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21 July 2017

Electronic Component Lead Time News (July 2017)

Generally speaking, lead times have remained constant since our previous update last month with only ST’s product lines increasing across the board. However, upon closer inspection, there has been a number of small but significant fluctuations that could seriously impact supply chains in the medium- and long-term.

Once again, the DSP and Microprocessor sector has seen availability on key product lines continue to contract. Supply constraints remain, with franchise distributors warning that they may be unable to deal with unforcasted demand.

In short

  • There has been a sharp rise in lead times for ON Semiconductor and ST Micro analog product lines.
  • Micron places DDR2 memory products on allocation.
  • Lead times for microcontroller and DSP lines are increasing, adding to an already constrained supply chain.

Analog

In our previous lead time update, we noted that industry figures were forecasting that the availability of ST Micro and ON Semiconductor product lines would decrease. Unfortunately, those predictions have turned out to be true as the two manufacturers have both increased lead times (twenty weeks for ST Micro, twenty-six weeks for ON Semiconductor,)

Discretes

There has been a fair amount of fluctuation regarding the lead times and pricing of discrete product groups. Thankfully, though, most of these changes appear to be minimal and should not be a problem to the majority of purchasing departments.

But as there has not been a decrease in lead times, we would advise you to check with independent distributors to secure stock, should it be required for an urgent production run – especially for ON Semiconductor product families. as franchise sources are excepting costs to rise in the short-term.

Memory

Once again, all of Toshiba’s NAND Flash products remain on available only through allocation and this situation is showing no signs of changing in the immediate future so plan your purchasing patterns accordingly.

Elsewhere, Micron’s DDR3 lines stay on allocation and these are joined by some DDR2 lines while Microchip has bumped up their lead times for their Eprom and EEprom products to a maximum of seventeen weeks.

Other manufacturers such as Fujitsu, IDT and Samsung have remained stable.

Optical

Lead times for the major opto product groups have remained static since our last update in June.

The main cause for concern in this area is the number of Osram lines that have either remained or been placed on allocation, though according to our information certain product lines will be removed come Q3 2017. This remains scant comfort for those who have been waiting patiently, however.

DSP & Microcontrollers

We have seen that lead times in this area have risen yet again, continuing a trend that dates back to the start of the year. Only Microchip and Texas Instruments have managed to keep lead time stable, with all the other major manufacturers in this sector posting incremental increase to ease existing supply constraints.

The one exception to this is ST Micro, with the Swiss-based company pushing their lead times out to a maximum of twenty-six weeks for their 8-bit, 16-bit and 32-bit product groups.

As per our statement last month, we would advise people to keep a close eye on this area for a sustained period of allocation could be on the cards if current market demand does not ease.

Logic

The logic market has remained stable, with no changes reported to either lead times or price through franchise channels.


27 June 2017

Toshiba Favours Bain Capital-led Group to Purchase its Chip Business

After months of speculation, Toshiba Corp has chosen its preferred bidders for its profitable chip business.

The successful party is a consortium of Bain Capital, a multi-assent investment firm, and a group of investors linked to the Japanese government. They will now move forward and attempt to finalise a deal estimated to be worth £14.2 billion.

Sources close to the matter have told Reuters that Bain Capital is set to be the biggest investor in terms of equity, stumping up a figure believed to be £6 billion.

Interestingly, the consortium’s bid was not the largest on the table. That honour went to the U.S. chipmaker Broadcom and its private equity partner, Silver Lake. However, this union did not have the implicit backing and visible support of the Japanese government, who want to keep the semiconductor technology under domestic control.

Additionally, many analysts believe that any deal could only be completed with the aid of Japanese government due to its complexity.

In a separate statement made earlier, Toshiba said that it would take into consideration concerns relating to the transfer of technology and the job security of its Japanese workforce. These comments gave the impression that Toshiba was willing to prefer a domestic-based buyer, rather than a foreign-based one that might threaten jobs and IP security.

