Hon Hai, TSMC decline to comment on Toshiba IC asset bid

Taipei--Hon Hai Precision Industry Co. (??) and Taiwan Semiconductor Manufacturing Co. (TSMC, ???) on Tuesday declined to comment on a report that the two Taiwanese high-tech giants will jointly bid for the memory chip assets of Japan's Toshiba Corp.

Both Hon Hai and TSMC, which are the largest contract electronics maker and the largest contract chip maker in the world, respectively, said they do not respond to market speculations.

The speculation arose after the Liberty Times reported on Tuesday that Hon Hai and TSMC had formed an alliance to procure Toshiba's memory chip assets. The report said the two companies are expected to submit their bid by March 29.

The report also cited unnamed sources close to the deal as saying that Hon Hai and TSMC have signed a non-disclosure agreement on the joint bid, the proceeds from which the Japanese firm plans to use to offset the impact of losses caused by its nuclear energy business in the U.S. market.

In February, a board meeting at Toshiba approved a proposal to spin off its semiconductor operations, which operate under the name Toshiba Memory.

The plan to sell a stake in Toshiba Memory has attracted strong interest from potential suitors in Taiwan, the United States and South Korea, the report said. Possible buyers in Taiwan include Hon Hai and TSMC, the report added.

Last week, Hon Hai Chairman Terry Gou (???) said in public that his company is very keen to acquire a stake in Toshiba Memory and believes the firm will be able to work with Toshiba to grow its memory operations. Gou said he will invite Toshiba Memory, which specializes in NAND Flash chip production, to establish a production base in China.

In the meantime, TSMC Chairman Morris Chang (???) told the local press the chip maker is closely watching the terms attached to the stake.

It had previously been reported that Toshiba would sell a 19.9 percent stake, but more recent Japanese media reports have suggested Toshiba could sell Toshiba Memory outright. Over the weekend, the Korea Herald said South Korea-based DRAM maker SK Hynix Inc. is likely to work with Hon Hai on the Toshiba Memory bid as the firm requires more cash assets to make the acquisition.

The Korea Herald estimated that the disposal of 100 percent of Toshiba Memory could cost about US$8.7 billion, but SK Hynix currently has only about US$3.4 billion in cash assets, so it could seek the assistance of Hon Hai.

The Korean media said Hon Hai has close business ties with the SK Group, which owns SK Hynix, with roughly a 3.5 percent stake in the Korean conglomerate.

Toshiba is currently the second largest NAND Flash memory chip supplier in the world, trailing only South Korea's Samsung Electronics Co. NAND flash, is used for storage functions and can be installed in smartphones.

Hon Hai, which acquired a 66 percent stake in Japan's Sharp Corp. for US$3.5 billion in mid-August, is believed to want to expand beyond contract manufacturing into the semiconductor business.

Source: Focus Taiwan News Channel