Artificial intelligence is driving a surge in demand for memory chips, transforming Japanese semiconductor maker Kioxia into one of the country’s most valuable companies as it expands production to meet growing global needs.
At the company’s new factory in northern Japan, robotic transporters carrying silicon wafers move along overhead rails as production ramps up. Opened in September, the facility reflects the industry’s race to supply the memory components needed for AI data centres.
The rapid expansion of AI infrastructure has boosted demand for memory chips, creating supply shortages and pushing prices sharply higher. Kioxia, which remains relatively unknown outside the technology industry, has emerged as one of the biggest beneficiaries. Its share price has risen around seven-fold this year, briefly making it Japan’s largest listed company by market capitalisation in June, ahead of Toyota.
The trend has also lifted other Asian technology suppliers. South Korea’s SK hynix recently listed on Wall Street following one of the world’s largest stock sales.
Memory chips play a critical role in AI systems by storing the vast amounts of digital information processed alongside high-performance computing chips used to generate chatbot responses and realistic images.
Kioxia Chief Executive Officer Hiroo Ota said demand for the company’s products was expected to continue growing as AI adoption accelerated.
“AI use has been expanding rapidly,” he said during a visit to the new manufacturing plant. “We have high expectations that the market for the flash memory we produce will continue to expand.”
The company specialises in NAND flash memory chips, which are becoming increasingly important as AI agents capable of completing tasks on behalf of users require greater storage capacity.
Counterpoint Research analyst MS Hwang said Kioxia’s strong share price performance reflected renewed investor interest in a sector that had previously received little attention.
“Kioxia’s stock price surge represents a normalisation of valuation for what was once an ‘ignored sector’,” he said.
However, Hwang warned that maintaining a competitive advantage would become more challenging as China’s Yangtze Memory Technologies Co (YMTC) rapidly expanded production of similar chips.
The AI boom has also fuelled concerns about whether semiconductor valuations have become overstretched, with investors questioning when the huge sums being invested in AI infrastructure will deliver sustainable returns.
Kioxia’s new factory is its second facility in the green outskirts of Kitakami, where several major manufacturers operate. Inside the highly controlled cleanroom, rows of advanced chip-etching machines produce semiconductors under strict conditions designed to prevent dust contamination.
The company’s growth has brought economic benefits to the surrounding community. Noriyuki Takahashi, a 47-year-old recruiter based near Kitakami Station, said business had improved as demand for workers increased.
“It’s a good thing to have so many jobs here experiencing improving business sentiment,” he said.
Not everyone shares the optimism. Hana, a 57-year-old who runs the Tachinomi Hanachan bar, said the semiconductor industry had always been highly cyclical.
“Semiconductors are an industry with a lot of ups and downs,” she said. “The locals are anxious about how long it will last.”
Japan once controlled around half of the global semiconductor market during the 1980s, but its share has since fallen to below 10 per cent, according to the government. Tokyo now aims to increase revenue from domestically produced semiconductors eightfold by 2040 compared with 2020 levels. As part of that strategy, the country is developing an advanced semiconductor hub in Hokkaido, while Taiwan Semiconductor Manufacturing Company (TSMC) has established a production plant in Kyushu.
Kioxia was formerly Toshiba Memory before Toshiba sold the business in 2018 while facing severe financial difficulties. The company is now planning a US stock market listing, similar to SK hynix, and forecasts operating profit of 1.3 trillion yen (about $8 billion) for the April-June quarter, up from 45 billion yen during the same period a year earlier.
According to Hana, some Kioxia employees are receiving bonuses that would previously have been unimaginable in the region. Even so, she said uncertainty remains.
“Taiwan is working hard; other places are working hard,” she said. “It’s good for the moment, but when we ask how many years the demand will continue, the local community is looking at it with unease.”