As noted previously, Bain Capital will be the consortium’s largest investor. However, the investment firm is likely to receive some financial assistance from SK Hynix, the South Korean chipmaker.

A spokesperson for SK Hynix, the world’s second-largest manufacturer of flash memory parts, confirmed that the company helped the consortium to ‘seek new business opportunities’ but declined to give further details.

Other known investors include the Innovation Network Corp of Japan, the Development Bank of Japan and the core banking unit of the Mitsubishi UFJ Financial Group.

It is believed that Toshiba wishes to seal an agreement by the end of this month, to coincide with its annual shareholder's meeting.

However, the likelihood of such an agreement being ratified in the short term appears to be slim as Western Digital, an existing partner of Toshiba, has launched a legal challenge in a bid to prevent any deal taking place with its consent.

Toshiba said it was open to discussing the dispute with Western Digital, but insiders believe that it is unlikely to change stance on the status of its preferred bidder.

If those talks are not successful, then it could mean that both Western Digital and Toshiba will have to appear in court. A provision date of July 14th has been scheduled.

The availability of Toshiba’s semiconductors, including its popular lines of memory components, is likely to be static. Unfortunately, though for purchasers around the world, that means those long lead times are going to remain for the foreseeable future.


26 June 2017

Memory shortages to remain until 2018, analysts predict

The global shortage of memory products looks likely to remain in place until late 2018, industry analysts and sources have said.

It is believed that the world’s biggest firms, such as Apple and Samsung (both of whom are believed to be releasing new flagship devices this year), will largely be unaffected due to their exceptionally strong purchasing power.

With Tier One manufacturers being prioritised, this will mean that other companies will see their supply chains become additionally constrained.

LG Electronics, the multinational electronics company, admitted in a statement that they have shifted their purchasing plans, due to current market conditions.

“After the supply shortages emerged we brought forward our procurement decisions….to ensure a stable supply,” the South Korea firm said. It is believed that LG has moved their existing strategy by about a month.

However, simply moving forward purchasing decisions is unlikely to be a fruitful endeavour for the majority of purchasers. Some analysts have predicted that device makers could be forced to reduce the amount of DRAM and NAND chips that their products use if availability does not improve.

“The problem will be more acute for the NAND market,” an anonymous industry source told the Reuters news agency. “

The iPhone remains a critical source of demand given the huge sales volumes and recent moves to increase the storage capacity on the device.”

Apple is believed to be responsible for around 18% of the world’s total supply of NAND chips. In years gone by, many OEMs and distributors had made moves to build up their inventory in the first half of the year to avoid ‘competing’ with Apple, which typically starts manufacturing in the summer for a mid-Autumn product launch.

However, the current shortage situation has caught many people out – including Apple.

Despite not being confirmed, the consensus is that Apple has struggled to source and secure all the parts that they will require for an upcoming production run. This, naturally, has had a knock-on effect on the entire electronics industry.

Although not widespread, signs of supply chains being squeezed to breaking point have started to emerge.

Earlier this year, Huawei was criticised by consumers after it was discovered that it had used a mixture of memory components in its flagship P10 phone, leading to a significant variation in performance from device to device.

In a bid to help improve the availability of key memory components, chip makers have started to allocate additional capital to help increase production. Samsung Electronics, for example, will open a $14 billion facility in South Korea later this year and another memory giant, SK Hynix, will begin to make its new NAND lines in the coming months.

Speaking to Reuters, an official representing SK Hynix admitted that current market conditions were ‘tight’, noting that its own inventory levels at a historic low.

But despite the best efforts of chip manufacturers, industry analysts believe that any meaningful new influx of parts will not arrive on the market until 2018 – at the earliest.

Additional reading

With 177,232 stocked line items available for next-day delivery and access to a further 10 million lines through our global procurement network,

Cyclops Electronics can source the parts you need to keep your production lines running. As well as being a leading independent stocking distributor, we can also help our customers with long-term purchasing plans.

Our dedicated scheduled service can help you secure all the stock you need and release it to suit your production runs.


