, Toshiba picked up some 3.5-inch HDD manufacturing operations to add to its existing 2.5-inch HDD business.

Analyst haus Stifel Nicolaus' MD Aaron Rakers notes: “Toshiba is not vertically integrated in terms of HDD heads and finished media, which compares to Western Digital and Seagate targeting internal supply to account for 80 per cent-plus (if not 90 per cent-plus) of required components.”

This increases Toshiba’s HDD manufacturing cost. Those costs are already facing an increase if Toshiba invests in developing helium-filled drives and/or ones using heat-assisted magnetic recording (HAMR) technology.

There are some 8,000 employees in Toshiba’s disk business, and layoffs are being pondered at a Philippines HDD plant it operates, as a disk division scaling down project is being examined, with exit being the ultimate possibility.

Toshiba is focusing on energy businesses, including nuclear and coal-fired energy generation, and storage, mainly meaning flash, as it restructures and rescues its business. It is exiting the LED business, having seen the light (sigh – Ed), selling its medical systems unit and also its image sensor production facilities. ®

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