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© bakhtiarzein dreamstime.com Analysis | January 30, 2017

Toshiba spins-off strengthen its NAND Flash competitiveness

Toshiba announced that its memory business will be spun off. Although the detail is not disclosed yet, but overall the procedure will be completed by March 31st, 2017.
DRAMeXchange, a division of TrendForce, believes that from this point on, Toshiba’s memory business will have more operational flexibility and stronger fundraising ability. These advantages in the long run will benefit the Toshiba-Western Digital alliance in the forms of expansion in NAND Flash production capacity and increased efficiency in storage product development.

“Toshiba wants to put its memory business in a more stable financial position,” said Sean Yang, research director of DRAMeXchange. “Facing mounting operational and competitive pressure, the spun-off entity will be more effective in raising cash to stay afloat or expand.”

Currently, Toshiba and Western Digital together represent 35% of the global NAND Flash output, according to DRAMeXchange. The leading supplier Samsung has a slightly larger share of 36%, while the Micron-Intel camp and SK Hynix account for 17% and 12%, respectively.

Samsung, SK Hynix and Micron are also the three top DRAM suppliers, so their roadmaps for memory products as a whole are much more developed. By contrast, Toshiba and its ally Western Digital are limited to just the NAND Flash industry. For Toshiba and Western Digital, the capital-intensive nature of the memory industry and the volatility of the end market will make their operational challenges more difficult compared with similar issues encountered by their rivals.

From the financial angle, Toshiba’s latest fiscal quarterly report shows that memory sales roughly made up around 15% of the company’s total quarterly revenue. However, up to 50% of the company’s operating margin for the period also came from the same source. This means that memory has become the main profit driver for Toshiba.

Among Toshiba’s various ventures, memory business would also receive the greatest attention from the parent company in terms of investment and resource allocation. However, Toshiba’s solvency and fundraising ability are presently in doubt because of the accounting scandal and the huge loss related to the nuclear plant purchase. Its financial problems were a major drag on the growth of its memory business.

“The spin-off deal therefore intends to make fundraising less difficult for Toshiba’s memory business, which will need a steady stream of capital to develop and compete in the memory industry,” Yang noted. “As a separate entity, the memory business will be in a better position to make significant changes to its operation and cost structure, making it more attractive to investors. At the same time, Toshiba’s move bolsters its NAND Flash partnership with Western Digital, showing commitment and renewed strength in this area.”

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May 22 2017 11:07 PM V8.2.2-1