[Digital Today intern reporter Seungah Yoo] In Japan's stock market, Toto, Nittobo and Ajinomoto, rather than semiconductor companies, are emerging as beneficiaries of the artificial intelligence (AI) boom.

On July 22 (local time), CNBC reported that the three companies have integrated their existing materials and manufacturing technologies into the semiconductor supply chain, lifting their shares 78 percent, 63 percent and 61 percent this year, respectively.

The three companies share a common point: They do not directly design or produce semiconductors, but they supply key parts and materials needed for semiconductor manufacturing and packaging. Toto, a maker of sanitary ware and bathroom fixtures, produces ceramic electrostatic chucks used in semiconductor manufacturing equipment. Nittobo supplies high-performance fiberglass for semiconductor package substrates. Ajinomoto, a global food and chemicals company, produces ABF, an insulating material used in semiconductor packaging for high-performance computers and data centre servers.

Their results also showed that AI-driven demand is spreading across the supply chain. For the fiscal year ended March 31, all three companies posted clear growth in semiconductor-related businesses. As expanding investment in AI servers and data centres extends to equipment, packaging and electronic materials, profit contributions from areas outside their core businesses increased.

Toto saw sales and profit decline in its core housing equipment business, but its advanced ceramics business offset the drop. Annual revenue in that unit rose 34 percent and operating profit climbed 42 percent. Toto said growing demand for the Internet of Things (IoT), digital transformation (DX), AI and data centres is lifting demand for advanced semiconductor equipment and improving profitability. It also said ceramic electrostatic chucks secure silicon wafers in semiconductor etching processes, and its ceramics contribute significantly to improving yields for advanced chips.

Toto, however, drew a line at any plan to rapidly shift the centre of gravity of its business from housing equipment to semiconductors. The company said the advanced ceramics business is a high-growth area, but it also had periods of losses over 40 years up to the present, adding, "We do not see one business segment as superior to another." It added that the housing equipment business is a stable foundation supporting its financial structure, and it will maintain balance between the two businesses in light of the volatility of the semiconductor industry.

Nittobo said its electronic materials business has already become a key growth pillar. Its T-glass, launched in 1984, is used in printed circuit boards and electronic components. The company said rising demand for AI semiconductors is changing capital investment, research and development and workforce allocation, and explained that T-glass and other electronic materials will be the core growth drivers over the next 10 years. In the previous fiscal year, net sales in the electronic materials business rose 20.4 percent from a year earlier and operating profit increased 39.7 percent.

The electronic materials business also made a large profit contribution. The unit accounted for about 91 percent of the increase in the company's total net sales, and the increase in operating profit for the segment was 5.5 billion yen (about 50 billion won), exceeding the company's total operating profit increase of 4.4 billion yen. Nittobo said it expects demand to persist for special glass used in electronic materials for data centre servers, network equipment and semiconductor package substrates, and it will actively push to expand production capacity. It is also broadening application areas for its existing glass fibre businesses, such as composites and industrial materials.

Ajinomoto is a food company, but it is drawing attention as an AI beneficiary on the strength of ABF insulating film for semiconductor packaging. ABF was commercialised in 1999 and is now used in high-performance semiconductors, including central processing units (CPUs). The company said by-products from its production process for the seasoning MSG were the starting point for developing ABF. As semiconductor packaging has become more advanced, ABF has grown in importance, and it forecast that the spread of AI and 5G will continue to drive semiconductor demand.

Ajinomoto does not disclose ABF as a separate business segment, but revenue in its healthcare and other segment, which includes ABF, rose about 4 percent in the previous fiscal year and business profit increased 45.1 percent. That reflected in part expanded sales of electronic materials. The segment accounted for more than a third of the company's total profit, and both revenue and profit exceeded those of its frozen foods segment. The company said, "We expect continued growth centred on ABF products in high value-added and advanced fields."

These cases show that the benefits of AI investment are spreading beyond semiconductor design and manufacturing across the supply chain, including equipment parts, substrate materials and packaging insulators. They also suggest that Japanese manufacturers are increasing their presence in the AI supply chain based on long-accumulated technologies in ceramics, glass and chemical materials.