These Japanese AI winners don’t make chips. They make toilets, glass fiber and seasoning

At a time when investor consideration has been on the semiconductor business, some hidden gems with companies fairly dissimilar to excessive tech have turned out to be market winners, using the AI growth.

Toto is greatest recognized for high-end bathrooms, Nittobo makes textiles and glass fiber, and Ajinomoto makes MSG seasoning. Their shares have gained 78%, 63% and 61%, respectively, this yr, as they make use of their core applied sciences to learn from the AI provide chain.

Toto makes ceramic electrostatic chucks utilized in semiconductor manufacturing tools, whereas Nittobo provides superior glass fiber utilized in semiconductor package deal substrates.

Ajinomoto makes insulating materials, often called “build-up movie” or ABF, utilized in semiconductor packaging for high-performance computer systems and data-center servers.

All three corporations reported sharp progress in companies tied to semiconductor demand for his or her full monetary years ended March 31, highlighting the influence of the AI growth.

The corporate’s superior ceramics enterprise loved increased revenue margin than its housing tools section, due to demand from IoT, digital transformation, AI and information facilities for superior semiconductor tools.

Toto, in its full year results, stated it noticed a lower in gross sales and earnings for its core 100-year-old housing tools unit, however this was made up by will increase in income and earnings in its superior ceramics enterprise.

The section noticed a 34% enhance in annual income and 42% bounce in working revenue, nearly single-handedly pulling the general firm into progress for the monetary yr.

The corporate’s experience in ceramics led it to fabricate digital chucks for semiconductor manufacturing tools in 1988.

These chucks maintain silicon wafers in place through the etching course of inside semiconductor manufacturing tools. Toto says that their ceramics considerably contribute to enhancing the manufacturing yield of superior chips.

“Nonetheless, we don’t view one section as superior to the opposite. Our Superior Ceramics Enterprise is a high-growth space, however we endured lengthy intervals of deficits over its 40-year historical past earlier than reaching this level,” the corporate stated to CNBC in an e mail.

It plans to develop each segments and “preserve a balanced ratio” for sustainable general progress, and “completely no plans” to pivot away from its core housing tools enterprise, because it gives a steady basis for the corporate’s steadiness sheet, whereas the chip sector stays risky.

Nittobo stated digital supplies had been already its mainstay, because it continues to develop markets for its conventional glass-fiber enterprise. Its T-glass product, launched in 1984, is utilized in printed circuit boards, and digital elements.

The corporate instructed CNBC that its T-glass and different digital supplies are “the pillar” of its progress for the following decade, and that AI semiconductor demand was altering the way it allocates capital expenditure, analysis and growth, and human sources.

Nittobo’s results inform the story: the corporate stated that robust demand associated to AI servers, in addition to components similar to robust gross sales of “Particular Glass” pushed up gross sales and earnings for the electronics supplies enterprise section.

Internet gross sales within the digital supplies enterprise climbed 20.4% yr on yr and working revenue climbed 39.7% in comparison with the earlier monetary yr.

That section contributed about 91% to Nittobo’s web gross sales enhance within the final monetary yr, in keeping with CNBC’s calculations, with the section’s revenue rising by 5.5 billion yen (about $34 million), greater than the corporate’s working revenue enhance of 4.4 billion yen.

The corporate stated glass fiber has been utilized in many functions over time, together with composite supplies for plastic reinforcement, however now, the corporate sees that there’s a “very robust chance digital supplies will stay its most vital enterprise nicely into the long run.”

In its outcomes launch, Nittobo stated it “expects to see robust demand for Particular Glass utilized in digital supplies, notably for servers at information facilities, community tools, and semiconductor package deal substrates, and can proactively strengthen its efforts to broaden manufacturing capability to satisfy this demand.”

Whereas semiconductor section turns into more and more profitable for the corporate, it’s also increasing functions for its conventional glass-fiber companies, together with composite and industrial supplies.

Ajinomoto has discovered functions for its merchandise, similar to producing the ABF insulation movie utilized in semiconductors, at the same time as meals stays its major focus.

In accordance with Ajinomoto’s web site, a byproduct from the MSG manufacturing course of helped the corporate develop applied sciences that ultimately led to the creation of ABF.

The product was put available on the market in 1999, and is presently used for high-performance semiconductors, together with CPUs.

Ajinomoto says ABF’s position has turn into extra vital as semiconductor packaging has grown extra complicated, and that AI, 5G and different superior applied sciences will proceed to drive semiconductor demand.

The corporate didn’t reply to CNBC’s request for remark.

Ajinomoto doesn’t get away ABF into its personal section, however stated in its full year results that its “Healthcare and Others” section — which embody ABF — noticed a rise in income of about 4% and enterprise revenue rising 45.1% yr on yr, partly because of increased income for digital supplies.

That section, which makes up greater than a 3rd of the corporate’s revenue for this monetary yr, even surpassed Ajinomoto’s frozen meals section by way of income and revenue.

“We foresee continued progress centered on ABFTM merchandise in high-value-added and cutting-edge fields,” the company said.

The corporate stated it goals for a “one-to-one steadiness” between its meals enterprise and its AminoScience enterprise, with ABF contributing to the latter.