Toshiba's board on Friday approved plans to make its core chip business a separate company and seek outside investment, aiming to avoid being crippled by an upcoming multi-billion dollar writedown of its US nuclear operations.
The green-light confirms rumours of the partial sell-off that emerged last week.
Toshiba estimates the value of its chip business - the world's biggest NAND flash memory producer after Samsung - at ¥1-1.5 trillion (A$12-17 billion), a person with direct knowledge of the matter told Reuters.
The partial sale of its chip business would provide a lifeline for Toshiba as a massive charge could wipe out shareholders equity at the end of the financial year in March.
The chips unit generates most of the Japanese firm's operating profit.
Toshiba has said it will unveil the size of the writedown on 14 February when it reports third quarter results.
Potential investors in the chip business include private equity firms as well as business partner Western Digital and the government-backed Development Bank of Japan, sources have said.
Toshiba's memory chip business generated sales of ¥845.6 billion (A$10 billion) and operating profit of ¥110 billion for the year ended in March 2016.