Photo/IllutrationToshiba’s head office building in Tokyo’s Minato Ward (Asahi Shimbun file photo)

State backing is being considered for a new company that struggling Toshiba Corp. plans to set up in April by splitting its lucrative memory chip business.

The investment will require an injection of funds from the Innovation Network Corp. of Japan (INCJ), a fund jointly operated by the public and private sectors, and the Development Bank of Japan Inc. (DBJ), an affiliate of the government, sources said March 17.

The two organizations will jointly buy more than one-third of the shares of the new semiconductor company, called Toshiba Memory, in an effort to prevent Japanese technologies from being leaked to foreign competitors, which could well happen if an overseas firm purchased the company.

According to the sources, the share purchases by the INCJ and DBJ will give them veto power on important management issues. They will be able to prevent, for example, the transfer of factories overseas.

The value of Toshiba Memory is believed to be in the range of 1 trillion yen ($8.9 billion) and 2 trillion yen. The INCJ and the DBJ are expected to need about 600 billion yen. The two plans to procure half of that amount with loans from banks.

The economy ministry is considering buying shares of Toshiba Memory because of the advanced technologies of the semiconductor memory business that Toshiba plans to sell. The company currently holds the second largest share in the world market.

If the technologies are leaked overseas, Japan’s international competitiveness will be compromised.

Memory chips are used in a wide range of applications, such as in defense industries and social infrastructure, and thus play a key role in Japan’s security.

At present, around 10 companies have shown interest in buying Toshiba Memory. Most of them are foreign firms. They include Western Digital Corp. of the United States, SK Hynix Inc. of South Korea, and Hon Hai Precision Industry Co. of Taiwan.

Sadayuki Sakakibara, chairman of Keidanren (Japan Business Federation), said in a February news conference, “It is a problem that Japan’s core technologies and human resources are leaked overseas.”

Toshiba President Satoshi Tsunakawa said in a news conference March 14, “Considering Japan’s security and other issues, we will think (about the sale of Toshiba Memory) comprehensively and make a decision (on whom we sell it to).”