Toshiba to outsource system chips to rival Samsung: Report

TOKYO: Japan's Toshiba plans to outsource production of system chips, used in cellphones, TVs and cars, to South Korea's Samsung in order to focus on its own strong memory chip business, a report said Friday.

Starting next fiscal year, Toshiba, the world's third-largest semiconductor maker, will consign fabrication of any newly-ordered system chips to Samsung Electronics, the number-two chip manufacturer, Japan's Nikkei daily said.

Toshiba will continue production of those system chips it now supplies to existing customers, the financial daily reported.

Toshiba officials could not immediately be reached for comment.

The tie-up with Samsung would allow Toshiba to save on investment costs for plants and capacity upgrades, the report said.

Cosmo Securities analyst Hiroyasu Nishikawa said Toshiba had been making losses in system chips and that most of its operating profit in chip operations came from its flash memory business, Dow Jones Newswires reported.

"It's a positive strategy to spin off this (loss-making) segment," Nishikawa was quoted as saying. "But there are concerns about the risk of leakage in know-how and technology" by partnering with rival Samsung, he said.

Toshiba now makes system chips at plants in Oita and Nagasaki prefectures.

The Oita plant will specialise in image sensors, for which global demand is expanding, while the Nagasaki plant will be sold back to rival Sony, which owned the facility until 2008, the report said.

Toshiba has the second largest global share of the NAND flash memory market, at 34.9 percent, behind Samsung's 39.3 percent share, the Nikkei said.

The Japanese company is investing more than 100 billion yen to beef up facilities for memory chips at its plant in Mie prefecture, where it plans to start production next summer, the report said.

Toshiba shares rose 1.8 percent to 446 yen in the morning on the Tokyo stock exchange after the Nikkei report, Dow Jones reported.