SK Hynix eyes stake in Toshiba

SK Hynix, a manufacturer of semiconductors, has joined the race to buy a stake of Toshiba’s flash memory business in an attempt to capitalize on thriving demand for NAND chips.

The company said Tuesday that it has submitted a nonbinding offer to buy a stake in the Japanese chipmaker through a regulatory filing but did not unveil how big the stake was or how much they offered for it.

“SK Hynix submitted a nonbinding proposal to buy a stake in Toshiba’s NAND business on Feb. 3,” the filing said. “Whether the company will apply for the final bid is not yet decided.”

Toshiba is second in the world’s NAND flash market after Samsung Electronics. In an attempt to stay afloat after a huge loss last year from its nuclear power business, Toshiba put 20 percent of its memory chip business up for sale last month. The Japanese conglomerate said it aims to complete the sale by March 31.

Industry sources speculate SK Hynix made a bid for the whole stake at around 3 trillion won ($2.62 billion). U.S-based Western Digital, Taiwanese tech giant Foxconn and a number of private equity funds have reportedly participated in the initial bid.

An SK Hynix spokesman declined to comment further.

Analysts believe the acquisition will be a huge gain for SK Hynix in terms of R&D if the deal goes through because SK Hynix lags relatively behind in the flash memory market. According to a report by Mirae Asset Daewoo, SK Hynix ranks fifth in the NAND flash market, making up a mere 11.9 percent in the global market.

“SK Hynix has the upper hand in DRAM memory chips but falls behind in NAND flash memory,” said Doh Hyun-woo, an analyst at Mirae Asset Daewoo. “NAND flash is a very hard market to penetrate as a second mover because of all the patented technology under the first movers.”

Toshiba’s long-term strategy for the burgeoning market will play a vital role as well. If it wants to take on Samsung Electronics, the top player in NAND flash memory, forming a partnership with rivals like SK Hynix will be advantageous.

Samsung Electronics accounts for 32.6 percent of market share, according to Mirae Asset Daewoo, Toshiba has 21 percent. If combined, SK Hynix and Toshiba would account for 32.9 percent, taking an upper hand in the market.

But it is also possible that Toshiba is merely seeking financial support rather than a technological collaboration, in which case a private equity fund would have advantage over SK Hynix.

“If Toshiba just wants to raise money, it wouldn’t pick its rival SK Hynix for the deal because it will indiscriminately expose their technology and intellectual property,” said Son Myung-seob, an analyst at HI Investment & Securities.

NAND chips have emerged as a cash cow for chipmakers in recent years for its competitive edge over its counterpart DRAM both in terms of function and cost. NAND flash allows for nonvolatile storage where data saved on the chip is maintained even after it is powered off. In DRAM chips, saved data vanishes if the power goes out.

Samsung Electronics was the first to began mass production of NAND chips in 2013.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]