21 June 2017

EU to Look At The Qualcomm-NXP Deal

Last October, a press release appeared on Qualcomm’s website.

“Qualcomm Incorporated (NASDAQ: QCOM) and NXP Semiconductors N.V. (NASDAQ: NXPI) today announced a definitive agreement…under which Qualcomm will acquire NXP” it began.

However, that deal, struck after months of negotiations, has not yet formally been completed.

Earlier this week, the EU’s competition regulator announced that it will take a closer look at the $47bn takeover.

The reason for the inquiry is that concerns have been raised that the acquisition and subsequent merger of two leading semiconductor manufacturers could be bad for both consumers and innovators.

Margrethe Vestager, the EU competition commissioner, said: “As semiconductors are used in practically every electronic device, we are dependent on them.

“With this investigation, we want to ensure that consumers will continue to benefit from secure and innovative products at competitive prices.”

The EU also said, on Friday, that it had fears that the combined Qualcomm and NXP entity could exclude rival suppliers, increase royalties and therefore impose artificial price rises.

This news comes at a bad time for Qualcomm because the San Diego-based company is already fighting one antitrust battle in America with the U.S. Federal Trade Commission over the use of “anticompetitive” tactics. At the same time, Qualcomm has become embroiled with an ongoing legal case with Apple.

A secondary area of focus of the EU Commission is believed to be on the potential for merging Qualcomm’s wireless processors with NXP’s Near Field Communication (NFC) chips, which together are used in mobile payment systems.

Responding to the opening of the investigation, a spokesperson for Qualcomm said that “it is confident that it can address the [EU’s] concerns.”

“The acquisition is complementary, and driven by the belief that the combined efforts of the two companies with produce even greater innovation than they would alone,” Qualcomm added.

Qualcomm believes that the process will be completed by the end of the year, allowing them to formally complete and close their acquisition of the Dutch-based NXP.

The European watchdog aims to make an official decision by October, though, of course, this could get delayed. The American counterpart to the EU’s competition regulator, the Federal Trade Commission, okayed the deal back in April.


13 June 2017

Electronic Component Lead Time News (June 2017)

Generally speaking, lead times have remained constant since our previous update last month with only ST’s product lines increasing across the board. However, upon closer inspection, there has been a number of small but significant fluctuations that could seriously impact supply chains in the medium- and long-term.

Once again, the DSP and Microprocessor sector has seen availability on key product lines continue to contract. Supply constrains remain, with franchise distributors warning that they may be unable to deal with unforcasted demand.

In short

  • Lead times for microcontrollers continue to rise.
  • Availability of Fairchild, Nexperia and ON Semi logic product groups are partially constrained.
  • Micron (DDR3) and Toshiba (all NAND flash) memory remain on allocation.
  • Analysts predict an increase in lead times for ON Semi and ST-manufactured analog parts.

Analog

In our previous lead time update, we noted that industry figures were forecasting that the availability of ST Micro and ON Semiconductor product lines would decrease. Unfortunately, those predictions have turned out to be true as the two manufacturers have both increased lead times (twenty weeks for ST Micro, twenty-six weeks for ON Semiconductor,)

Discretes

There has been a fair amount of fluctuation regarding the lead times and pricing of discrete product groups. Thankfully, though, most of these changes appear to be minimal and should not be a problem to the majority of purchasing departments.

But as there has not been a decrease in lead times, we would advise you to check with independent distributors to secure stock, should it be required for an urgent production run – especially for ON Semiconductor product families as franchise sources are excepting costs to rise in the short-term.

Memory

Once again, all of Toshiba’s NAND Flash products remain on available only through allocation and this situation is showing no signs of changing in the immediate future so plan your purchasing patterns accordingly.

Elsewhere, Micron’s DDR3 lines stay on allocation and these are joined by some DDR2 lines while Microchip has bumped up their lead times for their Eprom and EEprom products to a maximum of seventeen weeks.

Other manufacturers such as Fujitsu, IDT and Samsung have remained stable.

