Toshiba is considering spinning off its semiconductor business and selling a partial stake in the unit to Western Digital, the Nikkei financial daily reported on Wednesday.

Toshiba will sell a roughly 20 percent interest in the unit for about 200 billion yen-300 billion yen ($1.77 billion-$2.66 billion) while retaining a majority stake, the newspaper reported.

Besides Western Digital, U.S. investment funds are also showing interest in Toshiba's semiconductor business, the Nikkei reported, sources familiar with the matter.

The new chip business company will be created as early as the first half of this year, the Japanese daily reported.

"Toshiba positions its Memory business as a focus business, and is studying the possibility of splitting it into a separate company. However, at this point, nothing has been decided," Toshiba said in a statement.

Toshiba and Western Digital jointly operate a flash memory plant in the city of Yokkaichi in Mie prefecture.