SK Hynix bids for Toshiba memory business

South Korea's SK Hynix Inc has entered the running for a stake in Toshiba Corp's memory chip business, seeing an opportunity to gain on rivals in the booming NAND market, a person familiar with the matter said on Tuesday.

Reuters: The world's No. 2 memory chip maker had submitted an initial bid, although the size of the stake it wanted to acquire had not been decided, the source told Reuters, requesting anonymity as they were not authorized to speak publicly on the deal.

An SK Hynix spokesman declined to comment and Toshiba said it could not comment on specifics of the bidding process.

SK Hynix would benefit from Toshiba's technological know-how in high-end NAND products and a boost in chip supply, analysts said. The Japanese firm is the world's second-largest maker of NAND flash memory chips used for long-term data storage.

Interest in the stake is heating up with sources telling Reuters that private equity funds, California-based data storage company Western Digital Corp and other NAND makers have also submitted bids, amid a surge in memory chip prices.

As smartphones and data servers demand ever more processing firepower, chip suppliers are struggling to keep pace with demand. Nomura estimates global memory sales will grow 56.7 percent this year to a record $116 billion, and the NAND segment to expand 51.2 percent to $51 billion.

Toshiba aims to raise more than 200 billion yen ($1.7 billion) from the less-than 20 percent stake in its memory business, sources have said. The sale is part of a broader sell-off to cover multi-billion dollar writedowns stemming from its U.S. nuclear power unit.

SK Hynix reported record quarterly revenue in October-December and is now South Korea's second-largest firm by market capitalization behind Samsung Electronics Co Ltd, the world's top memory maker.

In December it announced a 2.2 trillion won ($1.94 billion) investment in a new NAND plant in South Korea, hoping to catch up with rivals' more advanced production technologies. 

While a handful of firms including Samsung, SK Hynix and Toshiba control the memory industry, SK Hynix's overall market share was not high enough to trigger antitrust concerns, said Claire Kyung-min Kim, analyst at Daishin Securities.

Investing in Toshiba could allow it to defend its turf against potential Chinese rivals, she said.

Tsinghua Unigroup Ltd, China's top state chip manufacturer, in January unveiled a plan to build a $30 billion memory chip factory and tried unsuccessfully in 2015 to acquire U.S. chip group Micron Technology Inc.

"If a Chinese firm buys a stake in Toshiba it would be a risk for all other memory makers," Kim said.

SK Hynix shares were up 0.6 percent in early Tuesday trade, while Toshiba shares were down 0.7 percent.