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Toshiba invests cash in SanDisk joint venture

Partnership restructured for second time

Toshiba will inject cash into a chip-manufacturing deal with SanDisk following a restructure of the joint venture.

Toshiba will provide one-third of the $895m - the estimated value of the deal - as well as taking on certain equipment-lease obligations.

According to SanDisk CEO Eli Harari, the restructure reduces the capital required by SanDisk and also strengthens the company's financial position.

In October, Toshiba partially bought out Sandisk's stake in two flash-memory-production joint ventures in Japan. SanDisk wants to shore up its balance sheet, and the deal adds cash to the company's coffers while reducing cash outflow, said Gregory Wong, president of market research company Forward Insights. The deal also secures Toshiba's partnership with SanDisk, which is one of the world's largest USB and flash-drive suppliers.

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It further ensures that SanDisk remains a big consumer of Toshiba's massive fab capacities, Wong said. The more semiconductors are shipped out of Toshiba's fabs, the more it could reduce the manufacturing cost per wafer while adding economies of scale, he said.

The agreement may also give Toshiba better access to SanDisk's intellectual property and could deter Samsung from making advances to acquire SanDisk, Wong said. Samsung attempted to acquire Sandisk last year.

Reduced demand for a wide range of products that use semiconductors is taking a toll on the semiconductor industry, which recorded an estimated revenue decline of $12bn for 2008 compared to 2007, Gartner has said. The deal comes the same day Toshiba recorded a net loss of $1.35bn with sales 21 down on last year and marks its first quarterly loss in seven years.

See also: Toshiba to release methanol fuel cell charger


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