Samsung challenged by sale of Toshiba’s unit
As major player Toshiba’s flash memory business is up for sale, global chipmakers are weighing their chances of competing against Samsung, which has a runaway lead in 3D NAND flash technology.
Samsung is a stable leader in the market. In the fourth quarter last year it maintained its top rank but also achieved record high market share and revenues in the global NAND flash market. According to DRAMeXchange, an industry analyst, on Wednesday, Samsung had a 37.1 percent market share while second-place Toshiba fell to 18.3 percent.
Samsung’s revenue in the fourth quarter rose 19.5 percent compared to the previous quarter to reach $4.47 billion, the highest since it started the NAND flash business in 2002.
NAND flash memory is a non-volatile computer storage medium that doesn’t require power to retain data. Samsung has a technological lead in 3D vertical NAND flash memory technology, which stacks memory cells vertically in a three-dimensional structure to increase capacity and reliability.
As use of mobile devices increase and Internet of Things technology develops, the demand for higher-capacity memory chips has been growing rapidly. The NAND flash market grew 17.8 percent between the third and fourth quarters of last year.
The concept of 3D stacking was actually introduced by Toshiba, but analysts say Samsung’s strategy of massive investment in facilities and research in the early stage has proven successful and widened its technological lead over other players.
After Samsung started mass producing 24-layer vertical NAND chips in 2013 - the first in the world - it has gradually been increasing the number of layers.
In the first half of this year, the company will be mass producing fourth generation 64-layer 3D NAND chips. With those chips, use of gigabyte devices can be shifted to terabyte devices.
“Apart from Samsung Electronics, the second to fifth-ranked players have similar technology levels and don’t differ much in market share,” said Lee Se-chul, an analyst at NH Investment & Securities. “It will not be easy for them to catch up with Samsung’s technology in the short term.”
But industry analysts say the sale of Toshiba’s flash memory business may transform the market into a two-top-player system.
Competition for the business has grown ever fiercer. Toshiba initially had proposed the sale of a stake of less than 20 percent in its business. Then it decided to sell its entire flash memory business.
“A merger or acquisition is the only way to increase market share without building a new facility,” said Song Yong-ho, professor of electronics and computer engineering at Hanyang University. “Chipmakers are cautious of expanding facilities as oversupplies in the market can drag down chip prices. Thus, acquiring Toshiba is a good option.”
With bids estimated at up to 25 trillion won ($22.5 billion), companies are rushing to team up for the acquisition.
The most active player is Taiwanese Hon Hai, trading as Foxconn Technology Group. Hon Hai is rumored to be joining forces with Korea’s SK Hynix or Taiwanese semiconductor producer TSMC for the bid.
Western Digital, currently the third player in the market, is also a strong prospective buyer. As its subsidiary SanDisk is already co-operating in a NAND flash facility with Toshiba, market insiders say there could be a synergy effect.
China-based companies are also showing interest. Chinese electrical appliances manufacturer Meidi Group, which acquired Toshiba’s white goods division for roughly 50 billion yen ($435 million) last year, is a likely candidate. One variable is the actual level of 3D NAND flash technology Toshiba owns.
SK Hynix has been maintaining it’s most important to verify Toshiba’s technology level before making a bid.
“SK Hynix would be reluctant to invest a huge amount of money if Toshiba’s 3D NAND flash technology is not very advanced,” a semiconductor industry insider said.
Some analysts think the Japanese government won’t let Toshiba fall into the hands of Chinese or Korean companies.
“The worst scenario would be Chinese companies, which lag behind in terms of technology, buying Toshiba on the back of huge capital and then rapidly catching up with developed memory flash technologies,” Ahn Ki-hyun, an executive director at the Korea Semiconductor Industry Association told the JoongAng Ilbo. “From the Japanese government’s point of view, it will not be easy to let Toshiba fall into the hands of Korea either.”
Bidding for Toshiba’s flash memory business will be closed on March 30.
BY LIM MI-JIN, KIM JEE-HEE [email@example.com]