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Samsung considers acquiring SanDisk

Bloomberg Samsung Electronics Co said it may buy SanDisk Corp, the US memory card maker with a market value of US$3 billion, in what would be the South Korean company’s biggest acquisition.

“We are considering various opportunities regarding SanDisk but nothing has been decided,” said James Chung, a spokesman at Samsung, the world’s No. 2 chipmaker. JPMorgan Chase & Co was hired about a month ago to advise the Suwon-based company, Korean online newspaper Edaily reported yesterday, citing unidentified bankers and semiconductor industry officials.

A takeover would help Samsung widen its lead over Toshiba Corp in the US$15 billion market for chips that store data in cameras and portable music players.

Chipmakers are under pressure to consolidate after prices halved this year, driving SanDisk to its largest quarterly loss in almost seven years.

“The smaller companies can’t hold out any more,” said Chang In Whan, chief executive officer of KTB Asset Management Co in Seoul, which manages the equivalent of US$5.4 billion. “If these smaller companies get absorbed into the bigger ones, it will be easier for the industry to control production.”

SanDisk, estimated by researcher iSuppli Corp to be the world’s largest buyer of NAND flash chips, has seen its shares fall 59 percent this year in New York trading as consumers cut spending and a glut drove down prices. In July, the Milpitas, California-based company posted a US$67.9 million loss, its largest deficit since 2001, according to data compiled by Bloomberg.

The stock’s drop has prompted interest by Seagate Technology Inc in buying SanDisk, Edaily said, echoing an EE Times report last month that said Seagate may make a bid.

Samsung had a 42.3 percent market share in the NAND flash memory-chip market in the second quarter, compared with Toshiba’s 27.5 percent and Hynix Semiconductor Inc’s 13.4 percent, iSuppli said.

Samsung pays US$400 million to US$500 million annually to use SanDisk’s flash memory patents, according to estimates at Lehman Brothers Holdings Inc. The savings from royalty fees alone may justify an acquisition, Lehman’s Chung Chang Won wrote in a note to clients on Friday. Analysts at Daewoo Securities Co and Meritz Securities Co also said a purchase would be positive for Samsung.

A Samsung acquisition of SanDisk may hurt Toshiba because it may force the Japanese company to invest in chip factories on its own, increasing Toshiba’s financial burden, said Hideyuki Suzuki, general manager at the research department of Morningstar Japan K.K. Toshiba spokeswoman Hiroko Mochida declined to comment.

Toshiba said in February it would spend more than US$16 billion with SanDisk to build two semiconductor plants.

SanDisk spokesman Mike Wong said the company, the world’s largest maker of memory cards for digital camers, isn’t aware of Samsung being interested in an acquisition.
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