Toshiba, a stalwart in Japan's postwar rise as a global industrial giant, warned on Tuesday that its disastrous foray into nuclear power had left substantial doubt over whether it could stay in business in its current form.
In a filing in Japan, Toshiba said losses associated with Westinghouse Electric, its troubled nuclear power arm, had created "substantial uncertainty" over its ability to continue as a going concern. It said it hoped a sale of its microchip business, its crown jewel, could alleviate that uncertainty — though the sale could mean a foreign purchase in what has long been a core Japanese industry, inviting potential political opposition.
The announcement was the latest development to arise from Toshiba's problems with nuclear power. Westinghouse already faced substantial cost headaches when it acquired an American construction company in an effort to control expenses. Instead, the deal saddled it with further liabilities. Westinghouse last month filed for Chapter 11 bankruptcy protection.
A sale of Toshiba's chip business, while offering it a lifeline, would take away its most successful business — and, more broadly, would represent a shift of a major technology away from Japan, depending on the buyer.
Nearly 40 years ago, an engineer at Toshiba invented the technology behind its chip business. That innovation would become one of the critical building blocks of the modern electronics industry.
Called flash memory, after the flash on a camera, the chips have become an essential part of smartphones and other gadgets and have proved a profitable technology for Toshiba, one of industrial Japan's stodgiest names.
Foxconn of Taiwan, a manufacturer with big operations in mainland China, is among the bidders — all foreign — that could pay billions to buy the business. It is a remarkable turnabout for Japan, a country that controlled the majority of the market for many kinds of microchips a generation ago, and where companies have frequently banded together to rescue flailing domestic rivals rather than let them fold or be acquired by foreigners.
The Japanese government may yet cobble together a "team Japan" offer, consisting of small financial contributions from multiple companies and a larger investment by a state-controlled bank or investment fund, according to a person familiar with deliberations. But the response from potential participants — who would have to explain the spending to shareholders — has been tepid.
"It is fundamentally unthinkable that the Industry Ministry would intervene and take some kind of action," Hiroshige Seko, the industry minister, said at a news conference on Tuesday, further dampening expectations.
The Toshiba sale is still in its early stages, and the identities of the bidders have not been made public, but people with knowledge of the process say as many as a dozen companies from the United States, South Korea and Taiwan have approached Toshiba with proposals. Toshiba has not said exactly how much of the business it will sell, but even a minority stake is expected to be worth several billion dollars.
One of the better-known suitors is Hon Hai Precision Industry, also known as Foxconn, the assembler of Apple iPhones and other electronics. The company has a strong interest and is bidding on the Toshiba chip unit, according to a person familiar with the matter who asked not to be identified because he was not authorized to discuss it.
Other potential investors include the American microchip makers Western Digital and Broadcom, and SK Hynix of South Korea.
For Foxconn, an investment in Toshiba would be the second recent foray into the often politically fraught world of corporate Japan. Last year the company acquired control of Sharp, the maker of flat-screen television displays, for $3.5 billion. In doing so it overcame a rival bid from an investment fund backed by the Japanese government.
Toshiba's microchips, a type known as NAND flash memory, are seen as a more valuable asset than TV screens. Japan — despite having pioneered liquid crystal displays — has lost most of its market share in screens to South Korea and China.
Samsung of South Korea has overtaken Toshiba in NAND, but Toshiba remains the world's second-biggest producer, with a global share of just under 20 percent, according to market research groups. Analysts say its technology, commonly used in smartphones and USB drives, remains at the cutting edge.
Mark Newman, an analyst at Sanford C. Bernstein, argued in a report that Toshiba's memory business remained valuable enough that selling it amounted to "selling the crown jewels to pay next month's rent."
Ceding even partial control would be painful for Toshiba, which created the first NAND chips in the 1980s.
Yet Toshiba sees little choice. It wrote off more than $6 billion in February connected to Westinghouse nuclear reactor projects in the United States, leaving its balance sheet perilously thin. Its auditors have refused to certify its latest finance statements, a sign that they believe its business remains on a shaky footing.
Unless a Japanese investor emerges, the question is not whether Toshiba's new partner will be from another country, but which country. That could still influence its choice.
Japanese politicians and industry leaders have fretted over Chinese investors' buying advanced chip production technology; semiconductors and memory are a major priority of China's industrial policy.
That could hinder any deal with Foxconn, said Mr. Newman, of Sanford C. Bernstein. The worry is that Foxconn "would build huge fabs in China," he said, referring to semiconductor fabrication plants. "The jobs would move to China from Japan, and furthermore China would go after market share at the expense of crushing industry economics, so the U.S., Taiwan, Korea, Japan all get hurt substantially by this arrangement."
It is not clear whether Foxconn's close relationship with China will undermine its bid. Although Foxconn is based in Taiwan, it has experience in attracting subsidies from the Chinese government to build large-scale production facilities in China.
It would be easy for Foxconn to take technology from Toshiba and manufacture it more cheaply in China. Such a move could drive down pricing for memory, a boon for Apple and low-cost Chinese smartphone makers. But it would also propel China forward in its long push to become internationally competitive in semiconductors.
A global bidding war would at any rate be good for Toshiba. Although the company still has a relatively strong position, Mr. Newman has warned that competition in NAND chips could heat up next year, creating the possibility of oversupply and putting more pressure on Toshiba's ability to put in effect next-generation technologies.