pole position

Foxconn Takes Lead in Toshiba Chip Chase

No rival suitor can match his combination of motivation, means and expertise.
At Closing, April 19th
289.00 JPY

Three statements late Wednesday from Terry Gou summarize why his Foxconn Technology Group should be considered a serious bidder for Toshiba Corp.'s memory-chip business.

  • We need memory technology;
  • Antitrust is not a problem;
  • We can help build factories.

Gou was speaking in southern China, where he was announcing a new display-panel plant in Guangzhou. Of the list of suitors for the Toshiba unit -- including private equity, rival memory-chip makers and a business partner -- only Foxconn can confidently make all three assertions.

In most cases, those that fulfill the first criteria probably don't meet the second. Private equity investors -- which Bloomberg News reported Wednesday include Bain Capital, Silver Lake Partners and KKR & Co. -- most certainly don't need memory technology, they're merely seeking upside from a punt on the ailing Japanese giant's crown jewel.

Beggars and Choosers

Toshiba's market value has plummeted following another financial scandal, yet its board is likely to be choosy about a buyer for its coveted chip business

Source: Bloomberg

Meanwhile, those that may benefit from the technology, such as other electronics players, are likely to face antitrust problems or struggle with the financial burden of continuing to spend money in an industry where there's no respite from the cycle of investment and obsolescence.

The fact that Gou announced a $9 billion investment in display-panel factories within a year of taking control of Sharp Corp. is testament to the final point, and will serve him well when it comes time to convince Toshiba's board.

What criteria the board will follow in selecting a buyer isn't yet clear, but if recent news and other takeovers are anything to go by, writing the fattest check may not be enough to secure victory.

If that's the case, then Gou just made himself the front-runner in the battle for Japanese assets.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Tim Culpan in Taipei at tculpan1@bloomberg.net

    To contact the editor responsible for this story:
    Matthew Brooker at mbrooker1@bloomberg.net

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