Japanese Seasoning Byproduct Emerges as Key Material for AI Semiconductors

A seasoning byproduct created by Japanese food company Ajinomoto is being used as a core material for AI (artificial intelligence) semiconductors. On July 24, Ajinomoto announced it would reject investor demands for price hikes, stating instead that it aims to lead the ABF (Ajinomoto Build-up Film) market by expanding production capacity and increasing the high value-added nature of its products.

British activist fund Palliser Capital demanded last June that Ajinomoto raise the supply price of the ABF it produces by at least 30%. Palliser Capital argued that there is sufficient room for price increases, noting that ABF accounts for a mere 0.1% of the cost composition of AI chips. In an interview with the Wall Street Journal (WSJ) on the 12th of last month, Ajinomoto CEO Shigeo Nakamura explicitly rejected the price hike request, stating, "If prices become excessively high, customers will develop alternatives."

The response Ajinomoto actually chose is increasing production. Ajinomoto decided to launch a volume offensive through a total investment of 25 billion yen from 2023 to 2030. Following the full operation of its Gunma plant in 2025, the company plans to build a third production base in Kanishi, Gifu Prefecture, with the goal of operation in FY2032 to respond to demand for AI servers.

Despite the fading of expectations for aggressive price hikes, the stock market did not join in selling. The decline was limited to 17% from the peak as of the 23rd. This is analyzed as a result of the market positively evaluating the company's growth strategy that prices will naturally rise if the sales organization is upgraded, centering on high-performance AI chips, along with the production increase plan.

Ajinomoto is scheduled to announce its financial results for the first quarter of fiscal year 2026 on the 6th of next month and reveal the performance of this management strategy.