Western Digital Corp. has offered 2 trillion yen ($17.8 billion) to buy Toshiba Corp.'s chip unit put up for sale by the embattled Japanese conglomerate, sources close to the matter said Wednesday.

But the Japanese company has shown reluctance over the U.S. firm's proposal to purchase Toshiba Memory Corp., the world's second-largest producer of NAND flash memory chips which are used in smartphones and other devices, the sources said.

Western Digital Chief Executive Officer Steve Milligan and Toshiba President Satoshi Tsunakawa held talks in Tokyo on Wednesday but few details were known.

The U.S. data storage company and Toshiba Memory jointly operate a chip plant in Yokkaichi, Mie Prefecture, in central Japan.

According to the sources, Western Digital is planning to offer 1.5 trillion yen through preferred shares that can be converted to common stock, while asking the state-backed turnaround fund Innovation Network Corp. of Japan and the state-owned Development Bank of Japan to provide some 500 billion yen in cash for common equities.

The U.S. company will then acquire Toshiba Memory through a special purpose company and take up the common stock several years later, they said.

But, the INCJ and the DBJ are preparing to join the bid separately from Western Digital, according to people familiar with the matter, as the Japanese government wants to defend against a foreign takeover to prevent a technology drain.

Cash-strapped Toshiba has been in the process of bidding to sell a majority stake in Toshiba Memory, its spun-off chip unit, in the hope of raising at least 2 trillion yen to make up for huge losses in its nuclear business and eliminate negative net worth by next March to avoid getting delisted from the Tokyo stock market.

Bidders that have participated in the bidding include U.S. investment fund Kohlberg Kravis Roberts, U.S. fund Bain Capital and Taiwan's Hon Hai Precision Industry Co.

Earlier this month, Western Digital took legal action against Toshiba's plan to sell a majority stake in Toshiba Memory, filing with the International Court of Arbitration of the Paris-based International Chamber of Commerce to block the sale. The U.S. firm has also demanded exclusive negotiating rights.

However, if Western Digital -- the world's No. 3 NAND flash memory chip maker -- buys Toshiba Memory, it could prolong antitrust examinations and delay the sale of the flash memory business.

Western Digital has been opposed to Toshiba's plan to sell the stake in Toshiba Memory as collateral for new loans from creditor banks but has apparently changed its stance due to concerns the prolonged row with Toshiba could have a negative impact on its operations.

 toshiba