What Western Digital stands to lose in its growing war with Toshiba
The firms are in legal fight over rights to memory chips
San Francisco — Toshiba took another stab at its US joint venture partner Western Digital, saying it has no rights to new chip production that is vital to the future of the firms.
The latest escalation of the fight between the two centres on a new factory called Fab 6. Toshiba said it would build the plant without participation from its US partner, thereby cutting off Western Digital from chips made at the factory.
Western Digital inherited its stake in the joint venture when it bought SanDisk.
"Toshiba is dismayed by Western Digital’s pattern of exaggerating SanDisk’s rights under the relevant agreements," the Tokyo-based company said in a statement.
"Despite claims to the contrary, Western Digital does not now possess any legal ‘rights’ to participate in this phase of investment, which is an important investment in the next generation of flash memory."
Western Digital countered with a statement, saying Toshiba’s position was wrong.
"The terms of the agreements and our related legal rights are clear, and we remain confident that we will receive our share of any capacity from Fab 6," the San Jose-based company said.
"We are continuing our constructive dialogue with Toshiba on this and other matters."
The two companies are locked in a legal fight over Toshiba’s plan to sell its share of the joint venture to make up for multibillion-dollar losses in its nuclear power operations. Western Digital argues it has a say in the sale, as well as right of first refusal.
Further legal wrangling could delay the sale to a group of preferred bidders, putting Toshiba at risk of being delisted.
Toshiba is dismayed by Western Digital’s pattern of exaggerating Sandisk’s rights under agreements
Aspects of the dispute have spilled over into court. Western Digital said a judge in San Francisco had agreed on Friday to change a temporary restraining order — prohibiting Toshiba from blocking access by Western Digital employees to shared databases and other joint-venture facilities — into a preliminary injunction.
The order also requires Toshiba to continue to supply materials and sample wafers to Western Digital in the US.
Western Digital needs to retain access to output from new Toshiba factories as improvements in manufacturing technology are one of the key determinants of success in the memory chip industry. Newer plants and equipment typically produce better semiconductors more cheaply.
Toshiba said the talks haven’t proved fruitful. "Toshiba provided an investment proposal to SanDisk earlier this year," the company said. "Despite numerous meetings and negotiations, including at the CEO-to-CEO level, Toshiba’s proposal was not accepted on the timetable set out in the agreements."
Western Digital shares dropped 4% on Friday to close at $81.17 in New York. The stock has gained 19% in 2017. After Samsung, Toshiba is the second-largest producer of flash memory chips used to store data in mobile devices.