Optical

Lead times for the major opto product groups have remained static since our last update in June.

The main cause for concern in this area is the number of Osram lines that have either remained or been placed on allocation, though according to our information certain product lines will be removed come Q3 2017. This remains scant comfort for those who have been waiting patiently, however.

DSP & Microcontrollers

We have seen that lead times in this area have risen yet again, continuing a trend that dates back to the start of the year. Only Microchip and Texas Instruments have managed to keep lead time stable, with all the other major manufacturers in this sector posting incremental increase to ease existing supply constraints.

The one exception to this is ST Micro, with the Swiss-based company pushing their lead times out to a maximum of twenty-six weeks for their 8-bit, 16-bit and 32-bit product groups.

As per our statement last month, we would advise people to keep a close eye on this area for a sustained period of allocation could be on the cards if current market demand does not ease.

Logic

The logic market has remained stable, with no changes reported to either lead times or price through franchise channels.


17 May 2017

Electronic Component Lead Time News (May 2017)

Lead times have generally remained stable throughout April and into May, though there has been fluctuation within individual product categories – noticeably DSP and microprocessors.

However, the biggest news in relation to the availability of electronic components comes from the ultra-competitive memory sector. Over the past six months, the cost of memory has risen as supply has become constrained. And to make matters worse, all of Toshiba’s memory products are now available only through allocation, as are some lines of Micron DDR3 memory. 

In short

  • Micron and Toshiba products on allocation
  • Memory prices stabilise but still remain high
  • Lead times for microcontrollers rise across the board
  • ON Semiconductor and ST lead time rise

Analog

The availability, price and lead times for the majority of analog product have remained stable through April.

Besides a couple of delivery constraints being reported for ST families (that have resulted in a slight lead time increase), the major worry in this sector is the availability of ON Semiconductor products.

According to our latest information, lead times for analog components have increased across the board, to a maximum of 26 weeks.

Discretes

Although pricing in this sector hasn’t seen much change, lingering concerns about manufacturing could see costs rise in the near future.

Due to capacity constraints, the lead times for a handful of products have gone up in the past month, with ST lines being most affected by these ongoing problems.

We have also heard that the Nexperia’s LFPAK is on allocation.

Memory

Toshiba’s woes have made headlines across the globe and with the company’s future in doubt, the market has responded accordingly.

All Toshiba’s memory products are now only available on allocation, accompanied with a minimum lead time of three months. Micron has also placed its popular DDR3 and DDR2 lines on allocation, whilst the manufacturer’s NAND flash products now come with a 16 week lead time.

Optical

Although lead times have, generally, remained constant, there is a lot of variation in the availability of parts. For example, lead times for Samsung products come with a 6-8 week lead time whilst comparable Broadcom parts are available after a 10-14 week wait.

The biggest shift in the opto market comes with Osram manufactured parts. Lead times have risen to a maximum of 20 weeks, whilst many product families have been placed on allocation.

DSP & Microcontrollers

We have seen lead times rise across the board, with only Texas Instruments able to keep their availability at a stable level.

This increase continues a recent trend that has seen lead times gradually get longer throughout this calendar year. Lead times of 20+ weeks are becoming common.

Logic

The market for logic products has remained stable, with only minor fluctuations in price and availability.

Unexpected lead time increases can play havoc with your purchasing strategies and production runs. Make sure that you’re guarded against fluctuations in price and availability by working with Cyclops Electronics.


15 May 2017

A Return to Allocation?

With lead times expanding and major OEMs struggling to secure stock, industry sources are suggesting that the electronics industry is about to see a widespread return of allocation. Cyclops Electronics examines the issue.

Is Apple going to release a brand-new smartphone for its tenth anniversary later this year? That is what many industry analysts are debating at the moment. Although there has been plenty of column inches dedicated to the topic of Apple’s latest phone, it is probably safe to say that nobody - except Tim Cook and a couple of other high-ranking officials (perhaps) – would be able to provide a definitive answer.

