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Toshiba plans to sell its prized memory chip business to a group of investors led by the Japanese government as it races to raise money to stave off financial ruin.

The struggling Japanese conglomerate said Wednesday it has picked a bid worth about 2 trillion yen ($18 billion) from a consortium driven by the Innovation Network Corporation of Japan (INCJ), a state-backed fund.

Toshiba (TOSBF) is selling off its crown jewels in a frantic effort to recover from billions of dollars in losses stemming from the collapse of Westinghouse Electric, its now bankrupt U.S. nuclear unit.

The crisis at the storied Japanese company sparked alarm among government officials. More than 100,000 of Toshiba’s roughly 190,000 employees are in Japan, where the company plays an important role in key industries like energy and transportation.

The idea of the sensitive technology of Toshiba’s memory chip business ending up under foreign control is a major worry for Japanese leaders.

The state-backed fund is at the heart of the government’s efforts to keep the chip business in mainly Japanese hands. The INCJ joined forces with U.S. investor Bain Capital and the Development Bank of Japan for the bid.

The group beat out other offers, including one from Taiwan-based electronics manufacturer Foxconn, one of Apple’s (AAPL, Tech30) biggest suppliers that took control of Japanese electronics firm Sharp (SHCAY) last year.

Toshiba cited the “retention of employees and maintenance of sensitive technology within Japan” among the reasons for choosing the INCJ bid.

Toshiba desperately needs to raise cash. It has warned that losses for the financial year that ended in March are likely hit 950 billion yen ($8.5 billion). Most of that was the result of the problems at Westinghouse.

But the sale of the memory chip business isn’t a done deal yet.

The INCJ-led group is now the preferred bidder, but Toshiba says the two sides still need to reach a definitive agreement. The company is hoping to do that before its annual shareholders meeting in a week’s time.

Kazunori Ito, an analyst with research firm Ibbotson Associates Japan, said that Toshiba picked the INCJ-led group because it will be “cooperative” and quickly close the deal.

Toshiba has to close the transaction and get its balance sheet in order by March or it will be “immediately” delisted from the Tokyo Stock Exchange, Ito said.

The plan is far from a slam dunk, however. The potential sale is facing a challenge from U.S. data storage firm Western Digital (WDC), which has taken legal action to try to block it.

Western Digital is unhappy that Toshiba is including its stakes in joint ventures between the two companies in the chip unit sale. The U.S. company has sought international arbitration and a U.S. court injunction over Toshiba’s plans.

“Even though Toshiba has decided, I don’t think the problem is over yet,” said Ito

written by: Sherisse Pham