TOKYO (Reuters) - Toshiba Corp's 6502.T board will meet on Wednesday to consider offers for its chip unit from Western Digital WDC.O and Taiwan's Foxconn in addition to a bid from a consortium that was previously favorite, a source familiar with the matter said. Toshiba is scrambling to sell its flash memory unit to cover losses from its bankrupt U.S. nuclear business Westinghouse.

FILE PHOTO: The logo of Toshiba Corp is seen as window cleaners work on the company's headquarters in Tokyo, Japan, February 14, 2017. REUTERS/Toru Hanai/File Photo

But it has struggled to close a 2 trillion yen ($18 billion) deal with the group it previously chose as preferred bidder - a consortium including Japanese-government backed funds, Bain Capital and South Korean chip maker SK Hynix 000660.KS.

Western Digital, which jointly operates Toshiba’s main chip plant, also wants to buy the business. It sought an injunction to block the sale to the consortium, arguing that any transaction required its consent.

The legal battle has unnerved the state-backed funds and they want the deal to be conditional on the conflict with Western Digital being resolved.

Another key point of contention has been a proposal by SK Hynix to help fund the deal with convertible bonds - a step that could eventually give it an equity interest in the world’s second-largest maker of NAND flash memory chips.

Japanese government officials are eager to keep Toshiba’s semiconductor technology in domestic hands, according to sources.

In attempt to revive the stalled talks, Toshiba earlier this month began reconsidering offers from Western Digital and Foxconn, formally known as Hon Hai Precision Industry 2317.TW, sources have said.

Western Digital is also offering about 2 trillion yen and would form an alliance with U.S. private equity firm join KKR & Co KKR.N as well as the two Japanese government funds that are part of the preferred bidder group, the source said on Tuesday.

The U.S. company has significantly compromised on its earlier demands for voting rights, said the source, who requested anonymity because the talks were confidential.

($1 = 111.3700 yen)