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Reports Say Stake in Toshiba Chip Business Gets Apple Interested

Reports Say Stake in Toshiba Chip Business Gets Apple Interested
In what is the latest twist in the sale of the world's second-biggest flash memory chipmaker of Toshiba, Apple Inc is considering teaming up with its supplier Foxconn to bid for Toshiba Corp's semiconductor business, Japanese public broadcaster NHK reported on Friday.
NHK reported, citing unidentified sources that as part of a plan that would have Toshiba keep a partial holding so the business remains under U.S. and Japanese control, the U.S. technology giant is considering investing at least several billion dollars to take a stake of more than 20 percent.
The broadcaster said that Japanese government concerns about any transfer of sensitive technology to investors it deems a potential risk to national security would be removed by the idea.
A Toshiba spokesman said he could not comment on specific transactions, Taiwan's Foxconn, formally known as Hon Hai Precision Industry, declined to comment and Apple was not immediately available to comment to media queries.
Due to its ties with China, Foxconn has been considered a national security risk even though it participated in the first round of the chip sale auction. Foxconn's extensive manufacturing base in China is the place where the bulk of Apple's iPhones are made.
NHK said Apple wants Foxconn to own a stake of around 30 percent of Toshiba's chip business.
As it seeks to secure a stable supply of key components, an investment by Apple would be its first direct stake in a major global memory chipmaker.Toshiba is the second largest manufacturer of memory chips behind Samsung Electronics.
The Japanese firm's plans to sell its chip unit violates a joint venture contract. Western Digital wants to be given exclusive negotiating rights, Western Digital Corp, Toshiba's partner and one of the bidders for its chip business, warned this week.
To cover multi-billion dollar writedowns at its U.S. nuclear unit Westinghouse, the auction of Toshiba's prized chips asset is essential to the company's plans. Prompting it even to warn that it may not be able to continue as a going concern, those costs have plunged the Japanese conglomerate into crisis.
U.S. chipmaker Broadcom Ltd, which has partnered with private equity firm Silver Lake Partners LP; SK Hynix; Western Digital; and Foxconn, the world's largest contract electronics maker are now the only bidders for the chip business as Toshiba has narrowed the field of bidders.
Sources said that Apple was not part of any of those four bids.
Hit by a Bloomberg report that the chip business sale had been temporarily put on hold to address the concerns raised by Western Digital, shares in Toshiba fell more than 5 percent on Friday.
"It is not true Toshiba has put the chip sale process on hold," a spokesman said.
Separately, for new loans and loan commitments worth around 1 trillion yen, Toshiba is likely to get the go-ahead from creditors to offer its chip business stake as collateral.
Before it can complete the sale of the chips business, access to fresh funds would help tide Toshiba over.
Toshiba's main lenders expect all creditors to approve the move.  as they have been offered other Toshiba assets as collateral, such as group companies' shares and real estate, some small lenders have baulked at the idea.

Christopher J. Mitchell

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