Western Digital or Toshiba intends to buy Toshiba Semiconductor shares

Focusing on Toshiba’s semiconductor business, partner Western Digital is seeking new ways to maximize profits. On December 4, according to foreign media reports, for Toshiba’s sale of its semiconductor subsidiary, Western Digital no longer tried to thwart and the two sides tended to move toward reconciliation. It is reported that after the Toshiba Semiconductor business was sold and listed, Western Digital intends to acquire a portion of the shares of the business. And Bain Capital, the main buyer of Toshiba Semiconductor, is in final negotiations with Western Digital. If agreement is reached, Western Digital will no longer prevent Toshiba from selling. At the same time, Toshiba will also revoke lawsuits hampering the Western Digital’s transaction.

Looking back and forth, the important node was in September this year. At that time, Toshiba formally sold the semiconductor subsidiary to Bain Capital's "Japan-US-Korea Alliance". During the bidding process, the dispute between Toshiba and Western Digital continued. The original two were partners in the semiconductor business (mainly flash memory chips), but they were "contradictory" because Toshiba sold the semiconductor business. In Western Digital's view, the sale may lead to the leakage of its flash memory technology and also affect future earnings.

However, Western Digital lost the final election bid for Toshiba Semiconductor. Therefore, Western Digital turned to seek shares and wanted to have more say in the new company.

Disputes and reconciliation

Western Digital has been a major “disease” in Toshiba's disposal of the sale. As the two sides jointly built a joint venture factory in Yokkaichi, Mie Prefecture, Japan, to manufacture flash memory chips, when Toshiba sold its chip business out of financial difficulties, Western Digital appealed on the grounds of “violation of the cooperation contract”. Immediately afterwards, Western Digital realized that the sale had become a foregone conclusion and became involved in the bidding party. Subsequently, after Bain Capital and Apple, Hynix and other competitors won the Toshiba Semiconductor subsidiary, Western Digital's conflict with Toshiba further intensified, and re-indicted.

However, according to informed sources, Western Digital already has “Plan B” in addition to the bid. Western Digital said that if it withdraws from the bid, it hopes Toshiba will ensure that it will occupy a favorable position in the semiconductor subsidiary as compensation.

Now it seems that regardless of whether the Western Digital chooses to withdraw its own accord, negotiations on “compensation” continue. According to Toshiba's plan, after the smooth sale of the flash memory business, it plans to make this semiconductor subsidiary publicly available three years later. Western Digital hopes to obtain a partial stake in the listed company and Bain Capital is negotiating with it.

The signs of reconciliation have also begun to emerge. The system of communication between Shiba City’s factory in the past four days in the Middle East and Western China was once shut down. Now the two sides continue to maintain good relations of cooperation, and Toshiba has proposed a plan to jointly build a new factory. If you continue to consume for a long period of time, it will not be of benefit to Western Digital, because this will affect the supply of new chip products next year.

Chen Tong, senior manager of DRAMeXchange, told the 21st Century Business Herald reporter: “Toshiba and Western Digital are really working towards reconciliation. The current situation is that both parties cannot exclude cooperation. Western Digital hopes. It is possible to invest in shares, and Toshiba hopes to make Western Digital take shares without affecting management rights. However, it is currently impossible to judge whether a settlement can be reached successfully."

Judging from the shareholding ratio of Toshiba Semiconductor, the corporate alliance led by Bain Capital will hold a 49.9% stake in Toshiba Semiconductor, Toshiba will hold 40.2%, and Japan HOYA will hold 9.9%. If Japan’s industrial innovation agency and the Japan Development Bank follow up on their investments in the follow-up, Japan’s shareholding ratio may climb to more than 50%.

Therefore, Chen Hao said: "Because Toshiba’s largest shareholding, Western Digital’s acquisition of shares in the future will not affect Toshiba’s control of semiconductor companies.”

Tested

From the perspective of the recent development of Toshiba, on the one hand, it is discussing the solution to the conflict with Western Digital. On the other hand, it has also used the capital increase and sale of other businesses to make up for the fiscal hole and buffered the uncertainty of the semiconductor acquisition. The simultaneous development of the two routes will also promote Toshiba’s own reconstruction.

Specifically, although the settlement negotiations continue, the lawsuits of Toshiba and Western Digital are still in progress, and the Tokyo District Court will hold a second hearing on December 11 to try Toshiba’s lawsuit against Western Digital to hamper the transaction. At the same time, "Nihon Keizai Shimbun" also mentioned that people in the industry recently stated that Western Digital has the intention of revoking appeals. The current flash memory business is hot, no matter whether it is Western Digital or other bidding parties, it will not easily let go of business, and there is also interest competition within the “Japan-US-South Korea alliance”.

According to the statistics of Jibang Consulting, the flash memory price in the second quarter of last year to the third quarter of this year rose more than 100%; the price increase in the first quarter to the third quarter of this year exceeded 20%. In the third quarter of this year, Samsung’s revenue and market share ranked first in the NAND Flash manufacturer’s ranking, with a market share of 37.2%. Toshiba’s revenue and share are second only to Samsung, ranking second in the market. The share is 18.1%; from the market share, the third to sixth place are Western Digital, Micron, Hynix and Intel.

However, even if Western Digital fully supports the sale, the transaction is still under pressure from the anti-monopoly review because Hynix and other peer competitors are among the acquirers. In order to pass the review of the anti-monopoly law, Toshiba has set a 10-year “firewall” against its peer SK Hynix. In 10 years, Hynix should not touch Toshiba's chip core technology, nor can it obtain more than 15% of the voting power of the semiconductor subsidiary. According to Chen Hao, “Toshiba Semiconductor has no antitrust (antitrust) issues in its sale, and the current level is the dynamic of Western Digital.” However, the review still takes a long time.

The good news is that Toshiba's previous capital increase plan has been implemented. On November 19, Toshiba announced a decision to increase capital by approximately 600 billion yen (approximately RMB 35.5 billion). On December 5, Toshiba issued an announcement saying that 600 billion yen had already been raised. With this large sum of money, Toshiba can get out of the debt insolvency situation, even if the semiconductor subsidiary can not be sold before the end of March next year, Toshiba will not withdraw from the market. In addition, Toshiba will also sell TV services to Hisense Group. Therefore, whether Toshiba’s reconstruction plan can go further and next year will be a crucial year.

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