Toshiba decides to sell part of memory chip business due to huge write-down

Toshiba memory chip

Toshiba’s board on Friday approved plans to make its core memory chip business a separate company and seek outside investment in it, aiming to avoid being crippled by an upcoming multi-billion dollar write-down for its U.S. nuclear business.

The drastic step will be only one of many tough choices the Japanese company must take to survive, as the proceeds are set to cover just part of the charge for cost overruns at a newly acquired U.S. power plant construction business - a figure that local media has put at 680 billion yen ($6 billion).

Toshiba's memory chip business is the world's biggest NAND flash memory producer after Samsung Electronics - is its crown jewel, accounting for the bulk of its operating profit.

Toshiba is looking to sell roughly 20 percent for more than 200 billion yen and potential investors include private equity firms as well as business partner Western Digital and the government-backed Development Bank of Japan (DBJ).

It aims to complete the sale by the end of the financial year in March as failure to do so will likely mean that shareholder equity which was whittled down to just $3 billion in the wake of a 2015 accounting scandal,  would be wiped out by the charge.

The final figure for the write-down will be announced on Feb. 14 when it reports third-quarter results.

Toshiba estimates the value of its memory chip business at 1-1.5 trillion yen ($9-13 billion). The business generated sales of 845.6 billion yen and operating profit of 110 billion yen for the year ended in March 2016.

Foxconn, formally known as Hon Hai Precision Industry, is interested in Toshiba's chip and broadcasting equipment business. Adding 8K high definition imaging technology is likely to be the focus of its interest.

A representative for Foxconn had no immediate comment.

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