Analysis

posted on 30 June 2008 17:43

I hadn't spotted this; earlier in June Toshiba, a supplier of notebooks, micro hard drives and flash memory chips, invested in Mtron, a supplier of flash solid state drive (SSD) controllers.

Here is a Japanese company, the number 2 supplier of flash chips in the world, investing 5 billion Korean won ($4,775,000) in a small Korean SSD controller company. It is also involved in a KRW27 mbillion third-party share allotment and will end up owning 698,324 Mtron shares.

Mtron recently announced a faster, 8-channel controller and the company reckons it has the best controller technology in the SSD market. Further, that the 'SSD is a flash-memory-based storage device that can replace the mechanical hard disk drive (HDD), the last analog device remaining in a computer.'

An Mtron official said: "As Toshiba becomes a shareholder, Mtron’s effort to make inroads into the global market will be given further impetus. On the basis of our strategic alliance with Toshiba, we are planning to establish a comprehensive strategy covering mutual technology development and marketing. ... Even though the SSD market is still in its infancy, the hard disk drive cannot but be gradually replaced by the SSD after all. Cooperation with Toshiba will help us firmly establish Mtron as a leader in the SSD market."

However, it is not all days of SSD wine and roses. Toshiba has, in effect, rescued Mtron from a financial dilemma.

At the end of last year Mtron (called Digital First at that time) merged with its affiliate Mtron, and triggered a sharp decline in stock prices, and consequently ended up having to pay as much as KRW 32.6 billion to meet the claim for stock purchase. Mtron had a difficulty raising the necessary funds. It postponed payment of the money to meet the claim for stock purchase several times. In this process the stock price fell a great deal as well. Enter Toshiba...

The Mtron official said: "Mtron is now able to take care of the money necessary to meet the claim for stock purchase with the KRW 27 billion it raised through the capital increase with consideration involving Toshiba, and its internal funds. As a result the biggest uncertainty of the company has been cleared."

What this might signal is ongoing vertical integration in the SSD market between chip foundries and controller manufacturers. It might re-ingnite acquisition interest in STEC whose share price has dived since the high point of the EMC and Apple MacBook Air deals and consideration of a potential Seagate acquisition earlier this year.

^{[Chris Mellor.]}