Robotic conveyors carrying silicon wafers run across overhead rails at a new factory that Kioxia, one of Japan’s most valuable companies, hopes can help it meet overwhelming AI-driven demand.
The global race to build artificial intelligence data centers has turbocharged business for chipmakers, creating shortages and driving up prices especially for memory components.
And Kioxia is reaping the rewards.
While barely known outside the tech industry, its share price has risen about sevenfold this year, and in June it briefly became Japan’s largest firm by market capitalization, quickly overtaking Toyota.
Other once-unknown players in Asia’s tech supply chain are also hitting the big time, such as South Korea’s SK hynix, which last week listed on Wall Street after one of the world’s largest share sales.
Different types of memory chips that store digital information are used in AI systems along with powerful processors capable of crunching data to generate chatbot responses or realistic images.
The use of AI “has expanded rapidly” so “we have high expectations that the market for the flash memory we produce will continue to expand,” Kioxia CEO Hiroo Ota said this month at the new chip factory that opened in September in northern Japan.
The company specializes in so-called NAND flash chips, an increasingly hot product as AI agents — tools that can perform tasks for users — demand more and more storage space.
– Chinese competition –
“The rise in Kioxia’s share price represents a normalization of valuation for what was once an ‘ignored sector’,” Counterpoint Research analyst MS Hwang told AFP.
A challenge will be “maintaining its competitive edge against rivalry” from China’s Yangtze Memory Technologies Co (YMTC), a rapidly expanding maker of the same type of chips, Hwang said.
Wider concerns of overvaluation have also fueled fears of a market bubble, along with questions about when the impressive sums being spent on AI will reap returns.
The new factory is Kioxia’s second facility in the green suburbs of Kitakami, an area with several other large factories.
The AFP was shown rows of large white chip engraving machines in a clean room, where conditions are closely controlled to stop dust contamination.
Near Kitakami Station, Noriyuki Takahashi, a 47-year-old recruiter, said work has been busy lately thanks to Kioxia.
“It’s a good thing to have so many jobs here experiencing improved business sentiment,” he told AFP.
Hana, 57, who runs the bar Tachinomi Hanachan, had a less rosy outlook.
“Semiconductors are an industry with a lot of ups and downs,” she said. “Locals are worried about how long it will last.”
– big bonuses –
At its peak in the 1980s, Japan held about half of the global semiconductor market share.
That has since fallen to less than 10 percent, says the government, which aims for an eightfold increase in revenues from domestically produced microchips by 2040 from 2020 levels.
The country is building a high-tech chip center in northern Hokkaido, while Taiwanese chip maker TSMC has a factory in southern Kyushu.
Some analysts say AI has brought a new dimension to the dramatic boom-and-bust cycles the memory chip industry is known for.
Kioxia began life as Toshiba Memory, a pioneering memory chip business that Japanese conglomerate Toshiba, then in financial trouble, sold in 2018.
Now the company says it is planning a US listing as SK hynix, forecasting 1.3 trillion yen ($8 billion) in operating profit for April-June – a massive increase from 45 billion yen a year earlier.
Some workers in Kitakami boast bonuses that are “impossibly high” for the region, Hana told AFP.
But the competition is fierce and “Taiwan is working hard, other countries are working hard,” she added.
“For now it’s good, but when we ask how many years the demand will continue, the local community is looking at it with concern.”
