Toshiba plans to exit money-losing LSI chip business

FILE PHOTO: The logo of Toshiba Corp is seen behind cherry blossoms at the company's headquarters in Tokyo, Japan April 11, 2017. REUTERS/Toru Hanai

TOKYO (Reuters) - Toshiba Corp on Tuesday said it will exit the money-losing system LSI chip business as the Japanese conglomerate aims to boost the group’s profit margins.

The chip business includes image recognition processors supplied to Toyota Motor Corp, although Toshiba said it would continue sales and support operations for existing customers.

Toshiba plans to relocate or offer early retirement options to 770 employees at its system LSI business, a step that will cost the Japanese company 11.8 billion yen ($111.77 million) but has already been factored in its earnings outlook. However, its power management chip business will be retained.

The company said in a statement it decided to withdraw and “establish a solid business structure not easily affected by market fluctuations; one that is sustainable even during the continuing U.S.-China trade conflict.”

Toshiba sold its prized flash memory business, now Kioxia Holdings Corp, to a consortium led by Bain Capital for $18 billion in 2018 as it scrambled to plug a financial hole caused by the failure of its U.S. nuclear power unit.

Kioxia on Monday shelved plans for what would have been Japan’s largest initial public offering (IPO) this year, as U.S-China tensions cloud the global chip market.

(This story was refiled to delete yen in 5th paragraph to clarify that the value is in dollars)

Reporting by Makiko Yamazaki; Editing by Kim Coghill and Sherry Jacob-Phillips