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Foxconn's Terry Gou Confirms that Apple and Amazon are backing Foxconn's bid for Toshiba's Memory Chip Business



Foxconn's Chairman Terry Gou stated yesterday that his company has financial support from Apple and Amazon in its bid for the memory chip unit of embattled Japanese conglomerate Toshiba. According to sources, Hon Hai is the highest bidder among five interested buyers, supposedly offering more than US$18.2 billion. Originally Foxconn was making a joint bid with TSMC. Now with Apple's participation in the bid, it's clear that Apple want's to drop Samsung for more components in the future. A successful bid would also improve Apple's already industry leading profit margins.


Gou at a hotel in Osaka told the Nikkei in an exclusive report that "Of course Apple and Amazon are offering money together, but I cannot comment on how much funds each company is putting on the table." Hours earlier on Saturday night, Gou told the Nikkei Asian Review in a separate interview that he has secured support from Apple and Amazon on the Toshiba deal.


While there had been speculation that Apple and Amazon may be interested in Toshiba's semiconductor business, Gou's comments Sunday were the first official confirmation that the two companies were participating in a bid.


More than half of Foxconn's revenue comes from supplying components and assembling gadgets for Apple, while the company manufactures Kindle e-readers and Echo speakers for Amazon. In April Patently Apple posted a report on this titled "Foxconn to open a new Production Facility for Amazon Products and Beef up Echo Lines by Year End."


Toshiba's NAND flash memory chip is a component for storing data used in a wide range of electronics, including smartphones, servers and PCs. The Japanese firm is a major supplier for Apple's iPhones. Meanwhile, Amazon needs NAND flash memory chips in the servers it uses in its data centers to provide cloud computing services for itself and external customers.


Apple and Amazon's interest in memory chips could significantly alter a sector currently dominated by Samsung Electronics, a major rival to Apple in the global smartphone market.


In the first quarter of 2017, Samsung generated $4.21 billion from its NAND flash business and enjoyed a 35.4% global market share, according to Taipei-based research firm TrendForce. Western Digital (17.9%) and Toshiba (16.5%) trailed the South Korean firm, while Micron and SK Hynix followed behind with respective market shares of 11.9% and 11%.


Toshiba is seeking to complete the sale of its memory chip business, the only profitable unit of the Japanese conglomerate, before the current fiscal year ending in March.


Foxconn's Gou is intent on building his manufacturing empire into another Samsung following his acquisition of Sharp, an iPhone panel supplier, and his ongoing efforts to snatch Toshiba. Panels and memory chips are two of Samsung's most profitable businesses.


Last year, Foxconn agreed to acquire Nokia's feature phone business from Microsoft. Foxconn is also making Nokia brand smartphones for Finland-based HMD Global, which has licensed the Nokia brand for 10 years.


On Saturday, Gou confirmed to the Nikkei Asian Review that his company was also financially backing and manufacturing the Essential Phone, designed by Android creator Andy Rubin. Patently Apple revealed this fact back in April in a report titled "What's the Game Plan for the Ever Aggressive Foxconn?"


In the report we noted that "The "Essential" smartphone is rumored to be ready to launch prior to Apple's World Wide Developer Conference. Foxconn is backing this company and is likely to manufacture the new smartphone." The Essential 'Phone' was indeed unveiled prior to Apple's WWDC 2017 event that begins later today.


Four other bidders are vying to win Toshiba's memory unit alongside Foxconn. American chipmaker Broadcom, U.S. private equity firm Kohlberg Kravis Roberts, Toshiba's technological partner Western Digital, and South Korea's SK Hynix together with U.S. private equity firm Bain Capital have all made offers.


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