Toshiba is considering spinning off its semiconductor operations into its own separate company as it struggles to recover from accounting scandal and nuclear plant business . Toshiba and Western Digital already cooperate in the joint Flash Forward NAND production business, and insider reports indicate that WD is involved in the restructuring efforts.
WD is already in a superb position as it transitions away from core HDD business into the lucrative SSD market, and an increased presence in Toshiba’s operations will only strengthen its position.
Toshiba’s woes began two years ago after the discovery of an accounting scandal that involved $1.2 billion in misstated earnings. Toshiba’s accounting indiscretions placed the company in perilous territory with the Tokyo Stock Exchange, which hamstrings its ability to recover from any other potential missteps.
On top of this Toshiba, which has vast holdings in a number of market segments, has encountered difficulties with its U.S.-based Westinghouse Electric nuclear plant subsidiary in the last year. The company is facing cost overruns and construction delays in the wake of the 2011 Fukushima nuclear disaster, as it made a strategic acquisition in 2015 of nuclear construction outfit CB&I Stone and Webster to clear the hurdles.
Toshiba’s expanded losses in the wake of the past few years of bad news is forcing the company to explore several options, with the most likely outcome involving spinning off its lucrative semiconductor business. Toshiba’s semiconductor operations, which includes the joint NAND production business with WD/Toshiba, accounts for nearly 80% of its operating profit. So selling it could just be a short term fix.
If Toshiba was a partial stake in the new firm, estimated at 20%, the sale could be worth around $2.5 billion. Toshiba has had a long history of flash production with SanDisk, which WD acquired for $19 billion in 2015.
The NAND industry is booming while we are in the worst NAND shortage in history. Toshiba plans to announce the extent of its poorly-defined losses next month, and we expect more news about its chip spinoff soon thereafter.
