Toshiba and Samsung ink supply chain agreement

In an effort to shore up its supply chain, electronics maker Toshiba Inc. recently announced that it will outsource its semiconductor business to rival Samsung Electronics in 2011.

Based in Japan, Toshiba is working to restructure its chip-related operations and made the decision to switch production to South Korea's Samsung at the beginning of this week. While Toshiba plans to continue to design large-scale integration chips, the company affirms it will focus its manufacturing capabilities in other areas instead of semiconductors. Moreover, Toshiba plans to sell its system chip production line in Nagasaki to Sony, freeing up additional resources.

Sensing an opportunity to profit from the burgeoning smart phone market, Toshiba will continue to manufacture memory chips as demand for the devices has rocketed higher in recent years as smart phones have become more ubiquitous. According to the Nikkei business daily, Toshiba chose Samsung because of the company's advanced technologies and its manufacturing capacity that allow for the production of high-performance chips at low cost in volume.

Toshiba asserts that the changes to its supply chain will ensure that the company frees up available resources, expanding manufacturing in more profitable sectors.