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UPDATE 2-Toshiba to pick govt-led Japan-US-Korea group to buy chips unit-source

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* Toshiba to decide preferred bidder on Wednesday

* Japan-US-Korea bid competing against Broadcom of U.S. (Recasts with Toshiba decision, adds context, comment)

TOKYO, June 20 (Reuters) - Embattled Toshiba Corp will pick a Japanese government-led group of Japanese, U.S. and South Korean firms and funds to buy the conglomerate's semiconductor business, a person briefed on the matter said on Tuesday.

The group includes the state-backed fund Innovation Network Corp of Japan, the government's Development Bank of Japan, and U.S. private equity firm Bain Capital, sources have told Reuters.

South Korean chipmaker SK Hynix Inc and the core banking unit of the Mitsubishi UFJ Financial Group Inc are to provide financing under the consortium's proposal, they said.

Toshiba, which needs to sell the prized chips unit to cover billions of dollars of losses from its now-bankrupt U.S. nuclear unit, is in the final stages of deciding on the group as preferred bidder.

Another person with direct knowledge of the matter said Toshiba's board will vote on a preferred bidder on Wednesday and announce the result through the Tokyo Stock Exchange.

A Toshiba spokeswoman said the company cannot comment on specifics of the sale process.

The Japan-U.S.-Korea bid has been orchestrated in large part by Japan's trade ministry, which wants to keep the valuable chip unit under domestic control.

The consortium, whose bid clears Toshiba's 2 trillion yen ($18 billion) minimum, has been seen as one of the strongest suitors for the unit - the world's No. 2 producer of NAND chips - as it would automatically have the government's stamp of approval, the sources said.

It is fighting to counter a 2.2 trillion yen from U.S. chipmaker Broadcom and its partner, U.S. private equity firm Silver Lake, which sources have said Toshiba management favours.

(Reporting by Taro Fuse and Makiko Yamazaki; Additional reporting by Taiga Uranaka and Kentaro Hamada in Tokyo, and Liana B. Baker in San Francisco; Writing by William Mallard; Editing by Edwina Gibbs and David Evans)