Daily Management Review

No Immediate Plans To Sell Stake In Memory Chip Business: Toshiba CEO


No Immediate Plans To Sell Stake In Memory Chip Business: Toshiba CEO
Toshiba Memory Corp. is preparing to go public in three years time and even as the company does so, its chief executive told the media that the company has no immediate plans to sell off its 40.2 per cent stake in the memory chip company. This business unit is the second largest manufacturer of NAND flash memory chips in the world.
In recent quarters, there is has been an oversupply of NAND memory chips which is used in smartphones and data storage servers and this therefore analysts and investors see Toshiba's stake in the business as a cause of concern. The overcapacity in the industry segment has pulled down costs and many manufacturers have forecast not so bring near term outlook.
Toshiba CEO Nobuaki Kurumatani said in an interview that the stake in the memory company gives Toshiba the chance to account for its former unit in its earnings but doe snot need to make any further investment in it.
"We're now in a position to benefit 40 percent of their profits while exempt from investment burdens," he said.
"I think we have an appropriate balance."
Because of the need to account for a multi-billion-dollar loss in its balance sheet following an accounting scandal and the collapse of its U.S. nuclear unit, this business unit was sold off by Toshiba to a consortium led by Bain Capital and included South Korean rival SK Hynix, Apple Inc, Dell Technologies and Seagate Technology.
Kurumatani said that when the time draws near for the initial public offering (IPO) of Toshiba Memory, it will take a call on its stake in the chip business.
"We still have time to examine the situation with Chinese chipmakers and market conditions," he said.
In September this year, the plan of the company to get listed in two to three years was confirmed by the chief of Toshiba Memory. At that time, the executive has also reaffirmed that the company was in the process of making the preliminary preparations for the launch of the IPO and dissuaded concerns about its weak fundamentals.
A weak consumer and business demand for phones and computers has resulted in reduced demand and a consequent oversupply and reduction in NAND flash chip prices following a period of two years of block buster growth in the segment. According to market research firm TrendForce, in the July to September period, there was a drop of 10 per cent in the prices of NAND flash memory contracts.
Recently, quarterly sales and profit well below market estimates was forecast by U.S. chipmaker Micron Technology Inc. a bad short term outlook was also given by Hynix.
Samsung Electronics Co Ltd, market leader of the chip industry, warned in October of lower profits till early next year and slash its 2018 capex by more than a quarter.
It has also been reported that starting next year, a strategy to transform some of the NAND production lines for manufacturing DRAM chips is being considered by Samsung. Designed to process large amounts of data fast, DRAM memory chips are used in servers, gaming PCs and cryptocurrency mining devices.