Apple joins consortium in revised £14bn bid for Toshiba's chip business

Successful bid with Bain Capital may help iPhone maker source memory chips for smartphones in battle with rival Samsung

Apple has joined a consortium of businesses led by the investment company Bain Capital in a last-ditch £14bn offer for Toshiba’s chip unit.

Toshiba is the world’s second-largest producer of Nand memory chips, which are used in smartphones and computers. A deal may be crucial for Apple in keeping down prices of components for its iPhone, as well as reducing dependence on the market leader, Samsung.

According to reports by Reuters, Apple has been brought in to help bolster the bid as Toshiba and the hard drive manufacturer Western Digital struggle to strike a deal, despite partnering on the joint venture chip business.

Frank Gillett, an analyst at the market research company Forrester, said: “Apple is so big they need to multisource.” Apple had to ensure there were as many chip suppliers as possible in the market to keep prices competitive, he added.

A successful Toshiba bid could also provide an important source of chips for Apple, reducing its dependence on Samsung, the smartphone maker’s chief rival. Samsung produces some of the company’s A series processors alongside chips for the iPhone, iPad and other devices.

Alternatively, a combined Toshiba and Western Digital business could be almost as large as Samsung’s memory unit, giving it more negotiating leverage against Apple.

Toshiba has been scrambling to sell its flash memory unit to cover billions of dollars in losses at its bankrupt US nuclear business, Westinghouse. Toshiba’s relationship with US-based Western Digital has been rocky throughout the auction process, to the point that other bidders were favoured first. Western Digital has also initiated legal action that threatens to derail any deal that does not have its consent.

The revised offer from Apple, Bain and others is worth 2tn yen (£14bn). Bain and the South Korean chipmaker SK Hynix will be responsible for 1.1tn yen, while Apple will provide up to 400bn yenand Japanese banks about 600bn yen in support. The proposal also calls for Toshiba to be part of the deal, investing 200bn yen, according to Reuters.

A Bain-led group had previously been chosen by Toshiba as its preferred bidder. But those talks lapsed as Japanese government investors who had been part of the consortium told Toshiba they were reluctant to close a deal in the face of the legal risks posed by Western Digital’s demands.

Bain’s new offer is designed to negate that problem, inviting the state-backed investors Innovation Network Corporation of Japan and Development Bank of Japan to invest in the business only after any arbitration with Western Digital is settled.

The bid surpasses the 1.9tn yen offered by the Western Digital-led consortium, which also includes the US private equity company KKR & Co. However, banking sources have previously said Western Digital was working to get its proposal up to 2tn yen.

Bain’s revised bid was first reported by Japanese broadcaster NHK, which said it would be structured so it and Toshiba would each hold 46% of the unit.

Toshiba wants to reach a deal soon and it is not clear whether it will give serious consideration to Bain’s proposal, but it missed a self-imposed deadline of Thursday for a deal with Western Digital.

Contributor

Samuel Gibbs

The GuardianTramp

Related Content

Article image
Samsung Galaxy S4 launch marks latest skirmish in firm's battle with Apple
South Korean firm brings hostilities to iPhone maker's home shores by debuting its latest smartphone in New York

David Batty

15, Mar, 2013 @1:23 AM

Article image
iPhone 5S and iPhone 5C launch to 'brighten everyone's day', says Apple

Apple will launch top-end iPhone 5S and cheaper iPhone 5C in an event to be shown to a select group in China

Charles Arthur, technology editor

09, Sep, 2013 @10:05 AM

Article image
Cambridge staff 'fobbed off' at meeting over Arm sale to Nvidia, says union
UK government urged to intervene in SoftBank’s $40bn deal with US tech firm

Rob Davies

15, Sep, 2020 @6:00 PM

Article image
Does Apple's sales slump mean the firm has finally peaked?
The company’s $1tn valuation has fallen 20% and fewer people are buying its iPhones

Alex Hern

16, Nov, 2018 @3:14 PM

Article image
Apple iPhone 5C and 5S launch gives China hang up over high price
Chinese analysts and consumers at Apple press event in Beijing say plastic 5C model is not low-end as publicity had suggested

Jonathan Kaiman in Beijing

11, Sep, 2013 @1:50 PM

Article image
iPhone X: thousands queue as Apple proves it still has the X factor
Demand for the £999 ‘future’ of the iPhone bucks the trend of recent years, with large crowds and some fans queuing for days to get their hands on one

Samuel Gibbs

03, Nov, 2017 @11:30 AM

Article image
Apple under fire over reports students worked illegal overtime to build iPhone X
Manufacturing partner Foxconn had student interns working 11-hour days to make most expensive iPhone ever

Alex Hern

21, Nov, 2017 @5:01 PM

Article image
Apple: what do you do after becoming the world’s most profitable company?
Its record-setting quarterly results stunned the tech industry – and its Chinese competitors, who have now been eclipsed in their own home market. But reaching the financial pinnacle creates some questions – and even problems – of its own. By Rupert Neate

Rupert Neate in New York

31, Jan, 2015 @3:01 PM

Article image
Samsung v Apple: Obama overturning import ban is not about favouritism

Analysis: The reversal on US imports for the iPhone 4 is about stopping owners of standards-essential patents from charging extortionate prices

Charles Arthur

05, Aug, 2013 @3:41 PM

Article image
To woo China, Apple must learn that it’s not in California any more
Developing markets offer growth: but the firm’s phones must become cheaper and its services must compete with local rivals

06, Jan, 2019 @7:00 AM