Business / Corporate

Hon Hai's Gou says 'very serious' about Toshiba chip unit bid

Bloomberg

Terry Gou is heading back to Japan.

The head of Taiwan’s Hon Hai Precision Industry Co., who waged a years-long battle against regulators and rivals for control of Sharp Corp., said he is “very serious” about bidding for Toshiba Corp.’s memory chip business. Toshiba plans to sell some or all of the operation to shore up its balance sheet and is soliciting bids from financial and strategic investors.

Gou sees an opportunity at Toshiba similar to Sharp. Toshiba’s operation will be able to expand if it has access to more capital resources, while Hon Hai, also known as Foxconn, needs the target’s supplies as it builds iPhones and other devices for its customers. Flash-memory will be used in increasing quantities for products like 8K high-resolution displays.

“We can’t afford not having this technology,” Gou said at an event in southern China on Wednesday to open a new $9 billion (about ¥1 trillion) display plant.

Gou made similar proclamations when he embarked on the mission to buy Sharp, a deal originally resisted by the target’s management and some regulators. He saw an opportunity to shake up the struggling Japanese company and take more control over the supply chain for electronic products like Apple Inc.’s iPhone and Sony Corp.’s PlayStation. He prevailed against stiff cultural resistance and a politically connected rival bidder.

With Toshiba’s memory unit, Hon Hai would be able to bring together display and memory technology, as well as assembly and supply, under one roof. Toshiba is sending letters soliciting offers for the unit and is seeking bids that value it at about ¥1.5 trillion.

Sharp and Hon Hai are also now considering expanding display production in the U.S., though Gou said that project wasn’t nailed down yet. Hon Hai hadn’t decided on the location for such a factory, which may also depend on the Trump administration’s tax reforms. Gou, who just returned from a trip to Washington, said Hon Hai may train 5,000 to 10,000 skilled workers to staff such a plant.

“We can help Toshiba to build factories in China, while they can leave the core technologies in Japan,” Gou said at the event. Toshiba needs massive manufacturing capacity and a partner to co-develop next-generation technologies and Hon Hai can provide both, he said.

Toshiba’s rivals in flash memory, including South Korea’s SK Hynix Inc., have expressed interest in the unit, but such a combination may face regulatory review and delay a transaction Toshiba needs for quick cash. Gou pointed out that he wouldn’t have to deal with such problems because Hon Hai isn’t in the business now.

“Antitrust is not an issue for us,” he said.

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