Accounting scandal might force Toshiba to sell off its NAND flash business

Toshiba is investigating options for restructuring itself after its accounting scandal in 2015 and massive write-down on the value of its U.S. nuclear business. The tech company recently confirmed that it’s evaluating splitting its semiconductor business with partner, Western Digital, and that any entity created in a deal between the companies would be eligible for an IPO in the future. 

Troubled since 2015, Toshiba announced that it had lied about its earnings over the previous seven years and overstated its total profits by $1.2 billion. The company also improperly valued inventory by an unspecified amount. This scandal caused two former CEOs and eight other executives to resign their positions, wiping $8 billion off of Toshiba’s market value.

Another problem that Toshiba has been faced with is dealing with the poor performance of its nuclear division. Back in 2006, the company bought Westinghouse for $5.4 billion but soon after had to write down $2.3 billion of the expense. In 2016, Westinghouse purchased CB&I Stone & Webster, a U.S.-based firm specializing in nuclear projects. Despite the fact that Westinghouse paid $229 million for the firm, Toshiba is facing a write-down of up to $6 billion related to its acquisition of the company. In the past decade, Toshiba’s worldwide nuclear ambitions have run into multiple roadblocks, thanks to cheap natural gas in the United States and the Fukushima disaster killing Japanese interest in nuclear power.

Of course, such news brings up the company’s NAND flash factories, which have been fairly successful but also come with high operating costs. No modern NAND flash manufacturer can afford to pause its migration to 3D NAND or lower process nodes, which means that there’s a continuous cycle of reinvestment in plants and equipment. Currently, Toshiba is thinking about selling a 20% interest in its NAND flash business in exchange for $1.77−$2.65 billion in cash. That money could provide a much-needed injection of capital and balance sheet improvement that could help the company while it deals with its structural problems and evaluates the future of its multiple enterprises.

Because Toshiba and Western Digital already operate a NAND flash plant in Yokkaichi, Japan, collaborating together makes sense for both companies. Whether the company would function as a jointly owned subsidiary or continue as a part of Toshiba is still being discussed, as is how much of its NAND business Toshiba wants to sell. Toshiba has announced that it is building 64-layer NAND flash with plans to ship hardware in 2017.

Source: Extreme Tech