However, despite there being no concrete evidence, either way, many within the media have been speculating that any imminent product launch from Apple could be delayed due to a global shortage of electronic components. If Apple is struggling, how are other OEMs going to secure the parts that they need for production runs?

And then there is talk that leading semiconductor manufacturers could be allocating stock on a widespread basis in the coming months and then add the usual fears associated with consolidation. It all comes together to paint a potentially worrying picture.

What do we know?

Well, for a start, lead times for certain types of components have risen.

During the past couple of months, the availability of ceramic capacitors through certain distribution channels has increased from sixteen to thirty weeks. The reason for this is that there has been a spike in demand from Asian manufacturers that has left little stock on the global markets.

People searching for memory from franchised sources are finding it harder and harder to secure stock. Due to strong growth in the smartphone sector and the release of a new line of premium Samsung handsets, many memory manufacturers have put their products on allocation. According to our latest information, all Toshiba memory products are now on allocation, as are Micron’s popular DDR3 lines.

Finally, we have heard reports that lead times for many ON Semiconductor and Analog Devices lines are increasing, to the point where allocation is a real possibility.

Why is this happening?

To put it simply: In many cases, supply is outstripping demand.

In a report released at the beginning of this month, an analyst for Deutsche Bank wrote: “Several supply chain reports have suggested that key component shortages…could delay the release of a high-end iPhone 8 device this [autumn].” This report supports a previous claim by KGI Securities analyst Ming-Chi Kuo who reported that the new device will face “severe supply shortages”. Bloomberg has also published a story earlier this year predicting that “supply constraints” will delay any release.

Of course, many component and semiconductor manufacturers will be prioritising their tier 1 OEMs. But even with global technological juggernauts such as Apple finding it hard to procure the quantities of stock needed, there is a massive knock-on effect across the entire supply chain.

Apple’s supposed woes, whilst making a lot of headlines in recent months, are part of a wider trend.

There has been a noticeable shortage of NAND flash products for over six months now. Worldwide production capabilities of NAND flash is somewhat limited, due to many manufacturers (a list that includes Samsung, Micron and Toshiba) switching from 2D to 3D NAND. This sluggish transition has inadvertently led manufacturers to concentrate their efforts on supplying their most prominent and profitable customers and market sectors.

For the majority of OEMs, this has resulted in an increase in price.

According to the industry research firm IC Insights, the average selling price of NAND flash is 40% higher today than it was at this point last year.

It is a similar story when it comes to DRAM memory products, which cost around 45% more than they did twelve months ago.

This inability to meet OEM demand is not just consigned to those manufacturers who produce NAND flash and other forms of memory.

Many semiconductor manufacturers plan their production runs on historical trends and future projections, building a percentage in to cope with fluctuations. However, there is a trend for customers to place high-volume orders through different sources when market prices start to rise in a bid to get the best deal. This impacts production plans, forcing lead times up and increasing the threat of allocated shipments and back orders.

Finally, the raft of mergers and acquisitions has played havoc with market trends. Consolidation is rarely positive for the OEM purchaser as the possibility of obsolescence increases whilst the number of potential suppliers diminishes.

As Adam Fletcher, chair of the Electronic Component Supply Network wrote on the issue recently: “legitimate concerns about the medium and long-term product availability, pricing, possible product rationalisation etc., causes considerable anxiety”.

In high-profile markets and industry sectors, it is natural for companies to move quickly and secure stock early to protect themselves against any change in production patterns. However, this leaves those who don’t act immediately wrong-footed and battling with inflated costs, amongst other headaches.

Another consequence of consolidation is that similar product lines are merged. This can cause a bottleneck in supply chains as demand is spread across a small number of franchised sources. A result of this is that semiconductor manufacturers can implement allocations until production levels can be increased and buffer stock successfully built up.

Whilst we are not at the point of widespread allocation due, we have seen that lead times for ON Semiconductor/Fairchild and NXP/Freescale lines have followed an upward trend throughout this calendar year.

How can Cyclops Electronics secure your supply chain?

