Japan urges WD and Toshiba to continue working together on chip division sale

The Japanese government has called on Western Digital and Toshiba to continue to work in harmony in the sale of Toshiba’s chip division. Western Digital has gone to an arbitrator to prevent Toshiba from selling its chip division.

Japan’s trade minister is concerned about the dispute between the two companies. He fears Western Digital’s move will jeopardize the sale of Toshiba’s memory division. The minister has said it is important that Toshiba and Western Digital continue to work together, but says he does not intend to intervene. That reports Reuters news agency.

The Japanese government plays a significant role in the acquisition of Toshiba’s nand memory division. In April, insiders said the Innovation Network Corp of Japan, a public-private partnership between the Japanese government and major tech companies, may be partnering with another candidate in the bidding war. The fund, along with US private equity firm KKR & Co, would be the main player in a consortium likely to participate in the second round of bidding. Senior officials of the Japanese government are said to be willing to provide more than 7 billion euros in loans to this consortium.

This Japanese stimulus fund, which is mostly owned by the Japanese state, would like to bid because the Japanese government may be able to prevent Toshiba’s memory division from falling into the hands of an unwanted takeover candidate. The Japanese government would like to keep production in Japan, given the strategic value of chip production for future Japanese technology.

Western Digital announced on Sunday that it had gone to an arbitrator to prevent Toshiba from selling its chip division. According to the company, the sale violates the terms of the joint venture between WD’s subsidiary SanDisk and Toshiba. The arbitration case is set to take place in California and aims to reverse the creation of Toshiba Memory. According to WD, Toshiba has transferred its nand manufacturing business to Toshiba Memory without seeking SanDisk approval.

SanDisk has entered into three memory joint ventures with Toshiba in the past. Western Digital’s subsidiary should have been involved in the plans to establish Toshiba Memory under the terms, Western Digital said. According to the American group, talks with Toshiba have failed and it has therefore been decided to take legal action. In the background, Western Digital sees itself as the best party to take over Toshiba’s memory activities.

Toshiba splits its nand production into a separate company called Toshiba Memory, selling part of it as it finds itself in financial turmoil after a series of financial setbacks. After Samsung, Toshiba is currently the world’s largest manufacturer of nand memory.