Apple, Foxconn & TSMC consider swooping in on Toshiba's flash memory business

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Apple, Foxconn, and TSMC are among a group of over 10 companies hoping to win a majority stake in Toshiba's flash memory business, reports say.




Some other bidders include Microsoft, SK Hynix, Micron Technology, and Western Digital, according to DigiTimes, quoting Japan's Nikkei. The latter noted that Toshiba is asking bidders to value its operations at about 2 trillion yen ($17.6 billion), and make at least a 50 percent investment.

The Toshiba board is expected to hold a final meeting on the sale on Friday, then organize an emergency shareholders' meeting in March before an official decision on whether to go ahead later that month. Share sales would only begin in April at the earliest, but could be a fait accompli by the end of May.

The outcome of the sale could have a major effect on Apple --?Toshiba remains the largest supplier of memory for the iPhone, according to Nikkei.
Toshiba remains the largest supplier of flash memory for Apple's iPhone.
Word that Toshiba was interested in spinning off its memory business first surfaced back in 2015, when the company also sold its image sensor business to Sony to $155 million. Changes at Toshiba have come after the company was embroiled in an accounting scandal, in which it overstated profits.

Previously in looking to sell its flash memory business, the company wanted to limit the stake bidders could hold to 20 percent or less, which would've allowed Toshiba to retain control. It is the second biggest memory chip supplier in the world, and despite the broader firm's financial woes, the memory unit produced 110 billion yen ($973.5 million) in profits during a fiscal year ending last March.

On Feb. 14, Toshiba revealed that its net worth would drop to 150 billion yen (minus $1.3 billion) without radical action, owing to problems like its accountancy scandal and billions of dollars in losses on its nuclear operations.

Investment by Apple or one of its key suppliers could be useful to the former's bottom line, potentially locking up memory shipments while keeping prices low. The company is constantly working to maximize profit margins, often by putting pressure on suppliers to offer better deals.

Comments

  • Reply 1 of 16
    blastdoorblastdoor Posts: 1,954member
    Investing in the supply chain seems so much more appealing than big splashy M&A. I love stories like this.
  • Reply 2 of 16
    Apple should really have a financial stake in many of their largest suppliers (except Samsung, for obvious reasons).
    jbdragoncali
  • Reply 3 of 16
    This is something analysts will hate because they didn't think of it and because it will not dent Apple's cash pile. 
    jbdragonwatto_cobra
  • Reply 4 of 16
    MacProMacPro Posts: 18,368member
    blastdoor said:
    Investing in the supply chain seems so much more appealing than big splashy M&A. I love stories like this.
    Agreed.  Didn't Apple do a similar thing with Sharp a while back?
    watto_cobra
  • Reply 5 of 16
    MacProMacPro Posts: 18,368member

    This is something analysts will hate because they didn't think of it and because it will not dent Apple's cash pile. 
    Analysts think? ;)
    jbdragoncaliwatto_cobra
  • Reply 6 of 16
    melgrossmelgross Posts: 31,901member
    This is a lot of money. Unless Apple would go in as a member of a consortium, as the article sort of hints there might be, I don't see them putting a lot of money into it. Half of $18 billion would be far more than they've ever spent on an investment. 

    What I don't understand, is why some others are seemingly interested. Microsoft, for instance. They no longer have a phone business, and their Surface Pro tablets sell maybe 3.5 million a year, and the Surface Book, much less. They won't have problems securing that much memory.
    watto_cobracali
  • Reply 7 of 16
    blastdoorblastdoor Posts: 1,954member
    melgross said:
    This is a lot of money. Unless Apple would go in as a member of a consortium, as the article sort of hints there might be, I don't see them putting a lot of money into it. Half of $18 billion would be far more than they've ever spent on an investment. 

    What I don't understand, is why some others are seemingly interested. Microsoft, for instance. They no longer have a phone business, and their Surface Pro tablets sell maybe 3.5 million a year, and the Surface Book, much less. They won't have problems securing that much memory.
    Whether $18 billion is a lot of money depends on what you compare it to. Compared to the Beats acquisition it's a lot; compared to annual share repurchase expenditures it's not too huge. 

