Toshiba Corp (TOSYY) shares edged higher in Tokyo Tuesday amid reports that the company's sale of its flash-memory unit has attracted the interest of Japan's state-supported innovation fund, which could play the role of kingmaker in the potential $23 billion deal.

Reuters reported that Toshiba has narrowed the field to four prospective buyers, including Broadcom Ltd.  (AVGO) , Foxconn, Western Digital (WDC) and SK Hynix. Each of the buyers, however, apart from Western Digital, is reported to be working with either financial or trade partners to cover both the expected $23 billion purchase price and mitigate any potential concerns the government may have in selling such a large stake in a critically important business sector. 

Innovation Network Corp. of Japan chairman Toshiyuki Shiga told reporters in Tokyo Tuesday that his group, a fund backed by the Japanese government that includes support from Toyota Motor Co. (TM) and Sony Corp. (SNE) , will look at participating in the sale of the division but that, given its size, it likely won't bid as as standalone buyer.

In that respect, the participation of Innovation Network could either grease the wheels of a potential bid from a non-Japanese buyer or represent the start of a longer process that would see the flash memory unit remain in the hands of a domestic owner. Innovation could also assist Apple's (APPL) reported attempt to gain a 20% stake in the flash-memory unit through a joint bid with Taiwan's Foxconn - also known as Hon Hai Precision (HNHPF) .

Industry Minister Hiroshige Seko hinted last week at the chip sector's importance to the world's third-largest economy and multiple reports have suggested the government would baulk at a full sale to Foxconn given its ties authorities in Beijing.

The Fund also has loose ties with Cupertino after agreeing to provide $636 million in aid to Japan Display Inc late last year after the panel maker -- and Apple supplier -- struggled amid increased competition from low-cost rivals.

Toshiba's chip sale was further complicated last week by news that Western Digital had written to Toshiba to object to the sale on the grounds that it violated terms of a joint-venture agreement between the two companies. 

Toshiba filed a twice-delayed third quarter earnings report last week, despite having failed to gain a sign-off from its auditors, that warned its financial future may be in doubt.

Toshiba's auditors, PricewaterhouseCoopers Aarata, told the company that it cannot determine whether Toshiba will need to take additional impairment charges until it has had time to review the results of an independent investigation into an October 2015 acquisition made by its U.S. nuclear unit Westinghouse, which filed for Chapter 11 bankruptcy protection earlier this year after a goodwill writedown of $6.2 billion.

The late filing has exposed Toshiba to the risk of being de-listed by the Tokyo Stock Exchange, but further pressures could also stem from debt guarantees held by Westinghouse that could cost the group another ¥650 billion, the company said. That could mean that the full year loss for Toshiba may top the ¥1 trillion threshold, according to management forecasts. The company said it expects to publish its full year results by the middle of May.

Editor's note: This story was originally published at 5:10 am ET

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