The Japanese bathroom fixture manufacturer Toto anticipates that its chip-related business expenditures will constitute over half of the company's total capital spending in the coming years, aiming to carve out new avenues for growth by capitalizing on the artificial intelligence (AI) boom.

This company, known for producing heated toilet seats and smart toilet covers, is benefiting from an unexpected surge in demand from chip equipment manufacturers. These manufacturers are seeking Toto's expertise in ceramic materials, which are engineered to withstand dust particles, corrosive substances, and high temperatures. The global wave of AI investment is driving increased sales for Toto's electrostatic chucks and other materials used in chip fabrication. Electrostatic chucks are utilized to secure silicon wafers during the semiconductor manufacturing process.

Toto's Chief Technology Officer, Ryosuke Hayashi, stated in an interview that the company will establish a production system "capable of adequately responding to demand." He noted that with the completion of major expansion plans in the United States and China, the proportion of capital expenditure allocated to residential equipment versus new business areas is set to reverse. In the fiscal year ending this March, Toto's spending on semiconductor-related products accounted for 11% of its capital expenditure.

On Wednesday, Toto's stock price in Tokyo surged by as much as 11%, marking its most significant intraday gain in over a month.

Headquartered in Kitakyushu, Fukuoka Prefecture in western Japan, Toto leveraged its expertise in ceramic materials for toilets to enter the chip supply chain as early as the 1980s. For instance, the company's technological advancements in stain-resistant materials facilitated the development of aerosol deposition films. These films are used to prevent corrosion on semiconductor substrates while minimizing particle contamination. In electrostatic chucks, even minor variations in thermal conductivity can lead to wafer deformation and a decline in chip yield.

Over the past year, Toto's share price has approximately doubled, outperforming its domestic bathroom fixture competitor, Lixil Group. Concurrently, conflicts in the Middle East are driving up production costs for petrochemical byproducts, including resins, plastics, and sealants used in sinks and bathtubs.

SBI Securities market analyst Koki Takada indicated that Toto's chip-related business still has room for expansion. He remarked that as manufacturing complexity continues to increase, market demand for Toto's materials is expected to grow further.