    Apple's dividend yield is currently about 1.7% so the ROI for buying back stock is 1.7%. So the bar is pretty low in terms of what ROI is needed in order to make the investment worthwhile. Apple is very likely to continue needing gobs of flash for the next 5 years at least. Toshiba seems to know how to make the stuff. So it's not a very risky investment in those senses. Maybe still more risky than a share repurchase, but not as risky as the Beats acquisition. 

    So I think that as long as they don't overpay it could be a worthwhile investment. And I can't imagine  they'd overpay. So fi they do it, I think it will be a good thing. 
    watto_cobra
  • Reply 8 of 16
    melgrossmelgross Posts: 31,901member
    blastdoor said:
    melgross said:
    This is a lot of money. Unless Apple would go in as a member of a consortium, as the article sort of hints there might be, I don't see them putting a lot of money into it. Half of $18 billion would be far more than they've ever spent on an investment. 

    What I don't understand, is why some others are seemingly interested. Microsoft, for instance. They no longer have a phone business, and their Surface Pro tablets sell maybe 3.5 million a year, and the Surface Book, much less. They won't have problems securing that much memory.
    Whether $18 billion is a lot of money depends on what you compare it to. Compared to the Beats acquisition it's a lot; compared to annual share repurchase expenditures it's not too huge. 

    Apple's dividend yield is currently about 1.7% so the ROI for buying back stock is 1.7%. So the bar is pretty low in terms of what ROI is needed in order to make the investment worthwhile. Apple is very likely to continue needing gobs of flash for the next 5 years at least. Toshiba seems to know how to make the stuff. So it's not a very risky investment in those senses. Maybe still more risky than a share repurchase, but not as risky as the Beats acquisition. 

    So I think that as long as they don't overpay it could be a worthwhile investment. And I can't imagine  they'd overpay. So fi they do it, I think it will be a good thing. 
    Compared to any acquisition or investment Apple has ever made in any other company. That the comparison that needs to be made, and is the only comparison that needs to be made.

    look, Apple has, by now, over $250 billion in cash and marketable securities. While most of that is overseas, if they wanted to they could use whatever portion they needed for any investment they really wanted. They were in negotiations with Imagination last year to buy the rest of the company, but they didn't want to pay what was asked. It would have been much less than this. There have been many other deals of greater importance to Apple that fell through because Apple got cold feet when looking at the price. 

    Its not likely that Apple will have a problem obtaining memory at a good price if they don't invest in this. They are a customer every company wants.
    watto_cobracali
  • Reply 9 of 16
    With Intel's development of 3D XPoint, why would Apple be interested in investing in an out of date and inferior technology?

    Toshiba's products are inferior and too expensive. Even with Apple as a customer, they in dire straits financially. How is Apple going to save them and what do they really have to offer? If they are losing money with Apple as a customer, exactly how does Apple stand to benefit by acquiring them? Obtaining the memory at cost, but even at cost the prices are likely higher than what Apple is now paying?!? Apple might very well be better off buying flash memory from Samsung. I know there is a lot of animosity towards Samsung but their 850 pro SSDs are excellent drives and superior to any drive based on Toshiba memory with the fastest speeds, outstanding warranties and best overall value. I don't even look at the Toshiba OCZ SSDs. Planar NAND just doesn't cut it compared to V NAND not by a long shot.  They just aren't competitive with the corresponding Samsung product. If Apple is using Toshiba memory, they are likely getting it at a cost that is unsustainable for Toshiba over the long term for an inferior product. 

    Like JDI and Sharp, Toshiba has been outclassed and outcompeted.  Apple is not acquiring JDI because they are so hopelessly behind Samsung in OLED technology, it would be costly and futile. The same holds true of Toshiba's flash memory division. Their technology is no longer competitive with Samsung's 3D NAND product never mind the revolutionary new product that Intel is bringing to the market. 

    I'm with Mel Gross on this one. It makes no sense for Apple to do this. 
  • Reply 10 of 16
    My mistake. Toshiba is currently making a profit from their flash memory operations. But the product is inferior to Samsung's V-NAND product and much inferior to Intel's 3D XPoint. 

    Toshiba's market position is tenuous at best. This might be an attempt by the company to unload the division while still profitable. The long term viability of their planar NAND product is under serious threat. And though they announced and sampled a V-NAND product nearly two years ago, they still don't have anything on the market remotely competitive to Samsung's products. 

