Toshiba's sell-off of its semiconductor business has been back to square one. The Japanese daily Nihon Keizai Shimbun reported on August 31 that Toshiba will resume negotiations with three groups -- the new US-Japan alliances, the Korea-US-Japan alliance and the Hon Hai alliance. The market's prediction that Toshiba will give exclusive negotiation rights to the new WD-led US-Japan alliance within August has turned out to be wrong.
It was Apple that changed the game. Apple has recently joined the Korea-US-Japan alliance by promising to pay 300 billion yen. Apple's participation means more than just securing an investor to the Korea-US-Japan alliance. The participation of Apple, one of Toshiba's biggest NAND flash customers, means that Apple began to pressure Toshiba not to sell its semiconductor business to WD.
According to market researcher DRAMexchange, WD's NAND flash market share in the second quarter stood at 17.5%, which is similar to that of Toshiba. When combined, the market share will hit close to 35%. This means that WD will be able to launch a two-frontrunner race with Samsung Electronics which chalked up a market share of 35.6% in the same period. "This is a case showing how big customers in the semiconductor market are wary of a phenomenon leaning on one side in the semiconductor industry," said a high-ranking official of the Korea-US-Japan alliance. "Apple began to keep in NAND flash makers in check for fear of seeing the balanced NAND flash market lose its balance.”
Another reason why Apple joined the Korea-US-Japan alliance is that Apple wants to secure the stable supply of NAND flash memories. The storage capacities of major electronic products such as smartphones have been on an upward spiral, intensifying competition to secure high-capacity Nand flash memories. "Observing a recent increase in demand for NAND flash memories, I became worried that major electronics companies might become unable to make products because they fail to secure enough NAND flash memories," said Song Yong-ho, a professor of the Convergence Electronics Department at Hanyang University.
The Korea-US-Japan alliance is employing a strategy to notch up a come-from-behind win at the eleventh hour by persuading Toshiba's board of directors, while advocating "balance and growth." Its blueprint is to guarantee Toshiba's management rights to the utmost and grow together while achieving technological synergies.
The Korea-US-Japan alliance is to finally form a grand consortium called a new Korea-US-Japan alliance by winning over WD. This plan is a perfect gambit through which the new Korea-US-Japan alliance can deter a leaning phenomenon in the semiconductor market, appease Japanese public opinions concerned about a leak of Japanese technology and wrap up negotiations fast. "From the beginning, we tried to band together with WD which has a joint venture with Toshiba but conflicting interests hindered us from partnering with WD because WD wanted to acquire a bigger stake in Toshiba," said a person leading the consortium in Bain Capital. “We hope that WD will make a forward-looking decision by taking into account the voices of customers, such as Apple, that want a balanced market."
It seems that there is a small possibility that Taiwan-based Hon Hai Precision Industry (Foxconn), which submitted the highest bidding price (three trillion yen) with Softbank and Google will become the preferred bidder even in a new review stage. At present, not the amount of money but quick cash is important to Toshiba. According to an official of the semiconductor industry, Toshiba which suffered from capital impairment for the second consecutive year, will be able to avoid being delisted from the Tokyo Stock Market by injecting funds in itself after concluding the sale of its semiconductor business by the end of March next year, "If Toshiba tries to sell off its semiconductor business to Chinese semiconductor business, Japanese public opinions will try to block the beleaguered company from selling it off," the official said.