UPDATE 1-Toshiba moves back some chip unit assets to ward off Western Digital's legal claim

Digital's legal claim@ (Adds statement from Western Digital)

TOKYO, June 1 (Reuters) - Toshiba Corp has moved some of the assets of its memory chip unit back to the parent company in a bid to ward off Western Digital Corp's legal claim that the Japanese conglomerate cannot sell the unit without the U.S. partner's consent.

The move was meant to address Western Digital's demand that Toshiba reverse a move to put their joint venture interests into a unit that was set up in preparation for the sale.

Toshiba, the world's second-largest NAND chip maker, is depending on the sale to cover billions of dollars in cost overruns at its now bankrupt U.S. nuclear unit Westinghouse.

Western Digital, which jointly owns a semiconductor plant with Toshiba in Japan, sought international arbitration in mid May to stop Toshiba from selling its chips arm.

In a letter dated May 31, Toshiba lawyers told Western Digital that the transfer back of the joint venture interests to the parent "puts this matter to rest," a move that would allow Toshiba to press ahead with the sale process.

The letter, seen by Reuters, also notes that the joint venture interests at issue relate just to financing vehicles for some of the manufacturing equipment and have a total value of less than 5 percent of Toshiba's memory chip business, which it has valued at at least 2 trillion yen ($18 billion).

Western Digital, however, said in a statement in response on Thursday that it "has no reason to believe that Toshiba has resolved its breach of the joint venture agreements" through the latest transfer.

"Therefore, Western Digital is not withdrawing its arbitration claim and will continue to vigorously defend its interests in the joint ventures and prevent any effort by Toshiba to circumvent Western Digital's rights," it said.

Suitors for the chip business include U.S. chipmaker Broadcom Ltd which has teamed up with private equity firm Silver Lake, and Bain Capital which has partnered with South Korean chipmaker SK Hynix, sources have said.

Taiwan's Foxconn, formally known as Hon Hai Precision Industry Co Ltd, also formed a consortium with its Japanese unit Sharp Corp to bid in the second round, they said.

Western Digital is not a favoured bidder for Toshiba's chip unit, having put in a much lower offer than other suitors, a source with knowledge of the matter has said.

Separate sources told Reuters this week that Western Digital may join a consortium of Japanese government money and KKR & Co (Reporting by Makiko Yamazaki and Kentaro Hamada; Editing by Susan Fenton)