With the prospect of allocation likely, although not officially confirmed, many OEMs will be looking at contingency plans to secure the parts that they need for upcoming production runs.

Thanks to our global procurement network, we are able to lock down large quantities of available stock – no matter where those components are located.

We offer a dedicated stockholding service for all our customers who opt to schedule their orders and deliveries. Based on your forecasts, our purchasing team will locate and buy the stock you’ll need on an annual basis. This not only secures your supply chain but because we buy the entire quantity, we can also offer you cost savings and other efficiencies that will greatly improve the bottom line of your business.

Then, when you need the stock, we ship it out to you. No more worrying about lead times and fluctuations in price: We give you the stock you need, when you need it at a fixed price. It’s that simple.

With many of the world’s largest OEMs operating on a near year-round production cycle, it can be difficult to be reactive when problems arise. If, for example, you need a small quantity to complete an additional manufacturing run, then your one-off request through franchised channels could see you left with a lead time of three months or above.

Again, this is where we come into our own. By pouring through our list of trusted suppliers from around the world, we can find you the parts you need – no matter if they’re on a three, thirteen or thirty-week lead time.

Don’t play the waiting game. Come to Cyclops Electronics and see how one of the world’s leading independent stocking distributors can keep your production lines running in a cost-effective manner, even with the threat of allocation and inflated prices looming large.


05 May 2017

Samsung could pass Intel in Chip Sales

Due to an increase in the price of memory chips, Samsung looks set to overtake Intel and become the world’s biggest supplier of semiconductors.

If industry predictions are correct, Samsung would be the first company to successfully supplant Intel as the world’s biggest semiconductor vendor for twenty-four years.

This feat is all the more impressive given that in Q1 2016, Intel’s sales were 40 percent up on those of Samsung.

Samsung’s big swing in sales is mainly down to the substantial rise of Dynamic Random Access Memory (DRAM) and NAND flash products in recent months. According to the industry research firm IC Insights, the average selling price of DRAM is 45 percent higher today than it was at this time last year, whilst the cost of NAND flash has gone up by 40 percent over the same period.

This rise is due, in part, to an industry-wide shortage of memory products, which as well as forcing prices upwards, has seen lead times increase.

If the cost of memory remains stable – or indeed rises – throughout the rest of the year, then Samsung will likely ride and this wave and overtake Intel. Some estimates put the South Korean firm’s yearly sales figures in the semiconductor sector to top $60 billion.

Intel has been the world’s biggest semiconductor supplier (in terms of revenue) since 1993 when the American company introduced its revolutionary x486 and Pentium-series processors.

This news comes at the same time as the Semiconductor Industry Association announced that IC sales for March 2017 were nearly twenty percent higher than in March 2016.

“Global semiconductor sales saw solid sales growth in March, increasing sharply compared to last year and more modestly compared to last month,” John Neuffer said.

The SEMI CEO continued: “Global sales are up 18% compared to last year, the largest increase since October 2010, with all major regional markets posting double-digit year-to-year growth. All major semiconductor product categories also experienced year-to-year growth, with memory products continuing to lead the way.”


21 April 2017

Who Wants Toshiba Memory?

With the Toshiba conglomerate struggling financially due to the losses incurred by its nuclear division in the United States, the Japanese firm’s management has made the decision to sell off its successful chip manufacturing arm (Toshiba Memory) in a bid to secure the company’s future.

The frontrunners in the race to purchase Toshiba Memory are Apple, the global electronics giant, SK Hynix, the world’s second-largest manufacturer of DRAM memory products, and Hon Hai Precision Industry, better known as Foxconn. However, various news outlets, including the New York Times, have reported that the Japanese government will attempt to block bids from companies based outside of Japan, due to fears that key intellectual properties, job and manufacturing facilities will be moved out of the country.

This stance, whilst understandable, is problematic for many of Toshiba Memory’s suitors – which is why they are exploring numerous avenues to secure a favourable position in the bidding war.

