April 19, 2024

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[THE INVESTOR] SK hynix CEO Park Sung-wook has vowed to boost the company’s three-dimensional NAND flash memory business this year, a remark that is interpreted by market watchers as a strong determination to acquire Toshiba’s NAND unit.

On Feb.3, SK hynix submitted a non-binding proposal to purchase a 20 percent stake in its Japanese rival Toshiba’s NAND chip business for about 3 trillion won ($2.62 billion).  

 

SK Hynix CEO Park Sung-wook

SK hynix’s offer nearly doubles the current market value of the Toshiba unit that is around $1.8 billion. 

To back the company’s move, Park, who is also a vice chairman of SK Group, the third largest conglomerate in South Korea, told a local newspaper recently, “We will do our best in the NAND flash memory business this year.” 

“There will be some opportunities as the market is going through a transition from 2D to 3D NAND chips,” Park said. 

As a seasoned veteran on research and development of the semiconductor business, Park seems like making a big bet on the NAND chip business in a bid to secure the core technology.   

The NAND chip market is forecast to grow up to $46 billion by 2020 due to soaring demand for the chips as they are increasingly adopted for Internet of Things, cloud and big data services for long-term storage.  

Although SK hynix is the world’s second largest memory chipmaker with flagship DRAM chips, it had continued posting deficits in the NAND chip business until 2016. The company began mass production of 48-layer 3D NAND chips just last November, falling behind its biggest local rival Samsung Electronics that is already providing 64-layer NAND chips.

Samsung is the global No.1 in the NAND chip market with a 32.6 percent share, followed by Toshiba with 21 percent, SanDisk with 15.4 percent, Micron with 14.8 percent and SK hynix with 11.9 percent, according to a report by Mirae Asset Daewoo.

If SK hynix wins the deal, the company could take on Samsung in the NAND chip market. 

According to media reports, at least four globally known chipmakers and two private equity funds offered their bids for the Toshiba unit. They are US-based Western Digital, Korea’s SK hynix, Taiwan’s Foxconn, Micron Technology, Bain Capital and Silver Lake. 

Since Toshiba should meet its deadline for the sale by its financial-year end on Mar. 31 in order to secure cash to survive an impending several billion dollars of write-down on its US nuclear power business, the schedule is quite tight for the bidders.

Prevailing market speculations are that Toshiba is leaning towards an investment fund rather than a chipmaker due to the time pressure and regulations on transactions within an industry by Japan’s fair trade authority. 

According to Japanese media, among the chipmaker bidders, Western Digital is the mostly likely preferred candidate at the moment, considering its long-time partnership with Toshiba.

Toshiba officials have had a meeting with Western Digital officials on the sale this week, according to Japanese sources. Also, the two jointly announced development of the first 512Gbit 3D NAND chips with 64-layer stacks on Wednesday.

The cash-strapped Japanese chipmaker is also planning to hold talks with the other bidders including SK hynix this week, and select a preferred bidder by mid-February.

“We can’t comment on anything related to the Toshiba deal,” said a spokesman at SK hynix, declining to confirm about the upcoming meeting.

Some in the Korean financial market view SK hynix’s takeover attempt positively. But Moody’s, a global credit rating organization, said on Wednesday the Korean semiconductor firm’s bid for a Toshiba stake is credit negative, if successful.

“SK hynix‘s bid for a minority stake in Toshiba, if successful, will give it only limited access to its competitor’s technology and cash flows, as its stake will likely be less than 20 percent,” says Gloria Tsuen, a Moody‘s vice president and senior analyst.

Although SK hynix’s operating profit is expected to be robust this year, the bid for the Toshiba stake could potentially prove sizeable, the analyst noted. 

By Song Su-hyun/The Korea Herad (song@heraldcorp.com)