Friday, January 27th 2017

Toshiba Confirms Spin Off of Its NAND Flash Production Business

After some reports pegged this event has likely and upcoming, Toshiba has now confirmed that they will be spinning off their NAND production business, whilst simultaneously parting with a 20% minority stake on the resulting business. This would inject Toshiba's coffers with enough liquidity to keep the company afloat, whilst letting them keep a hold of their most profitable business.

While details are still scarce (namely regarding the structuring of this spin off and who will be the investor to buy the reported 20% stake that Toshiba is willing to part with (with it most likely being Western Digital, as we've mentioned in our previous piece), the company has announced that they want to complete the transaction by the end of this quarter, March 31st.
For Toshiba, NAND flash production is strategically important because it enables the company to produce all types of storage devices in-house, allowing it to keep total production verticality, since product development, inception and design, all the way towards parts manufacturing and assembly - which leads to higher margins on each product sold.

The only other company that can manufacture all types of storage products using its own media is Western Digital, which already has working relations, in the form of joint ventures, with Toshiba. As such, Western Digital would be the perfect investor, since it already has everything needed (from infrastructure, production and quality assurance to channel partners) to produce actual storage devices.

According to Reuters, sources have said Toshiba aims to raise more than 200 billion yen ($1.7 billion) from the sale: with other potential investors including private equity firms and the government-backed Development Bank of Japan.

Though it has to be said: selling of your most profitable business may be a short-term need, but it's surely a long-term risk. Mark Newman, an analyst at Sanford Bernstein in Hong Kong, reiterated the fact that such moves are usually met with long-term hurdles that may help to sink the company even more, by saying that "The NAND business is the only one with value, as it makes up all of the semi-conductor profits, which comprise 75 percent of the overall company's profit. I won't be surprised if they sell another 20 percent in a few years time and then another 20 percent.".

The other most recognizable spin off in recent years has been AMD's spin off of their manufacturing business and the creation of Globalfoundries. The verdict is still up in the air regarding that business decision, with AMD still incurring regular penalties and charges that they would otherwise be free of (though it would appear, looking only towards the company's recent history, that it is now paying off).

We'll just have to wait and see how this turns out, but this might mean that Western Digital will become even more of a juggernaut in NAND production - and we all know what happens when one company has the leverage on any given market, even if it isn't, in the legal sense of the word, a monopoly. Source: Reuters
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10 Comments on Toshiba Confirms Spin Off of Its NAND Flash Production Business

#1
ssdpro
It is getting hard to refute that OCZ was a cancer or virus of some kind. After acquisition by Toshiba it continued to infect both financial reports and product quality of the host.
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#2
TheGuruStud
Doesn't this just solidify their eventual fate?

Might as well have liquidated it all.
Posted on Reply
#4
cdawall
where the hell are my stars
ssdpro, post: 3592321, member: 131037"
It is getting hard to refute that OCZ was a cancer or virus of some kind. After acquisition by Toshiba it continued to infect both financial reports and product quality of the host.
All of the OCZ/Toshiba products were normally top of their class...?
Posted on Reply
#5
deemon
cdawall, post: 3592717, member: 28601"
All of the OCZ/Toshiba products were normally top of their class...?
my 6TB Toshiba X300 normal hdd started getting bad sectors after 5 months of usage... duh.
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#6
cdawall
where the hell are my stars
deemon, post: 3592821, member: 156683"
my 6TB Toshiba X300 normal hdd started getting bad sectors after 5 months of usage... duh.
You know that's using Hitachi desktop lineup of drives correct?
In May 2012, WD divested to Toshiba assets that enabled Toshiba to manufacture and sell 3.5-inch hard drives for the desktop and consumer electronics markets to address the requirements of regulatory agencies.
Posted on Reply
#7
ssdpro
cdawall, post: 3592717, member: 28601"
All of the OCZ/Toshiba products were normally top of their class...?
Depends on how you define "top of their class". From 2009-2013, it could be argued they had top of class in performance as the competition was limited. Unfortunately, limited R&D kept them from ever achieving a respected level of reliability during that time. From 2013 on, the lack of R&D also kept them from producing matched-performance solutions to Samsung's offerings. Currently, with OCZ Storage Solutions totally absorbed into Toshiba, their products are pretty darn reliable but dated. They still market the VT180 which is a respun Vertex 180 that is still based on the the 2012 Barefoot 3 controller - a controller that is reasonably fast for SATA3 but has 2012 features. OCZ/Toshiba is so embarrassed by this they don't even specify the controller in their own product brief. Setting that aside their other SATA3 offerings are some "Toshiba controller" that is reported as a rebadged 3rd party controller (see http://tinyurl.com/zx9zltu ). Then there is the RD400 which is plenty fast but lags behind the 950 and 960.

What is left of OCZ may still have a real in-house controller lingering in there. Perhaps it will appear this year. The point is OCZ Technology had products and management that left it in bankruptcy (not to mention accounting fraud and SEC-charged executives). After Toshiba's purchase, that company leeched into Toshiba as Toshiba now has their own accounting scandal and now financial problems. Yes, I was being a bit sarcastic and ironic. However, the facts are the facts and it isn't too sarcastic.
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#8
cdawall
where the hell are my stars
The RD400 is about middle of the pack pretty close with samsung and intel's 750 depending on specific test. The barefoot 3 controller still runs speedwise with everything else... I wouldn't say they are perfect, but they are no better or worse than anyone else.
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#9
ssdpro
cdawall, post: 3593152, member: 28601"
The RD400 is about middle of the pack pretty close with samsung and intel's 750 depending on specific test.
The RD400 is actually really close with the 950 Pro in real world and benchmarks and even real world with the 960.

cdawall, post: 3593152, member: 28601"
The barefoot 3 controller still runs speedwise with everything else...
Agreed. It is a great performing controller but lacks almost every energy-related feature of modern controllers. It flat out can't be used in a notebook if the intention is running on battery.

cdawall, post: 3593152, member: 28601"
I wouldn't say they are perfect, but they are no better or worse than anyone else.
Agreed, they are definitely not perfect. It is hard to argue OCZ/Toshiba is not worse though. OCZ Technology went bankrupt. OCZ Storage Solutions failed as a independent subsidiary. Their sales remain dismal and Toshiba as a whole is floundering. With the cSSD and eSSD division of Toshiba loosing direct NAND production it is hard to see them recovering.
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#10
cdawall
where the hell are my stars
There are a lot more issues outside of OCZ that toshiba was/is dealing with.
Posted on Reply