Apple and Google in the Memory Business?

News@com | Friday April 14 2017 11:55 | Comments (0)

A recent report out of Japan says three of tech’s biggest and most prominent companies are interested in bidding on Toshiba’s memory chip business. Can this be true?

Here’s one to put in the healthy skepticism file: a recent report from a Japanese newspaper claims that Apple, Google and Amazon have all thrown their hats into the bidding for Toshiba’s chip business. Hmmmm.

A few disclaimers about this up front. First, the report, which originated in the Yomiuri Shimbun a week and a half ago, doesn’t include the attribution of any sources. Second, none of the companies mentioned have confirmed its accuracy.

But neither qualifier is in and of itself debunks the story. First of all, the fact that Apple, Google and Amazon have all stayed mum on the report is par for the course. Secondly, with the exception of SK Hynix’s bid for a stake in Toshiba in February, all of the companies mentioned as bidders in the Toshiba chip sweepstakes so far have come to light through anonymous sources, simply because nobody with any real knowledge of the process is supposed to be talking at all.

For most of the past decade, companies have been scrambling to get out of the memory chip business. Some have literally died trying. Is it really conceivable that three of the largest and most successful companies in high tech — none of which are semiconductor suppliers — are willing to plunk down something in the neighborhood of $18 billion to buy their way in?

Perhaps not. More recently, news reports have indicated that Toshiba has whittled the list of potential buyers down to a handful, with no further mention of Apple, Google or Amazon (more on this below).

Whether there was ever any truth to the report of Apple, Google and Amazon sniffing around Toshiba, the fact that this possibility even generated any smoke at all says two things: the memory business is better positioned right now than it has been in a long time and NAND flash is a very desirable commodity right now in this era of Big Data deluge.

“If [the report is] true, it shows Amazon and Google consider flash to be a key component for their datacenters and are willing to put money down to secure supply of this strategic commodity, especially in a market where NAND flash supply is tight,” said Greg Wong, founder and principal analyst at Forward Insights, a market research firm focused on the memory chip business.

A recent report out of Japan says three of tech’s biggest and most prominent companies are interested in bidding on Toshiba’s memory chip business. Can this be true?

 Jim McGregor, principal analyst at Tirias Research, said he has surprised by the report for several reasons, including the historical cyclicality of the memory business and the fact that flash is on its last legs due to scaling challenges. Toshiba, he noted, is not at the forefront of any of the emerging memory technologies that may rise to prominence when flash runs out of gas.

“The only reason I can see for these companies to be interested in Toshiba is the fact that they all consume large amounts of flash for their massive data centers, as well as consumer applications, and that is unlikely to change until the other memory technologies mature over the next five to 10 years,” McGregor said in an email exchange with EE Times. “Buying Toshiba would give them valuable memory IP and a dedicated source and reduce their reliance on companies like Samsung and Micron, as well as alleviating the price swings that are common in the memory industry.”

Bill McClean, president of IC Insights, told EE Times that he could see why Apple may want to bid for the Toshiba chip unit considering how much flash it uses in its iPhones, iPads, Macs and other products. But McClean said the motivation for Amazon and Google is less clear.

“While these companies will indirectly use a lot of flash for their servers, they are usually buying their flash already installed in the system,” McClean said.

More recently, the Bloomberg news service has reported that bidders still in the running for Toshiba’s memory chip business include South Korea’s SK Hynix, which confirmed back in February it was interested, and a joint bid by Broadcom and private equity firm Silver Lake Management. Bloomberg and others have also reported that Taiwan’s Hon Hai Precision Co., the massive electronics contract manufacturer which operates under the trade name Foxconn, also remains in the running and has indicated that it is willing to pay as much as 3 trillion yen (about $27 billion), which is about 50 percent more than the $18 billion Toshiba had originally hoped to fetch for the business.

Meanwhile, the Japanese government continues to push for a domestic Japanese buyer for Toshiba’s memory chip business. Reports out of Japan indicate that government officials have met with representatives from Japanese firms to explore putting together a coalition to buy the business and keep it from falling into foreign control, similar to what was put together in 2012, when the display businesses of Toshiba, Sony and Hitachi were lumped together to make Japan Display Inc. So far, no such coalition appears to be in place this time around.

—Dylan McGrath covers the semiconductor industry and business news for EE Times.