Toshiba Memory to Acquire Lite-On’s SSD Business: Gains IP, R&D, Manufacturing Ops
by Anton Shilov on September 3, 2019 8:00 AM EST
Toshiba Memory, which is set to rebrand as Kioxia Holdings this October, has signed a definitive agreement to acquire SSD business of Lite-On Technology Corp. The decision will enable Toshiba to produce its own SSDs using proven IP, technologies, and product lines.
Under the terms of the agreement, Toshiba Memory will pay Lite-On $165 million dollars for its SSD business, which includes IP, R&D operations, manufacturing lines (i.e., equipment, buildings, etc.), sales channels, and other assets. The transaction is expected to close sometimes in the first half of 2020.
While Lite-On is primarily known for its SSDs as well as optical disc drives, the company produces a wide range of products for major PC makers, including Dell and Lenovo. Despite the fact that Lite-On is the world’s No. 3 supplier of enterprise and datacenter NVMe drives with a 7% market share (according to Forward Insight), SSD business is not the main source of revenue that Lite-On has.
At present, Lite-On has two SSD manufacturing facilities in Taiwan that can produce 12 million of client drives as well as 6 million of datacenter drives per year. In addition, the company owns a $45 million stake in its joint venture with Tsinghua Unigroup (it invested $45 million in early 2018) that develops and produces SSDs in Suzhou, China. This JV can produce up to 45 million drives a year. It is likely that Toshiba Memory will obtain Lite-On’s 45% stake in the JV as a part of its acquisition deal, but this was not explicitly confirmed in the press release.
As a result of the acquisition, Toshiba Memory will expand its SSD market share and will therefore improve its profit margins as it is more lucrative to sell drives rather than 3D NAND memory. Meanwhile, it should be noted that Tsinghua Unigroup formed the JV with Lite-On to produce SSDs based on 3D NAND made in China by one of the producers the Chinese government controls or supports directly or via ivarious companies. That said, it remains to be seen how Kioxia will deal with Tsinghua Unigroup once the acquisition with Lite-On is closed.
Nobuo Hayasaka, acting President and CEO of Toshiba Memory had the following to say:
“Lite-On’s solid state drive business is a natural and strategic fit with Toshiba Memory and expands our focus in the SSD industry. This is an exciting acquisition for us, as it positions us to meet the projected growth in demand for SSDs in PCs and data centers being driven by the increased use of cloud services.”
Related Reading
- Toshiba Memory To Rebrand As Kioxia
- Lite-On and Tsinghua Unigroup Create $100 Million Joint Venture for SSD Operations in China
- Toshiba's Timeline for PCIe 4.0 SSDs
- Toshiba Introduces New Tiny NVMe SSD Form Factor
- Lite-On Demos Its First ‘Ruler’ EDSFF SSDs: CNEX Labs Controller, Up to 80 TB Capacity
- Western Digital: Nearly All NAND Capacities Resumed Normal Operations
Source: Toshiba Memory
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bolkhov - Tuesday, September 3, 2019 - link
Anton, you write "decision will enable Toshiba to produce its own SSDs using proven IP, technologies, and product lines", but...Doesn't Toshiba ALREADY have its own IP and technologies?
They have a wide product line of M2 and BGA SSDs, and OCZ RD400 -- one of the best PCIe SSDs several years ago -- was in fact a consumer version of Toshiba XG3.
Billy Tallis - Tuesday, September 3, 2019 - link
Toshiba does already have a lot of in-house SSD IP, but they could benefit from some more diversity and updates. Some of their controllers (especially on the client side) are severely outdated, but aside from using some Phison SATA controllers Toshiba has been oddly reluctant to use third party controllers. They've chosen instead to let their retail SSD product lines wither away to irrelevance.At this point it probably doesn't make sense for Toshiba to do another in-house SATA controller, so they can benefit from Lite-On's experience with a variety of third-party controllers to cover that shrinking segment. Toshiba's in a great position for low-end client NVMe, but their high-end client NVMe controller (used in the XG5/6) is overdue for replacement. Lite-On doesn't have much to offer there at the moment, mainly because Marvell's fallen behind.
Overall, I think Toshiba's getting a good deal on a mix of IP, experienced staff, and manufacturing capacity.
bolkhov - Tuesday, September 3, 2019 - link
Thanks for your analysis!FreckledTrout - Tuesday, September 3, 2019 - link
In June of 2018 Toshiba sold off there memory division which was needed to keep them afloat. The failing Westinghouse nuclear business was killing them which they also sold that off as well. So if they want to get back into the memory related businesses they needed to get a hold of new IP.DanNeely - Tuesday, September 3, 2019 - link
It's the sold off flash memory division Toshiba that's buying Lite-on's IP; not broken by Westinghouse progenitor.FreckledTrout - Tuesday, September 3, 2019 - link
I assume you are trying to clarify what I said? Anyhow they sold off there flash business in wholesale for $18bn which I have to assume for that price was everything from IP to physical manufacturing locations. Anyhow was just responding as to why they would do something like this purchase because I am sure many don't realize Toshiba sold off there flash business.Billy Tallis - Tuesday, September 3, 2019 - link
"Toshiba Memory" is the flash/SSD business that was split off from Toshiba the conglomerate and sold. Toshiba the conglomerate is not getting "back" into the SSD business; they own part of Toshiba Memory and are not going to start competing with Toshiba Memory. Toshiba Memory is who's buying Lite-On's SSD business, not Toshiba the conglomerate. Toshiba the conglomerate is basically done making news that's relevant to this site. Toshiba Memory will be changing their name next month to Kioxia, which may help you figure out what's going on.magreen - Tuesday, September 3, 2019 - link
I'm confused. If Toshiba wants to be vertically integrated, they need an in-house SSD controller. Does Lite-On make controllers? Are they good? The article doesn't say, and so leaves out the point I'm most interested in.Billy Tallis - Tuesday, September 3, 2019 - link
Toshiba already has some in-house controllers, but not enough to cover all market segments. Lite-On doesn't make controllers, but they do everything else: firmware, manufacturing, marketing, etc. Those resources can be useful to Toshiba even if it doesn't come with a controller ASIC team.magreen - Wednesday, September 4, 2019 - link
Got it, thanks. Wonder if Toshiba will also look to acquire a controller design house to get vertically integrated.