Expecting Win-Win Situation
SK Hynix's moves are drawing much attention as it has become more likely that Toshiba, Japan's second-largest NAND flash semiconductor maker will spin off its semiconductor business and sell off some of its equities in order to raise funds.
According to Japanese media including the Nihon Keizai Shimbun, Toshiba will spin off its electronic equipment division in the first half of this year and sell off 30% to 40% of its stake in the subsidiary. As losses of up to 500 billion yen are expected in its nuclear power plant service business, Toshiba hurriedly mapped out a plan to raise funds.
According to Nikkei, Western Digital, a US digital storage company and Toshiba's partner, is likely to acquire a 20 percent stake worth between 200 billion and 300 billion yen in its semiconductor subsidiary. SK Hynix and Tsinghua Uni Group in China are also considered potential buyers of equities in the company. Toshiba will formulate a specific financing plan and announce it in the middle of next month.
Experts in the semiconductor industry expect that SK Hynix is likely to make investment in Toshiba in order to acquire 'controller' technology that determines NAND performance. Toshiba ranked second in NAND market shares (19.8%) after Samsung Electronics (36.6%) in the third quarter of last year. SK Hynix placed fourth (10.4%). "We know that SK Hynix has taken over the US’s LAMD and the controller division of Taiwan's Innostor in order to develop controller technology, but SK Hynix is still not satisfied," said an official in the semiconductor industry. "If SK Hynix invests hundreds of billions of won in Toshiba and receives controller technology from Toshiba, the two companies can enjoy 'win-win' outcomes.
According to the semiconductor industry, SK Hynix attempted to acquire a Toshiba image sensor plant in Oita Prefecture, Japan in 2015. However, while SK Hynix executives were considering it, it was reported that Sony bought the Oita factory for about 180 billion won. Another source in the semiconductor industry said, "As SK Hynix executives missed the opportunity to increase its capacity in system semiconductors such as sensors, there is a high possibility that SK Hynix will become active in investing in Toshiba."
SK Hynix is placing a top priority on boosting its position in the NAND market as the company is relatively weaker in the NAND market than in the DRAM market. The company aims to reduce its gaps with Samsung Electronics and Toshiba by mass-producing 72-layer 3D NAND flash memories in the first half of this year. In addition, SK Hynix will complete a 3D NAND-only factory by June 2019 by investing 2.20 trillion won in Cheongju Factory in North Chungcheong Province.
SK Hynix re-entered a club of 1 trillion won in operating income in the fourth quarter of last year, increasing funds to take over equities in other companies. Analysts believe that SK Hynix's operating profit in the fourth quarter of last year to be released on January 26 will reach 1.3 trillion won to 1.5 trillion won, and recovered to the 1 trillion won level in five quarters. There is a big prospect that SK Hynix’s operating profit will reach between 5.5 billion and 6 billion won this year.
The fact that SK Hynix and Toshiba have formed a cooperative atmosphere is also a factor in boosting a possibility that SK Hynix will buy a stake in Toshiba. The two companies suspended litigation on a technology leak with 1 trillion won at stake in December 2014. In February 2015, both agreed to build a full-scale cooperation system including the joint development of next-generation memory processing technology, and has been maintaining the partnership.