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Abu Dhabi, UAESaturday 22 September 2018

Bain will support Toshiba in pursuing mergers and acquisitions

The booming demand for chips with the advent of smartphones, artificial intelligence and autonomous driving require larger amounts of data storage that may prompt consolidation 

Toshiba Memory Corp. President and CEO Yasuo Naruke (right) and Bain Capital Private Equity Japan's Managing Director Yuji Sugimoto (left) shake hands at the end of a press conference in Tokyo. US Bain Capital Private Equity completed the acquisition Toshiba's memory-chip unit for 18 billion US dollar and will support acquisitions by the company. Franck Robichon /EPA
Toshiba Memory Corp. President and CEO Yasuo Naruke (right) and Bain Capital Private Equity Japan's Managing Director Yuji Sugimoto (left) shake hands at the end of a press conference in Tokyo. US Bain Capital Private Equity completed the acquisition Toshiba's memory-chip unit for 18 billion US dollar and will support acquisitions by the company. Franck Robichon /EPA

Bain Capital, which led the $18 billion (Dh66bn) acquisition of Toshiba Memory Corp, said on Monday it plans to support the business in pursuing M&A in the chip industry, including potentially large deals.

The world's No. 2 maker of NAND chips is expected to have significant funding and spending needs - partly due to the high capital cost nature of the semiconductor industry but also because it has to please the many members of the winning Bain consortium.

The US private equity firm and Toshiba Memory will discuss what kind of technologies or acquisitions will be required, with Toshiba Memory president Yasuo Naruke noting that in the longer term technology relating to next generation memory chips would be needed.

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"I believe our financing power will enable Toshiba Memory engage in large-scale M&A deals," Yuji Sugimoto, head of Bain Capital in Japan, told a news conference following the completion of the deal last week.

Talk of potential acquisitions comes amid booming demand for chips as the rise of powerful smartphones, artificial intelligence and autonomous driving require ever-larger amounts of data storage.

Last September, the Bain consortium won a long and highly contentious battle for Toshiba Corp's chip business - put up for sale after cost overruns at a US nuclear unit plunged the Japanese conglomerate into crisis.

Under the deal, Toshiba has reinvested in the unit, holding some 40 per cent. Other consortium members include Apple, South Korean chipmaker SK Hynix, Dell, Seagate Technology, Kingston Technology and Hoya Corp.

Its new owners plan an IPO for the business within three years.

Toshiba had 19.3 per cent of the NAND market in the January-March quarter, trailing arch-rival Samsung Electronics Co Ltd which held 37 per cent, according to research firm TrendForce.

"Compared to our bigger rival...we are lagging behind in volume, including production capacity," Mr Naruke said, adding that there had been a slight delay in investing in the shift to so-called 3D NAND chips from planar ones.

Three-dimensional NAND chips have a stacked cell structure giving them far more storage capacity than conventional chips.

Aggressive capacity expansion for 3D NAND chips is underway at Toshiba Memory, with its sixth production line set to start operating this summer at its Yokkaichi plant in central Japan, already the largest single NAND production site in the world.

Construction of a new memory chip plant in Kitakami, northern Japan, will also start in July this year.

Further capacity expansions will depend on market demand, Naruke said, but added that new production lines could be built either in Yokkaichi or in Kitakami

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