Silver Lake and Broadcom eye $18bn Toshiba chip unit

Silver Lake, the tech-focused private equity group, has teamed up with US chipmaker Broadcom in an attempt to acquire Toshiba’s semiconductor business for nearly $18bn, people briefed about the situation said. 

The Japanese company is in talks with several other potential suitors for its chipmaking unit, these people said, as it hopes that the sale will help it meet any financial shortfalls related to this week’s bankruptcy filing for its US nuclear business Westinghouse. 

Toshiba’s decision to sell its valued Nand flash memory unit comes after shareholders this week approved a plan to split it from the rest of the business. Satoshi Tsunakawa, Toshiba president, has said it will be sold for no less than ¥2tn ($18bn).

The 142-year-old conglomerate has warned that its net loss for the financial year that ended in March could expand to ¥1tn — the largest loss for a Japanese manufacturer — related to Westinghouse’s Chapter 11 filing.

The company also faces an April 11 deadline to submit twice-delayed audited accounts for the third quarter of 2016 to avoid the delisting of its shares on the Tokyo Stock Exchange.

Nikkei, the Japanese news organisation which first reported Silver Lake and Broadcom’s joint bid for the chip business, said that a decision on the sale would be made before a shareholder meeting in June. The report lifted Toshiba’s shares by 5.8 per cent.

People familiar with the sales process have said other interested bidders include Western Digital, a US data storage company, Micron Technology, South Korean chipmaker SK Hynix and private equity groups.

Taiwan’s Hon Hai Precision Industry, better known as Foxconn, has previously expressed interest in Toshiba’s flash memory business. But Japanese government officials and business leaders have expressed concerns about sensitive chip technology falling into the hands of Chinese and other Asian rivals.

Noting that Toshiba is already partners with Western Digital in the chip business, Yoshimitsu Kobayashi, an outside director at Toshiba and chairman of a Japanese business group, has recently suggested the technology should be protected by selling to a US company instead of to other Asian groups.

The semiconductor industry has undergone a wave of consolidation in the past few years, with large players combining in an effort to cut costs and boost margins. 

In recent years Qualcomm acquired NXP for $47bn, Broadcom merged with Avago in a $37bn deal, and Intel took over Mobileye for $15bn and Altera for nearly $17bn.

The Nand flash technology was invented at the Japanese conglomerate 30 years ago and has become an essential component in digital gadgets such as cameras and smartphones. Toshiba’s share of the market has fallen from 34 per cent to 18 per cent since the start of the decade, according to research firm Statista, although it has held on to its position as the second-biggest producer, after Samsung.

Silver Lake and Broadcom declined to comment. Toshiba could not be immediately reached.