Tokyo could block Toshiba chip business sale to foreign firm

March 28, 2017

TOKYO- With embattled Toshiba Corp.looking for a buyer of its prized flash memory , the Japanese government plans to put any bid by a foreign company or fund under close scrutiny.

As a result of a screening under the foreign exchange and foreign trade law, the government could seek to block the sale of the strategic business to a company from China, Taiwan or South Korea due to national security concerns, analysts said.

The law restricts investments from overseas in business fields related to national safety and maintenance of order, including the airline, nuclear power and social infrastructure industries.

“If we receive advance notice (of acquisition proposals) based on the foreign exchange law, we’ll conduct a strict scrutiny from the viewpoint of national security,” Economy, Trade and Industry Minister Hiroshige Seko said at a news conference on Friday.

Toshiba’s semiconductor business “has high global competitiveness and is very important in light of the need to maintain jobs,” Seko said, while also noting that the business “is expected to have increasing importance in term of information security.”

He thus suggested his ministry’s stance of keeping a close watch on Toshiba’s chip business sale negotiations.

Toshiba, a financially strapped electronics and machinery giant, is looking at selling a majority equity interest in the flash memory business, its main profit source, to raise funds to help cover massive losses in its overseas nuclear operations.

Taiwanese and South Korean companies have indicated interest in acquiring the memory business, while a Chinese company is rumored to be weighing a bid, informed sources said.

Within the Japanese government, an increasing number of officials stress the need to prevent an outflow of key technologies owned by Toshiba’s semiconductor business. “The technologies could be diverted to military use. We’ll never allow it (the flash memory business) to be purchased by China, for instance,” an influential official said.

In 2008, the Japanese government resorted to the foreign exchange law to foil a British investment fund’s attempt to raise its equity stake in nuclear plant operator Electric Power Development Co., or J-Power. Jiji Press