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

At a time when investors’ attention was on the semiconductor industry, some hidden gems with very different high-tech businesses turned out to be market winners, riding the AI ​​boom.

Toto is best known for high-end toiletries, Nittobo makes textiles and glass fiber, and Ajinomoto makes MSG seasoning. Their shares have gained 78%, 63% and 61%, respectively, this year, as they use their core technology to benefit from the AI ​​supply chain.

Toto makes electrostatic ceramic chucks used in semiconductor manufacturing equipment, while Nittobo supplies advanced glass fiber used in semiconductor package substrates.

Ajinomoto makes a protective material, known as “build film” or ABF, used in semiconductor packaging for high-performance computers and data center servers.

All three companies reported sharp growth in demand-side semiconductor businesses for their full fiscal years ended March 31, highlighting the impact of the AI ​​boom.

The company’s advanced ceramics business enjoyed a higher profit margin than the real estate segment, thanks to demand from IoT, digital transformation, AI and data centers for advanced semiconductor equipment.

Toto, in its full-year results, said it saw a decline in sales and profits at its core 100-year-old home appliances unit, but this was offset by increased revenue and profit in its advanced ceramics business.

The segment saw a 34% increase in annual revenue and a 42% jump in operating profit, which almost led the company as a whole to growth for the fiscal year.

The company’s expertise in ceramics led to the creation of electronic chucks for semiconductor manufacturing machines in 1988.

These chucks hold silicon wafers in place during the insertion process inside semiconductor manufacturing equipment. Toto says that their ceramics have played a major role in improving the production efficiency of advanced chips.

“However, we do not view one segment as superior to the other. Our Advanced Ceramics business is a high-growth area, but we have endured a long period of deficits over its 40-year history before reaching this point,” the company told CNBC in an email.

It plans to grow both segments and “maintain a moderate rate” of overall sustainable growth, and has “absolutely no plans” to exit its home appliances business, as it provides a stable base for the company’s balance sheet, while the chip sector remains volatile.

Nittobo said electronics are already a mainstay, as it continues to develop markets for its traditional glass-fiber business. Its T-glass product, introduced in 1984, is used in printed circuit boards, and electronic components.

The company told CNBC that its T-glass and other electronics are a “pillar” to its growth over the next decade, and that semiconductor AI demand was changing the way it spends, research and development, and human resources.

Nittobo’s results tell the story: the company said that strong demand related to AI servers, as well as factors such as strong sales of “Special Glass” increased sales and profits in the electronics business segment.

Total sales in the electronics business increased by 20.4% year-on-year and operating profit increased by 39.7% compared to the previous financial year.

That segment contributed about 91% to Nittobo’s net sales growth last fiscal year, according to CNBC figures, with segment profit rising 5.5 billion yen (about $34 million), above the company’s operating profit of 4.4 billion yen.

The company said that glass fiber has been used in many applications over time, including composite materials to reinforce plastics, but now, the company realizes that “it is likely that electronic materials will remain very important in the future.”

In the release of its results, Nittobo said it “expects to see strong demand for Special Glass used in electronic equipment, especially servers in data centers, network equipment, and semiconductor package substrates, and will continuously strengthen its efforts to increase production capacity to meet this demand.”

While the semiconductor segment is becoming more profitable for the company, it is also expanding the applications of its traditional glass-fiber businesses, including composites and industrials.

Ajinomoto has found applications for its products, such as the production of ABF deposition film used in semiconductors, as food remains a major focus.

According to Ajinomoto’s website, the product from the MSG manufacturing process helped the company develop the technology that eventually led to the creation of the ABF.

The product was introduced to the market in 1999, and is currently used for high-performance semiconductors, including CPUs.

Ajinomoto says ABF’s role has become more important as semiconductor packaging has become more widespread, and that AI, 5G and other advanced technologies will continue to drive semiconductor demand.

The company did not respond to CNBC’s request for comment.

Ajinomoto does not break out ABF in its segment, but said in its full-year results that its “Healthcare and Others” segment – which includes ABF – saw revenue increase by about 4% and operating profit rise by 45.1% year-on-year, partly due to higher revenue from electronics.

That segment, which accounted for more than a third of the company’s revenue this fiscal year, even surpassed Ajinomoto’s frozen food division in terms of revenue and profit.

“We foresee continued growth focused on ABFTM products in the high-value and high-end segments,” the company said.

The company said it aims for a “one-to-one balance” between its food business and its AminoScience business, with ABF contributing to the latter.