    This one smells similar to GTAT. Not certain that Apple would want to revisit that scenario. 
  • Reply 11 of 16
    melgrossmelgross Posts: 31,901member
    Several years ago, Apple was going to invest 50/50 with Samsung in a memory production plant. Each was going to invest about $500 million, I think it was.

    then, Samsung was convicted in yet another price fixing scheme, for I believe, LCD panels, and Apple withdrew from the partnership.

    just now, Apple was negotiating to buy Ron Howard's production company, a highly successful company, but backed down because of, again, price.

    ive read a number of articles that I agree with about Apple's investments, and lack of investments. When a company can afford a company, but doesn't have the amount of cash to waste on overpayment, as long as that purchase isn't necessary, they can bypass it. But companies like Apple, if they feel a company would give them a major boost in an area the feel they need to get into, can afford to overpay for that company, and should.

    many of us here remember Google buying Motorola for $12.5 billion a few years ago. What many people don't realize was that on the day of the announced acquisition, the market value of Motorola was just $6.5 billion. A fair market purchase price would have been about $8 billion, as most companies go for about a 30% premium. Google spent what they did so that no one would decide to bid against that purchase, because Google felt Motorola was a necessary purchase. They were willing to pay a $4 billion premium to that purpose.

    yes, it's true that it didn't work out, as Google didn't handle Motorola well after they go it, and likely, it wasn't a good idea in the first place. They wrote most of it off, and then sold it to Lenovo a couple of years later for a small fraction of what they paid, though they kept the patents, and are licensing them.

    the point to that story is that Google was a much smaller company than Apple, with a much smaller hoard of cash, yet they were willing to take a chance. Look at Google (now Aphabet) today, and you'll see that that bad bet hasn't adversely affected them at all. Sales and profits are at a high, as is their stock.

    apple really does need to be more aggressive. We have read many times about Apple TV initiatives, and what little has come of them. It's all about the money. Apple is simply not willing to pay the amount that they need to to get their plans working. Meanwhile, vastly smaller companies are making these deals that Apple backs away from. These companies wouldn't be making these deals if they weren't good ones. But Apple is boxing themselves in.
    edited February 2017
  • Reply 12 of 16
    wizard69wizard69 Posts: 12,865member
    melgross said:
    This is a lot of money. Unless Apple would go in as a member of a consortium, as the article sort of hints there might be, I don't see them putting a lot of money into it. Half of $18 billion would be far more than they've ever spent on an investment. 

    What I don't understand, is why some others are seemingly interested. Microsoft, for instance. They no longer have a phone business, and their Surface Pro tablets sell maybe 3.5 million a year, and the Surface Book, much less. They won't have problems securing that much memory.
    It isn't really a lot of money for Apple though.    Frankly I think it make good sense for them to do so as this is a well respected business producing quality hardware.   Apple likely has 18 billion sitting in a bank someplace in Japan right now.   I'd pay cash as it would be an investment that will pay off for Apple for a very long time.

    In any event I thought that Toshiba's problems came from their nuclear plant business.   This taking a big hit due to the tsunami that flooded the nuclear power plant in Japan.    What ever the case, the current problems at Toshiba create a unique opportunity to buy ones way into the DRAM business.
  • Reply 13 of 16
    In general, I am all for Apple making aggressive investments in suppliers - even to the point of acquisitions. That being said, things need to be tempered in some ways.

    Technologies like TouchID, which was acquired by buying Authentec, make sense to acquire outright. Because, it shuts it out from others, plus it needs a lot of investment to refine the technology to make it usable at the level that Apple wants.

    Beats was not at all a useful acquisition - especially not at the price Apple paid for it.

    Imagination would have been good - especially if Apple wants to launch it A-series processors in desktop, and make more investments in Metal. It is actually stupid of Apple to not buy Imagination considering what edge they have with Metal. Absolutely the only reason I can think of, is that Apple is considering doing something on its own in that space. Which is also dicey because of IP issues. Buying Imagination makes immense sense.

    Buying Toshiba makes sense from one angle - if Apple decides that the speed and longevity of Toshiba technology is good enough to live with for next 10 years or so. And it will be more important to dramatically increase volumes by completely stopping the usage of spinning drives altogether. An investment of $10B in old technology still makes sense, if volumes at Toshiba are going to double and stay high for next 10 years! The only one who can actually take that call is Apple.

