AI demand lifts outlook for Japan memory chipmaker Kioxia

Kioxia, the Japanese memory chipmaker, is trying to expand production as artificial intelligence data centres drive demand for memory components. At a new factory in northern Japan, robotic transporters carry silicon wafers on overhead rails, part of a facility the company hopes will help meet strong AI-related demand.

The global build-out of AI data centres has increased business for chipmakers, especially makers of memory components. The source reported that shortages have pushed prices higher. Kioxia's share price has risen around seven-fold this year, and in June it briefly became Japan's largest company by market capitalisation after passing Toyota.

Kioxia specialises in NAND flash chips, which store digital information. The source said such chips are used in AI systems alongside powerful processors, and that AI agents, which can carry out tasks for users, require increasing storage space. Kioxia CEO Hiroo Ota said this month at the new chip fabrication plant that AI use has been expanding rapidly and that the company has high expectations for continued growth in the flash memory market.

Counterpoint Research analyst MS Hwang told AFP that Kioxia's stock price rise represented a normalisation in valuation for what had been an ignored sector. Hwang said one challenge would be maintaining Kioxia's competitive edge against China's Yangtze Memory Technologies Co., a fast-growing maker of similar chips. The source also reported wider concerns that valuations may be stretched, along with questions about when large AI investments will produce returns.

The new factory is Kioxia's second facility in Kitakami, an area with several other large factories. AFP reported seeing rows of large chip-etching machines in a cleanroom designed to prevent dust contamination. Near Kitakami station, recruiter Noriyuki Takahashi said business had been busy because of Kioxia and welcomed the jobs. Hana, who runs the Tachinomi Hanachan bar, said the semiconductor industry has many ups and downs and that local people are unsure how long the boom will last.

Japan held around half of the global semiconductor market in its 1980s peak, according to the source, but the government says that share has fallen to less than 10 percent. The government is aiming for an eightfold increase in revenue from domestically produced microchips by 2040 compared with 2020 levels. Japan is building a chip hub with advanced technology in northern Hokkaido, and Taiwanese chipmaker TSMC has a plant in southern Kyushu.

Kioxia began as Toshiba Memory, a memory chip business sold by Toshiba in 2018 when the conglomerate was under severe financial strain. Kioxia now says it is planning a US listing and forecasts 1.3 trillion yen, or $8 billion, in operating profit for April-June, compared with 45 billion yen a year earlier. Hana said some workers in Kitakami speak of bonuses that are very high for the region, but she also pointed to fierce competition from Taiwan and elsewhere and said the local community remains uneasy about how many years demand will continue.