The third biggest chip manufacturer in the world, Toshiba Corporation, will restructure its microchip production as a number of its system microchips will be outsourced to Samsung Electronics while the Sony Corporation will purchase one of its microchip manufacturing lines.
The move comes after the Toshiba Corporation incurred a $3.4 billion operating loss in 2008 during the financial crisis. Even as the Toshiba Corporation will continue to design the latest microchip, Samsung will be tasked to manufacture them to minimize expensive capital investments.
According to market analyst Yumi Nishimura, the Toshiba Corporation will benefit from the agreement as it may not be able to handle the weight of a huge capital outlay needed for increased production.
The agreement also allows the Toshiba Corporation to utilize extra resources for other undertakings.
Due to the increase in the popularity of Web-to-television gadgets, tablet PCs, and smartphones, the demand for system microchips will also increase.
The microchip manufacturing line, which manufactures microchips for the Sony PlayStations, will be sold by the Toshiba Corporation. Industry experts project that the transaction will reach 50 billion yen.
The shares of stocks of the Toshiba Corporation, which ranks third among the most traded stocks in the Tokyo stock market, went up to 441 or 0.7 percent increase.
Samsung was selected due to its cutting-edge technology and the capability of manufacturing a huge number of low-cost but advanced microchips.
The system microchip division of Samsung showed solid growth for the year as it earned almost 5 trillion won in the first three quarters as compared to the less than 4.5 trillion won in 2009
The earnings are just a small portion of the total revenue of Samsung which had a 20 trillion won income in the first three quarters of 2010 from its memory microchip division, making it the biggest in the world.
The earnings of the foundry chipmaker are projected to increase by 42 percent to over $28 billion for 2010 and over $33 billion in 2011.
Aside from the Toshiba Corporation, Samsung Electronics already has agreements with some firms like the Xilinx of the US.