From The Economist, May 14:
What the creator of MSG and the world’s biggest toilet-maker have in common
Ajinomoto has spent well over a century supplying monosodium glutamate (MSG), a chemical that gives food an umami kick. Now another of the Japanese seasoning giant’s products is whetting investors’ appetites. Ajinomoto Build-up Film (ABF) is a material used to insulate artificial-intelligence processors from circuit boards. It was originally made from by-products of MSG manufacturing. Ajinomoto controls more than 95% of the market. Booming demand for AI chips has made the film scarce, pushing Ajinomoto’s share price up by 65% since the start of the year, around three times the gain in Japan’s benchmark Nikkei index.Toto, another century-old Japanese firm, has lately enjoyed an equally improbable flush of prosperity. Best known as the world’s largest toilet-maker, it has found a profitable seat in the semiconductor supply chain. The firm is a leading producer of electrostatic chucks: ceramic plates that hold silicon wafers firmly in place while memory chips are etched. Toto’s operating profit from advanced ceramics now accounts for more than half its total.
The AI frenzy has produced obvious winners in semiconductors: American chip designers, South Korean memory-makers, Taiwanese foundries. Japan has its equivalents, with giants such as Tokyo Electron and Advantest that make the sophisticated equipment used to fabricate and test chips.
But like Ajinomoto and Toto, many of the country’s AI winners are in less flashy trades. Hoya, a health-care company that makes spectacles and contact lenses, is a leading supplier of photomask blanks: transparent plates coated with light-sensitive material that lithography tools use to etch chip designs onto silicon wafers. Sakura, a stationery brand, has adapted technology once used for coloured pencils to spot defects in chip-manufacturing processes. Nitto Boseki (or Nittobo), which began life as a textile company in 1923, is today the sole supplier of “T-glass,” an ultra-thin glass fibre essential for packaging AI chips.
Two factors explain this eclectic industrial cast. The first is history. In the 1980s Japan was a semiconductor superpower, accounting for more than half of global chip production. Six of the world’s ten biggest chip firms in 1989 were Japanese. Those champions created demand for local suppliers of all sorts. The country’s firms still dominate several niches in the supply chain, particularly for materials and tools.
The second factor is culture. David Dai of Bernstein, a broker, argues that Japanese companies keep developing technology even when demand is not yet obvious, and rarely abandon it. That lets them deepen their knowledge over decades. When the opportunity finally appears, they are ready, armed with better technology and more credibility than newer rivals. Ajinomoto began work on ABF in the 1970s, as it looked for ways to apply the chemistry behind MSG elsewhere. Only in 1999 was the material first adopted by a major chipmaker....
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