Earlier this week The Japan Times published an article saying that Apple is in the midst of exploring a variety of options that will, hopefully, secure them Toshiba’s memory-making business. The report states Apple has thought about launching a joint bid with Foxconn, but, interestingly, that the iPhone manufacturer has started to sound out Japanese investors. A source, who wished to remain anonymous, told the media outlet that SoftBank could be one of the potential investors.

It is believed that a partnership between Apple and SoftBank would be favourably received by both the Japanese and American governments. Though this is all completely hypothetical at this moment in time.

Another favourite to secure Toshiba Memory is Foxconn.

Early reports indicated that the Taiwanese-based electronic manufacturer was willing to overpay in order to force Toshiba to the negotiating table. Although Toshiba Memory has been valued in the region of $18 billion, Foxconn’s hierarchy was ready to pay $27 billion.

However, recent news stories indicate that Foxconn may be preparing a proxy bid through one of their Japanese subsidiaries, Sharp.

By proposing a deal with Sharp, Foxconn may be able to avoid any attempts by the Japanese government to block the deal, as, in theory, Toshiba Memory would remain under Japanese ownership.

“We’re not going to make profits by keeping our cash in banks,” a Sharp executive told the Asian press earlier this week, hinting at an impending move.

Whilst Foxconn, Apple and Sharp have been relatively coy about their formal intentions, SK Hynix has made some rather public overtones about a potential bid in recent days.

Earlier today (21st April), the Nikkei Asian Review published a news report stating that key representatives of the Korean memory manufacturer will be travelling to Tokyo to discuss a deal.

Chey Tae-won, the chairman of SK Hynix’s parent company, SK Holdings, is set to visit Japan early next week. In an effort to appease concerns about a foreign firm taking control of Toshiba Memory, it is believed that he will unveil plans that include further investment at Toshiba’s Yokkaichi fabrication factory and a commitment to keep jobs in Japan.


11 April 2017

Toshiba posts $4.8 billion loss, looking to sell its semiconductor business

When Westinghouse, Toshiba’s United States-based nuclear unit, filed for bankruptcy late last month, it set off a chain reaction of events that have plunged Toshiba’s very existence into doubt.

Now, less than a fortnight on, Toshiba Corporation has taken the unprecedented step of publishing its delayed financial results without prior approval from the firm’s external auditors.

Back in February, the company had forecast a $3.5 billion loss for the fiscal year. However, the recently released results indicate that Toshiba has in fact posted a loss of $4.8 billion for the period of April-December 2016.

Although the majority of Toshiba’s financial losses stem from issues relating to Westinghouse, the impact has been felt across the entire conglomerate.

In a bid to stay afloat, the company is attempting to sell off some of the most viable parts of its vast portfolio.

The Tokyo-based conglomerate has over 600 different businesses, with interests in everything from light bulbs to elevators, but its most viable – and financially attractive – asset is its semiconductor business, which makes flash-memory chips for use in mobile phones, tablets and other similar devices.

It is believed that Toshiba has valued its semiconductor business at $18 billion but Foxconn, formally known as Hon Hai Precision Industry, has indicated that it may be willing to shell out $27 billion in order to force the Japanese firm to the negotiating table.

Based in Taiwan, Foxconn is the world’s largest contract electronics manufacturer and has a roster of high-profile customers that include Apple, Sony and Microsoft. Despite the potentially high-value bid, Foxconn’s move will face stiff resistance from the Japanese government due to fears that the company will move both manufacturing and crucial intellectual property out of the country.

Another leading name believed to be interesting in acquiring Toshiba’s semiconductor business is SK Hynix. An unnamed source, quoted by Bloomberg, has said that officials at the South Korean firm are looking into the feasibility of launching a joint bid with a Japanese-based investment group to secure preferential treatment. However, there are anti-trust fears over this bid, as well as the worry that Hynix may be able to buy its partners out to gain full control in the future.

Whilst the future of Toshiba’s semiconductor arm is in the air, the 142-year-old conglomerate has sought additional financial support from financial centres, even offering real estate as collateral.


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