IA: Japanese porcelain manufacturer cools data centers – 04/12/2024 – Market

A Japanese company with more than two centuries of history in ceramic art and fine porcelain is benefiting from the rise of generative AI (artificial intelligence), electric vehicles and the intensifying technological war on heat.

Shares of Maruwa, a global leader in a range of specialty ceramics, have nearly doubled over the past year and have jumped to a record high since early April.

The Aichi-based company, largely ignored by securities analysts previously, now has a market capitalization of $2.75 billion and has become the focus of an extensive Goldman Sachs report, while other institutions also say they are preparing to analyze it.

Their excitement is about how Maruwa has successfully transferred its centuries-old art to newer ceramic components used for high technology. The company, once famous for exquisite dishes used in traditional Japanese banquets, entered the field at the beginning of Japan’s “economic miracle” era in the 1960s.

The division produces ceramics for circuit boards and semiconductors and specializes in materials used for heat dissipation in electronics, operating at very high temperatures — the type of temperature prevalent in AI servers and electric vehicle power modules.

The most in-demand products today are ceramic circuit boards, used in high-speed optical communications, as tech giants build ever-larger (and high-heat-generating) data centers as the backbone of AI projects. generative.

“We expect next-generation high-speed communications, including those related to generative AI, to be the biggest driver of our business growth in the coming years,” Maruwa said.

Goldman Sachs analyst Mitsuhiro Icho calculates that the company holds 60% of the global market for heat dissipation substrates for vital optical transceivers. He predicts this market will grow to $12.3 billion by 2027 as AI-related demand increases.

Icho says Maruwa is isolated from competitors as it is “almost impossible” for any non-ceramic supplier to enter the market at this stage, building a business from scratch. Its long history in ceramics has created deep competitive moats around materials and manufacturing processes. His key advantage, Icho said, is his age.

“As it has more than 200 years of history as a ceramics supplier, all the knowledge and technology accumulated since the early 1800s are the company’s core competency,” he said.

Maruwa has been cautious in its sales forecasts, only raising them slightly in February for its financial year ending in March. However, Icho believes that transceiver AI server-related sales could see a compound annual growth rate of 60% over the next five years.

However, the outlook now appears to be fully reflected in stocks, according to some analysts.

In a note published last week by British research firm Storm Research, analysts argued that the significant recent rise in Maruwa’s share price meant that its growth prospects had now been largely priced in by the market.