The news means that WD is backing away from an earlier demand for an immediate majority stake.

The consortium is expected to be the favoured bidder for the world's second biggest producer of NAND memory chips, as the presence of state-backed fund, Innovation Network Corp of Japan and the Development Bank of Japan (DBJ) will be taken as the government's stamp of approval.

Toshiba has valued its chip unit at $18 billion and a successful sale is critical to the outfit’s recovery after massive cost overruns at its US nuclear unit Westinghouse.

WD, which jointly operates Toshiba's main flash memory chip plant, has sought arbitration, arguing that the Japanese conglomerate is violating their joint venture contract and demanding exclusive negotiating rights.

WD wanted at least 51 percent for the chip unit to be competitive but it was not seen as a strong bidder after submitting one of the lowest bids in the first round of offers, sources have said previously.

Now it seems that WD is open to being a minority investor for the time being and plans to increase its stake to more than half when INCJ and KKR seek an exit from their investment.

It is unclear whether the Japanese trade ministry would allow such a move. The ministry has insisted that the chip unit should not fall under the control of a foreign manufacturer as semiconductors are important from the standpoint of national security, the sources said.