UPDATE 1-Toshiba to step up chip talks with Bain, Western Digital still in running -Nikkei

running -Nikkei@

* Toshiba board met on Wednesday to review offers

* Aims to reach agreement with the Bain group next week -sources (Recasts with Nikkei report, adds background)

TOKYO, Sept 13 (Reuters) - Toshiba Corp has signed a memorandum to step up talks to sell its memory chip business to a group led by private equity firm Bain Capital and South Korean chipmaker SK Hynix Inc, the Nikkei newspaper said on Wednesday.

But the struggling Japanese conglomerate also plans to continue talks with Western Digital Corp which is leading a rival group bidding for the $18 billion semiconductor unit, the report said.

Toshiba said it had no comment. A representative for Bain declined immediate comment.

The report comes after the Toshiba's board met earlier in the day. Sources told Reuters on Tuesday that Toshiba now favored the Bain group after failing to bridge key gaps in talks with business partner and rival bidder Western Digital.

Toshiba now hopes to reach agreement with the Bain group by next week, said the sources, who declined to be identified as the talks were private.

Discussions with Western Digital faltered as Toshiba, fearing its partner was angling to eventually take over the chip business, sought to limit the U.S. firm's future stake in the unit, the sources said.

The embattled conglomerate has been rushing to finish the deal to cover billions of dollars in liabilities at its U.S. nuclear business, Westinghouse.

Toshiba needs to clinch a deal soon so that regulatory reviews can be completed by the end of the financial year in March.

If it does fail to secure sufficient financing by then, it is likely to report negative net worth, or liabilities exceeding assets, for a second year running - a scenario that could result in a delisting from the Tokyo Stock Exchange. (Reporting by Makiko Yamazaki; Editing by Edwina Gibbs)