Why SK Hynix keeps smiling despite uncertainty over management right

Sep 18, 2017, 08:00 am

By AsiaToday reporter Bae Ji-yoon

While a South Korea-U.S.-Japan consortium has regained the initiative in the auction of Toshiba's semiconductor business, it's unclear whether SK Hynix will secure the management rights of Toshiba Memory. It's because a clause has been reportedly added that restricts SK Hynix' management interference due to concerns of the Japanese government and the media. However, industry observers termed it a half success because it excluded Chinese companies and blocked the possibility of technology leaks of Toshiba.

According to industry sources on Sunday, the South Korea-U.S.-Japan consortium took the advantageous position in the Toshiba Memory auction as it has been recently selected as a priority bidder. It is reported that negotiations between Toshiba and the global consortium are underway to drop SK Hynix' demand for voting stake, which was a sensitive issue. Nevertheless, industry observers are convinced that SK Hynix managed to maintain its current NAND market structure by defending the entry of Chinese companies, which could be the biggest variable in the Toshiba Memory deal.

Of course, some feel a sense of frustration at the fact that SK Hynix has not been able to get substantial benefits despite its huge investment in the acquisition. However, the worst situation is avoided because the consortium succeeded in eliminating Chinese companies and striking a damp over China, who wants to become a superpower in semiconductors. An official in the semiconductor industry said, "It's important to note that it not only blocked China from taking over Toshiba Memory but also acquired its competitor's stake."

The industry views that Apple played a major role in bringing back the initiative in the Toshiba Memory takeover bid from Western Digital (WD). It is because the iPhone maker is in talks to provide about $3 billion in capital to the South Korea-U.S.-Japan consortium and make a final contract this month. According to Japanese media outlets, Apple warned it won't buy Toshiba chips if Western Digital takes control of Toshiba's chip business, playing a crucial role in the battle for Toshiba Memory.

"The leak of NAND flash technology to China would have been the biggest negative impact on existing companies," an industry official said. "As the South Korea-U.S.-Japan consortium became a strong candidate for negotiation, SK Hynix may have a burden of spending money. However, it can increase the competitiveness of NAND memory chips in the mid to long term, and prevent the risk of supplying low-priced NAND by Chinese companies in the semiconductor market."

Meanwhile, Toshiba and the consortium are likely to sign a deal at the board meeting to be held on Wednesday.

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