Business / Corporate

Sharp mulls jointly investing in Toshiba chip unit with Hon Hai

Kyodo

Sharp Corp. is considering a joint bid with parent company, Hon Hai Precision Industry Co., to invest in embattled Toshiba Corp.’s memory chip business, a Sharp executive said Wednesday.

By teaming up with the Japanese electronics firm, Hon Hai, the Taiwan-based main assembler for Apple Inc., may be attempting to avoid a possible scenario in which the Japanese government blocks the deal out of fear that a sale of Toshiba Memory Corp. to a foreign company could undermine national security.

While the chip industry is vulnerable to swings in demand, the business can still be an important asset in the age of the internet of things, the Sharp executive told reporters Wednesday.

“We still think it’s a good investment. We’re not going to make profits by keeping our cash at banks,” the executive said.

Toshiba is seeking to sell a majority stake in Toshiba Memory, which it established by spinning off its chip division in an effort to raise cash following huge losses at U.S. nuclear unit Westinghouse Electric Co.

Toshiba closed the first round of bidding for the chip company late last month and is likely to select the winner around July. No Japanese firms have participated in the bidding.

Hon Hai submitted the highest bid of about ¥3 trillion ($27 billion) for Toshiba Memory, sources close to the matter said. The Taiwanese company has also asked for the cooperation of SoftBank Group Corp. and Apple in its bid to acquire the chip unit.

Meanwhile, state-backed turnaround fund Innovation Network Corp. of Japan is also considering investing in Toshiba’s memory chip company.

The fund is “studying the case based on published information,” INCJ Chairman Toshiyuki Shiga said at a news conference on Tuesday.

The INCJ set up a study team to look into the chip company and will “proceed if (the case) meets our strict investment criteria,” he said.

The government is keen for Japanese suitors to submit a joint bid as it is concerned Toshiba’s key technology could get into the hands of a foreign company deemed risky to national security.

If the INCJ decides to invest in the chip company, Shiga said the fund “will not be able to do so alone” and will look for partners to make a joint bid.

He ruled out the possibility of investment for the purpose of bailing out of Toshiba, which is estimating a group net loss of ¥1.01 trillion ($9.3 billion) for the year ended March.

The INCJ, with an investment capacity of ¥2 trillion, has so far invested a total of ¥984.6 billion in 114 investment projects, including those involving chip maker Renesas Electronics Corp. and liquid crystal display maker Japan Display Inc.

The INCJ invests in areas including self-driving technology and artificial intelligence.

Toshiba is also considering spinning off other key operations such as infrastructure systems to keep its deteriorated finances from affecting healthy businesses, people familiar with the matter said Tuesday.

Its financial problems are clouding the prospects for a renewal in December of a government permit that allows Toshiba to undertake large-scale construction projects. Such permits can be revoked if companies cannot meet the minimum level of capital and other financial requirements.

Toshiba hopes to avoid losing large infrastructure building and energy system contracts by detaching the operations into separate entities, the sources said.