Toshiba and Western Digital Are Said to Settle Spat Over Chip Sale

Toshiba and Western Digital have agreed in principle to settle their legal dispute over the $18 billion sale of Toshiba’s flash-memory business with a formal announcement expected soon, according to Bloomberg, citing people familiar with the matter.

The U.S. company will drop arbitration claims in the U.S. that were aimed at stopping Toshiba from selling the chip business to a consortium led by Bain Capital, while the Japanese company will end its legal claims against Western Digital, said the people. As part of the settlement, Western Digital will be able to invest alongside Toshiba in a chip plant in Japan and receive a guaranteed supply of next-generation memory chips.

Toshiba had stepped up pressure on Western Digital in recent weeks. Last month, the Tokyo-based company said it would accelerate investments in its new Fab 6 chip facility in Yokkaichi, blocking Western Digital from participating and raising the prospect the U.S. company wouldn’t get supplies of newer chips that it will need to remain competitive. Toshiba also unveiled plans to raise 600 billion yen ($5.3 billion) in a stock sale, a deal that would help it avoid delisting even if the chip business sale isn’t completed on time.

Toshiba’s earnings results last month underscored the importance of the semiconductor unit. Profit in the memory business quadrupled to 205 billion yen in the first half of the fiscal year, helped by demand for data storage in smartphones and solid state disks. The division accounted for 88 percent of the company’s operating income.