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June 22, 2017

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Are Apple and Amazon backing Foxconn's bid for Toshiba? Terry Gou confirms the rumor

Hon Hai Precision Chairman Terry Gou confirmed that his company had secured the support of two giant U.S. clients, Apple and Amazon, for its bid for Toshiba, foreign media reported. The report indicates that among the many bidders for Toshiba's semiconductor business, Hon Hai has the highest bid, which may exceed 2 trillion yen, or roughly NT$540 billion. As for how much the two U.S. firms are contributing, Gou said this was a business secret that could not be revealed.

According to Japanese media outlet Nikkei, Gou, who is currently in Osaka, confirmed during an exclusive interview that for the purposes of its bid for Toshiba's semiconductor business, Hon Hai had secured the support and financial backing of U.S. giants Apple and Amazon. He said Apple and Amazon had an increasing demand for memory chips, and so the two were contributing an amount of money, though he could not reveal how much was given as that was classified information.

This March, Gou had expressed his intent to take over Toshiba's semiconductor business. He said that he had studied the case for a long time, and while he could not say that he would win for sure, he underscored that Hon Hai was confident and sincere in its bid. However, there have been statements claiming that Japanese officials did not want the transfer of the key chip technology out of the country. Therefore, there has been speculation that Hon Hai, with a number of plants in mainland China, was unlikely to win the bidding war.

To diffuse the concern that Japan may have regarding the outside transfer of technology, Hon Hai has reportedly asked for Apple and Amazon's support while upping its investment in Japanese company Sharp in hopes that a U.S.-Japan-Taiwan alliance would win favor with Toshiba and Japanese officials. This most recent interview with Japanese press has confirmed, for the first time, that Apple, Amazon and Hon Hai are working together to secure the bid.

Nikkei reported that to heighten his bid's persuasiveness, Gou has for the first time revealed his promises and conditions for acquiring Toshiba's semiconductor business. Gou underscored that Hon Hai would not meddle with the management of Toshiba's semiconductor business and instead let the Japanese staff continue to manage the business like they had in the past. He said Hon Hai could help Toshiba by vouching for its debt credibility, and said that Hon Hai would not act like a private equity fund that would later sell Toshiba for a higher price but rather would enable the business to have a sustainable management.

The second round of bidding for Toshiba's semiconductor business ended in mid-May, with Toshiba estimating that it would secure a buyer by the end of June. Reports indicate that there are currently five groups of bidders: Hon Hai; U.S. fabless semiconductor company Broadcom Corporation; U.S. private equity firm KKR; Western Digital Corporation, which has a tense relationship with Toshiba though the two shared a working relationship in the past; and SK Hynix Semiconductor Inc., which has partnered up with U.S. Bain Capital.

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