Japanese toilet maker Toto's shares surge 18% as it invests $190M in AI semiconductor production

Shares in Japan's Toto soar on AI-related pivot

Japanese toilet maker Toto's shares surged 18 per cent on Friday after unveiling plans to boost production of semiconductor components and posting record annual profits. Its advanced ceramics business has turned Japan's largest toilet manufacturer into an AI play that has been driving a near-50 per cent share price rise this year and caught the attention of activist investor Palliser Capital. Shares in the company are now trading around ¥6,425 ($40.86) each, taking gains over the past six months to 65 per cent. Despite being better known for its bidet washlets that have defined the Japanese toilet globally, Toto is also the world's second-largest producer of electrostatic chunks used in the manufacturing of Nand memory chips. Surging sales of semiconductor components -- gaining 34 per cent year-on-year -- have lifted the division to account for more than half of Toto's operating profit, which jumped 11 per cent to ¥53.8bn in the year to March. The toilet producer expects sales for the unit to grow 27 per cent in the coming year, as it pledged to invest ¥30bn to strengthen mass production, as well as boost research and development, by the end of the 2028 financial year. Other Japanese companies that produce components essential to the rollout of AI have been benefiting from investor interest and pledging to pour funds into boosting output. The AI boom has led Kioxia, a producer of flash Nand memory, to eclipse Sony in market value. Meanwhile, cosmetics manufacturer Kao started production last year at a cleaning factory for chips and Ajinomoto, the inventor of monosodium glutamate, is investing more than ¥25bn to boost production of its insulating film critical for motherboards by 2030. Palliser had called on Toto to promote the division's importance to the market and plough more of its investment into the highly lucrative segment when it took a stake in February. The big rally for Toto comes despite the threat to its regular business of toilets and bathroom fittings from potential adhesive and plastic shortages due to the Middle East energy shock. Toto suspended new orders of prefabricated baths in mid-April. Although it has since gradually resumed taking orders, building contractors in Japan say that they still cannot get hold of bathroom units to complete projects. The toilet producer said that it expects the risks related to geopolitical turmoil to ease from July, as it factored in a ¥7bn hit. Many analysts, however, were underwhelmed by Toto's results. "Profit guidance gets a passing grade," said Citi analyst Masashi Miki. "Although Middle East assumptions carry some downside risks."

Toilet Maker Spikes in Value as It Flushes Money Into AI

Can't-miss innovations from the bleeding edge of science and tech Last month, failing tech bro shoe company Allbirds made the baffling announcement that it was pivoting to AI -- three magic words that turned the waning business into Silicon Valley's latest obsession overnight. Now Japanese toilet maker Toto, which has been at the epicenter of the country's -- and the rest of the world's -- bidet revolution, is looking to cash in as well. Toto isn't exactly pivoting to AI -- it's more like a doubling down. The company unveiled plans last week to ramp up existing production of semiconductor components, an attention-catching "AI play" that sent its shares soaring by 18 percent to their highest levels since 2021, as the Financial Times reports. In all, the company announced it was investing $190 million to strengthen chip production and boost research and development. While it's far better known for its high-tech toilets -- which not only light up, clean and dry behinds, open and close automatically, spray deodorizer, and flush on their own -- Toto is also the world's second-largest producer of electrostatic chucks, a critical component that holds NAND computer flash storage chips in place during manufacturing. In large part thanks to the massive surge in interest for chips driven by AI, Toto's semiconductor component sales now account for more than half of its profits, according to the FT. Meanwhile its toilet business is starting to plunge, thanks to adhesive and plastic shortages triggered by the ongoing Middle East energy crisis. The company was forced to halt new orders in mid-April as a result. Fortunately, the ongoing AI hype cycle could keep it afloat, at least for the time being.