    And even if Apple takes that call, it won't be about consumer facing devices. It will likely be about Cloud storage and power savings.
  • Reply 14 of 16
    calicali Posts: 3,495member
    macarena said:
    In general, I am all for Apple making aggressive investments in suppliers - even to the point of acquisitions. That being said, things need to be tempered in some ways.

    Technologies like TouchID, which was acquired by buying Authentec, make sense to acquire outright. Because, it shuts it out from others, plus it needs a lot of investment to refine the technology to make it usable at the level that Apple wants.

    Beats was not at all a useful acquisition - especially not at the price Apple paid for it.

    Imagination would have been good - especially if Apple wants to launch it A-series processors in desktop, and make more investments in Metal. It is actually stupid of Apple to not buy Imagination considering what edge they have with Metal. Absolutely the only reason I can think of, is that Apple is considering doing something on its own in that space. Which is also dicey because of IP issues. Buying Imagination makes immense sense.

    Buying Toshiba makes sense from one angle - if Apple decides that the speed and longevity of Toshiba technology is good enough to live with for next 10 years or so. And it will be more important to dramatically increase volumes by completely stopping the usage of spinning drives altogether. An investment of $10B in old technology still makes sense, if volumes at Toshiba are going to double and stay high for next 10 years! The only one who can actually take that call is Apple.

    And even if Apple takes that call, it won't be about consumer facing devices. It will likely be about Cloud storage and power savings.

    Still bit*hing about Beats?

    Beats makes 3B in sales every year as of time of purchase. They probably make more now. 

    Tell yourself that was a useless purchase again. 
  • Reply 15 of 16
    melgrossmelgross Posts: 31,901member
    wizard69 said:
    melgross said:
    This is a lot of money. Unless Apple would go in as a member of a consortium, as the article sort of hints there might be, I don't see them putting a lot of money into it. Half of $18 billion would be far more than they've ever spent on an investment. 

    What I don't understand, is why some others are seemingly interested. Microsoft, for instance. They no longer have a phone business, and their Surface Pro tablets sell maybe 3.5 million a year, and the Surface Book, much less. They won't have problems securing that much memory.
    It isn't really a lot of money for Apple though.    Frankly I think it make good sense for them to do so as this is a well respected business producing quality hardware.   Apple likely has 18 billion sitting in a bank someplace in Japan right now.   I'd pay cash as it would be an investment that will pay off for Apple for a very long time.

    In any event I thought that Toshiba's problems came from their nuclear plant business.   This taking a big hit due to the tsunami that flooded the nuclear power plant in Japan.    What ever the case, the current problems at Toshiba create a unique opportunity to buy ones way into the DRAM business.
    It's a lot of money to them. Believe it. It's easy to say this, but it's different when you're the one making the decision. The point is that the largest investment Apple has ever made is the $3.1 billion when buying Beats. Moving to $18 billion is a major step.
  • Reply 16 of 16
    melgrossmelgross Posts: 31,901member
    cali said:
    macarena said:
    In general, I am all for Apple making aggressive investments in suppliers - even to the point of acquisitions. That being said, things need to be tempered in some ways.

    Technologies like TouchID, which was acquired by buying Authentec, make sense to acquire outright. Because, it shuts it out from others, plus it needs a lot of investment to refine the technology to make it usable at the level that Apple wants.

    Beats was not at all a useful acquisition - especially not at the price Apple paid for it.

    Imagination would have been good - especially if Apple wants to launch it A-series processors in desktop, and make more investments in Metal. It is actually stupid of Apple to not buy Imagination considering what edge they have with Metal. Absolutely the only reason I can think of, is that Apple is considering doing something on its own in that space. Which is also dicey because of IP issues. Buying Imagination makes immense sense.

    Buying Toshiba makes sense from one angle - if Apple decides that the speed and longevity of Toshiba technology is good enough to live with for next 10 years or so. And it will be more important to dramatically increase volumes by completely stopping the usage of spinning drives altogether. An investment of $10B in old technology still makes sense, if volumes at Toshiba are going to double and stay high for next 10 years! The only one who can actually take that call is Apple.

    And even if Apple takes that call, it won't be about consumer facing devices. It will likely be about Cloud storage and power savings.

    Still bit*hing about Beats?

    Beats makes 3B in sales every year as of time of purchase. They probably make more now. 

    Tell yourself that was a useless purchase again. 
    Beats sales the year Apple bought them was about $1.3 billion, not $3 billion.
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