SanDisk to Own Less of the Manufacturing Joint Venture with Toshiba

Following reports that Toshiba has bought Fujitsu's hard disk drive business, SanDisk has just announced that it will own less of the manufacturing joint venture with Toshiba. The two companies have reached a definitive agreement according to which SanDisk will transfer more than 20 percent of its equipment lease obligations to Toshiba. Under this new agreement, Toshiba is expected to pay approximately 80 billion yen or $890 million to SanDisk, something that will likely benefit the latter, which is struggling to reduce the effects of the global financial turmoil.

 

“We are pleased to sign this definitive agreement with Toshiba which reflects the long-term commitment of both companies to our partnership. This agreement will reduce our capital spending, strengthen our financial position and increase our business flexibility by allowing us to return more rapidly to our desired captive/non-captive supply model. Importantly, this maintains the economies of scale of Fab 3 and Fab 4 for SanDisk and the deep technology and manufacturing cooperation between SanDisk and Toshiba,” said Dr. Eli Harari, chairman and chief executive officer, SanDisk.

 

SanDisk and Toshiba are expected to continue their partnership for the remaining capacity in the joint ventures. SanDisk will be allowed to purchase part of the transferred capacity on a foundry basis. The memory maker has also announced that it will continue to invest up to 50 percent in future Fab 4 expansions and technology transitions in Fab 3 and Fab 4. The lease transfers and Toshiba's cash payment are expected to end by the end of Q1 2009.

 

Despite the global low economy, Toshiba appears to be focusing on the development of its storage business, as the company has recently been reported to have bought the hard disk drive business from Fujitsu. The move will likely improve the company's current position in the market for hard disk drives.