Toshiba, Western Digital to resume joint investment as chip dispute ends

Lloyd Doyle
December 13, 2017

The Japanese firm needs to sell its memory business to cover the billions of dollars in liabilities it faces due to the bankruptcy of its US based nuclear power business Westinghouse.

But even though legal issues with Western Digital have been resolved, antitrust screening in major global markets could still be a major hurdle.

"I want to thank the hardworking teams at Western Digital and TMC for the dedication they have exhibited over the past several months, operating the JVs without interruption, and we look forward to building upon the success of our 17 year partnership". The U.S. hard-disk drive maker had claimed that selling the chip unit to a third party without its consent would be a breach of contract.

"We are very pleased to have reached this outcome, which clearly benefits all involved", said Yasuo Naruke, senior vice president of Toshiba.

But Western Digital chief executive Steve Milligan said on Tuesday that litigation was not the firm's preferred path and "we're very pleased to be able to resolve this".

A Western Digital consortium had lost a bidding war for the flash business to a group led by Boston-based Bain Capital, and including Fountain Valley-based Kingston Technology Inc.

In September, Toshiba made a decision to sell Toshiba Memory shares to a Japan-U.S.

The main sticking point was settled when Toshiba and Bain pledged to limit SK Hynix's involvement in Toshiba Memory and prevent the South Korean company from obtaining confidential information.

As the legal action could have delayed the sale, Toshiba had to draw up a contingency plan in case the deal did not close in time. Western Digital wanted to buy Toshiba's memory business itself for a reduced fee due to the booming demand for NAND flash, which is a critical storage component for most next-generation technologies.

As part of this agreement, Toshiba Memory Corporation or TMC and Western Digital will participate jointly in future rounds of investment in Fab 6, the state-of-the-art memory fabrication facility now under construction at Yokkaichi, including the upcoming investment round announced by Toshiba in October 2017.

The settlement calls for Western Digital to drop arbitration claims seeking to stop the sale to the Bain consortium in exchange for Toshiba allowing the United States partner to invest in a new production line starting next year for advanced memory chips.

TMC and Western Digital have also agreed to extend the terms of their joint ventures (JVs).

Western Digital is also expected to invest in another factory planned in northern Japan.

Other reports by Iphone Fresh

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