Would a delisting from the Tokyo Stock Exchange really be the end of the world?

Thursday's self-imposed deadline for Toshiba Corp. to sell its semiconductor business came and went with no deal. Toshiba's inability to finalize an agreement with the consortium led by Western Digital or any of the other bidders still in the hunt has heightened fears that Toshiba won't be able to sell the unit in time to avoid being delisted.

Despite Toshiba's obvious trepidation over this possibility, maybe it wouldn't be the worst thing in the world. A delisting would remove the pressure to close a deal, enabling Toshiba to hold out for a better price and better terms.

According to Jim Handy, principal analyst with memory focused research firm Objective Analysis, the longer that Toshiba waits to consummate a sale, the higher the valuation of Toshiba Memory may ultimately be. "I’m not sure [delisting] is all that bad for them," Handy said. "So far, that’s the issue that has been driving the deadlines."

Jim Handy
Jim Handy

On the other hand, with its future ownership in limbo, Toshiba Memory has no doubt had to delay some decisions about long-term planning and investment. With each passing day that Toshiba Memory remains at least in part a rudderless ship, it could potentially falls that much further behind Samsung and other competitors in the cutthroat NAND flash business.

The memory chip business is not for the faint of heart. Even while enjoying the best year in the NAND business for some time, NAND vendors are busy girding for the battles to come — investing billions of dollars to ramp up capacity and bring more 3D NAND capacity online.

According to DRAMeXchange, a market research firm that tracks memory pricing, Toshiba's second quarter market share in the NAND market slipped to o17.5 percent — down more than 1 point from 18.8 percent in the second quarter of 2016. Nearly all of the market share that Toshiba surrendered went to Samsung, the market leader, which increased its share to 35.6 percent from 34.4 percent last year.

But Toshiba isn't just sitting around twiddling it's thumbs waiting for a buyer. Toshiba announced in early August that it would allocated about $1.76 billion to start buying equipment for its new NAND fab at its Yokkaichi Operations manufacturing site — snarkily cutting partner Western Digital out of the process as part of the escalating spat between the two firms around the issue of the Toshiba Memory sale.

Toshiba "will try to keep up [investment] because the memory group is a big profit generator accounting for about 90 percent of Toshiba’s profits last quarter," said Greg Wong, principal analyst at market research firm Forward Insights Inc. "Yes, there is a risk of delayed investments. However, I’m sure management is aware of this and will try to ensure they continue to invest so as to not fall behind."

"If the NAND market were doing badly, then Toshiba’s troubles would be pretty bad," Handy said. "Since NAND is extremely profitable, for the time being they can wait."

Samsung has to juggle its investment between DRAM, NAND and logic, so that may affect the speed at which they can expand 3D NAND capacity, whereas Toshiba is only focused on NAND and can more rapidly increase 3D NAND capacity by  converting from 2D NAND, Wong added.

The sage of Toshiba's semiconductor unit remains fluid. Reuters and other news services have reported that Toshiba has been unable to finalize a deal with the Western Digital consortium — which includes both the public private partnership Innovation Bank of Japan (INCJ) and the state-owned Development Bank of Japan, as well as U.S. private equity firm KKR and Co. The group has bid about $17.2 billion — less than the $18 billion that Toshiba originally expected the unit to fetch. According to the Reuters report, Western Digital is still working to raise its offer past the $18 billion threshold, but  the main issue is apparently the size of the stake Western Digital will ultimately have in the firm.

Meanwhile, Apple's name has once again surfaced as a potential buyer. Reports indicate that Apple has been brought in on another bid with private equity firm Bain Capital and both INCJ and the Development Bank of Japan, which at the behest of the Japanese government stand ready to participate in whichever consortium ultimately hammers out a deal with Toshiba.

This may be a long way from over. And for Toshiba, that might actually be a good thing.

—Dylan McGrath is the editor-in-chief of EE Times.

Related content:

This editorial originally appeared on EE Times.