Exclusive: Japan to vet bidders in Toshiba chip sale for national security risks - sources

Fri Mar 10, 2017 6:34am EST
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By Kentaro Hamada and Makiko Yamazaki

TOKYO (Reuters) - The Japanese government, fretting over the future of Toshiba Corp's flagship memory chips unit, is prepared to block a sale to bidders it deems a risk to national security, sources said, a stance that gives U.S. suitors a major advantage.

The government would use Japan's foreign exchange and foreign trade laws to control the auction if need be, one of the sources said. The sources are directly involved in the sale process, but declined to be identified because it is not public.

"The United States is the only feasible partner from Japan's national security standpoint," said another source, noting that cutting-edge chips are at the heart of robotics, artificial intelligence and connected devices.

Seeking to plug an upcoming $6.3 billion writedown for its U.S. nuclear unit Westinghouse and create a buffer for future potential losses, Toshiba is rushing to sell most or even all of the unit - world's second-biggest NAND chip producer - which it values at at least $13 billion.

With Westinghouse woes deepening to the point of it hiring bankruptcy lawyers to explore a possible Chapter 11 filing, the Japanese industrial conglomerate is also leaning towards U.S. suitors given the potential for friction with the United States.

"It's obvious U.S. players are more suitable bidders," a Toshiba executive said. "We'll probably need to fight over Westinghouse (with the U.S.), so we could cooperate over chips in exchange."

U.S. suitors include data storage firm Western Digital which operates a Japanese chip plant with Toshiba, rival Micron Technology Inc and financial investors like Bain Capital, sources have previously said.

Preferring those bidders would exclude others including South Korean chipmaker SK Hynix Inc, Taiwan's Foxconn, the world's largest contract electronics maker, and TSMC, the world's biggest contract chip manufacturer.   Continued...

FILE PHOTO -  A logo of Toshiba Corp is seen outside an electronics retail store in Tokyo, Japan, February 14, 2017.  REUTERS/Toru Hanai/File Photo