TOKYO — As the second round of bidding for Toshiba’s coveted memory business draws near to its close in a few weeks, the opaque process is exposing a deep schism of interests in Japan among politicians, bureaucrats, corporate leaders and bankers. Many observers blame the deepening rift on the malaise that afflicts the semiconductor industry here.
Also, the bidding process has become a highly political spectacle, which partly explains why there have been so many leaks to the Japanese media on the topic.
But before identifying the flaws in this bidding process, let’s not forget who’s who in the Toshiba memory sweepstakes.
(Source: Takashi Yunogai, Japanese media reports, EE Times)
In the first round of bidding, Toshiba narrowed the field to four suitors: Western Digital, Broadcom, South Korea's SK Hynix and Hon Hai.
Last week, a joint proposal by KKR and two Japanese state-backed institutions — Innovation Network Corp. of Japan (INCJ) and Development Bank of Japan (DBJ) — surfaced, reportedly preparing to participate in the second round. Western Digital, U.S. partner in Toshiba’s NAND flash memory venture, also acknowledged talks with Japanese government-backed investors, posing a possible a joint second-round bid.
Ultimately the winner won’t be the big bidder. It will depend on who curries favor in a way that satisfies the whims of politicians, bureaucrats and Toshiba’s top management, several Japanese sources told us.
If so, what do they want?
On one hand, politicians yearn the prestige of saving too-big-to-fail Toshiba and promoting Japanese nationalism.
Bureaucrats here have never stopped believing in top-down industrial policy — despite its mixed results since the decline of “Japan, Inc.” They want credit for “restoring” Japanese electronics industry.
In another precinct, top management at Toshiba see the sales of its prized chip unit as the only solution to save their skin and avoid the risk of getting delisted from the Tokyo Stock Exchange.
They want to erase their memory business as soon as possible so they can fill a huge hole in the Toshiba balance sheet, which was dug its U.S. nuclear unit Westinghouse Electric Co.
Westinghouse last month filed for U.S. bankruptcy protection.
Meanwhile, Japanese bankers are flat out not interested in gambling on Toshiba’s memory business while it’s dwindling.
The Innovation Network Corporation of Japan (INCJ), which repeatedly said earlier this year that it has no intention of investing in Toshiba’s memory business to save Toshiba, might prove an exception. INCJ has been cornered by the Ministry of Economy, Trade and Industry of Japan (MEITI), which supervises its investments.
Even if you’re not a student of Japanese politics, you can discern the flawed logic in Toshiba’s conclusion to sell its cash-cow memory business.
Next page: Save Toshiba, but what about Toshiba's memory biz?