Western Digital Seeks To Block Sale Of Toshiba's Chip Unit

Western Digital announced that it’s taking its fight with Toshiba to the International Court of Arbitration in San Francisco to stop the sale of its jointly operated memory-chip business without its consent.

For those of you not up to speed on the current situation, Western Digital acquired control of half of Toshiba’s main semiconductor plant when it bought SanDisk almost a year ago today. Since then, Toshiba suffered significant financial hardship after its U.S. subsidiary, Westinghouse Electric, filed for bankruptcy earlier this year. As a result, Toshiba transferred ownership of the joint venture assets held with Western Digital into the newly formed Toshiba Memory with the intent of selling the unit to the highest bidder.

Western Digital’s chief executive, Steve Milligan, said:

Toshiba’s attempt to spin out its joint venture interests into an affiliate and then sell that affiliate is explicitly prohibited without SanDisk’s consent. Seeking relief through mandatory arbitration was not our first choice in trying to resolve this matter. However, all of our other efforts to achieve a resolution to date have been unsuccessful, and so we believe legal action is now a necessary next step.

Toshiba CEO Satoshi Tsunakawa responded:

The majority stake sale of the semiconductor business poses no conflicts with the joint venture contract with Western Digital. Western Digital has no basis for stopping the procedure. We will communicate to the candidates the legitimacy of our argument to wipe out their concerns.

Given Toshiba’s current financial state, sale of the newly formed memory unit is extremely important to the company’s financial recovery. In a statement, Toshiba’s CEO stated that Western Digital’s complaint was groundless and that his company would push on with the sale, with a second round of bidding to commence on Friday. Just last week, Toshiba sent two letters to Western Digital asserting that the company had the right to sell its part of the semiconductor joint venture and that Toshiba would block Western Digital employees from its facilities and networks unless it complies by May 15.

A three-person panel in San Francisco will hear the arbitration under the rules of the International Chamber of Commerce. Toshiba has 30 days to respond to the request for arbitration.  

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