Court Ruling Favors Western Digital in Memory Chip Tiff With Toshiba

The joint venture partners continue to battle in court as Toshiba pushes to unilaterally invest in a memory fabrication facility separately from its partnership with Western Digital.

Toshiba, Western Digital Chip Dispute

Western Digital and its flash memory subsidiary SanDisk won a round in its growing legal dispute with joint venture partner Toshiba when a California court said this week that Toshiba could not bar Western Digital employees from gaining access to shared databases that are part of the joint venture.

In a statement, Western Digital officials applauded the ruling, saying it clarified an earlier temporary restraining order and “allows our talented team to continue working productively alongside our [joint venture] colleagues to innovate and deliver cutting edge technology to our customers.”

For their part, Toshiba executives said in their own statement that the current litigation with Western Digital and SanDisk will not limit the company’s business plans.

Those business plans have been at the center of the legal litigation between the two companies. Toshiba, which has been dealing with financial issues, is trying to sell its memory chip business. It has gotten an $18 billion bid from a group that includes venture capital firm Bain Capital and SK Hynix, a chip maker from South Korea.

However, Western Digital, Toshiba’s joint venture partner, has opposed the sale of the business to that group and has put in its own counteroffer. Western Digital executives have argued that any sale of Toshiba’s memory chip business would need their company’s approval.

In response, Toshiba announced earlier this month that it is building a new memory chip line—investing about $1.76 billion in the Fab 6 production line in Japan—without Western Digital’s involvement. Toshiba officials at the time said that they had been negotiating with their Western Digital counterparts on investing in the effort, but they haven't able to strike a deal.

"This decision to move forward with a unilateral investment in Fab 6 does not impact production for the memory business, as Toshiba produces the memory," Toshiba officials said in a statement Aug. 3.

Meanwhile, Western Digital executives at the time said their negotiations with Toshiba around planned investments by the joint venture—including with Fab 6—were ongoing and that agreements around the companies’ joint venture “give us priority to participate in joint investments in Fab 6 equipment through the JVs, and that is exactly what we intend to do." They said they were “confident that we will receive our share of any capacity from Fab 6."

In the ongoing disagreement about the sale of Toshiba’s memory business, the company in June reportedly barred Western Digital employees from databases that were shared as part of the joint venture. They reopened access in July after a superior court in California issued a temporary restraining order, then shut out the Western Digital employees again when the court accepted its petition of appeal.

Earlier this month the court ordered that access be reinstated, which Toshiba agreed to do. The recent ruling by the Superior Court of California for the County of San Francisco further reaffirmed that Toshiba could not prevent Western Digital employees from accessing the share databases and could not refuse to ship certain engineering wafers and samples, according to Western Digital officials.

The enhanced line at Fab 6 is expected to produce 3D flash memory chips. There has been an ongoing shortage of memory chips worldwide and memory makers have been able to drive up the price of their NAND and DRAM products, which helped fuel Samsung’s push past Intel to become the world’s top semiconductor maker, according to Gartner analysts.

In July, the Samsung said it expected revenue in the memory market to jump 52 percent this year over 2016, though the analysts also said the market could bust in 2019 as vendors add more supply and China makes an expected push into the space.