(2nd LD) SK hynix's consortium tapped as preferred bidder for Toshiba

(ATTN: ADDS details throughout)
By Kang Yoon-seung

SEOUL, June 21 (Yonhap) -- A global consortium including South Korea's SK hyinx Inc. was tapped as the preferred bidder for the sale of the memory arm of Japanese tech giant Toshiba Corp., industry sources said Wednesday.

Toshiba earlier put its stake in its memory operations up for sale as it struggles with losses from its nuclear power business in the United States.

The consortium, also including Japanese players and U.S. Bain Capital, is estimated to have secured cash worth 2 trillion yen (US$17 billion).

Taking anti-monopoly regulations into consideration, SK hynix is expected to join the consortium by offering loans, instead of directly chipping in money.

"Toshiba has determined that the consortium has presented the best proposal, not only in terms of valuation but also in respect to certainty of closing, retention of employees and maintenance of sensitive technology within Japan," the Japanese company said through a release.

Toshiba is expected to clinch an official agreement by June 28, when it holds a shareholders' meeting.

As U.S.-based Western Digital earlier filed a request for arbitration with an international court, demanding exclusive negotiation rights, industry watchers said the move may still hinder the sales procedure.

The latest deal is expected to bring major changes to the scope of the global chip industry, as Toshiba stands as the No. 2 player in the NAND flash segment.

According to industry tracker IHS Markit, Samsung Electronics Co. took up 36.7 percent of the world's NAND flash market in the first quarter, trailed by Toshiba with 17.2 percent. Western Digital and SK hynix posted 15.5 percent and 11.4 percent, respectively.

While Toshiba's sales of its chip business will not affect Samsung's dominant position, industry watchers said the remaining players will instead struggle to gain the second spot.

If SK hynix secures at least half of Toshiba's shares, it will immediately grow to become the second largest, although it is more likely to only take over 15 percent of the combined stake in the consortium. Even with this modest share, the deal can play a crucial role in the company's efforts to seek sustainable growth and position itself well going forward, the industry watchers said.

SK hynix said it will seek new opportunities in the chip industry through the deal, although it is too early to come up with details.

"As the deal is not at the final stage, there are still hurdles for the consortium including SK hynix," an industry watcher said. "Nevertheless, competition in the global chip market will continue to intensify amid the industrial boom."

The deal also comes in line with SK hynix's devotion to developing next-generation NAND flash technology. The global demand for NAND flash products is set to post sound growth down the road as they are widely used in mobile devices including smartphones.

Optimists claim that as Samsung and SK already boast robust performances in the DRAM industry, the latest development will also help South Korean chipmakers solidify their presence in the NAND flash sector as well.

In the first quarter, Samsung and SK hynix took up 43.5 percent and 27.9 percent of the DRAM market, respectively.

Others, however, claim that the deal will only have a limited impact as seen from the acquisition of Japanese Elpida Memory by U.S. Micron.

colin@yna.co.kr
(END)