Flush with AI Cash, Toilet Maker Toto Bets Big on Semiconductor Business

Japanese bathroom fixture manufacturer Toto is investing ¥80 billion (approximately Rp 8.8 trillion) over the next five years to expand its semiconductor materials business, supporting the development of next-generation chip manufacturing technology with circuit widths around 1 nanometre. While best known as a producer of ceramic sanitary ware, Toto has now turned its semiconductor-related business into its main profit engine. The surge in demand for AI chips has driven growth in this segment, helping reshape Japan’s manufacturing landscape, which has faced structural transformation challenges for years. Toto is currently concentrating its research and development activities at its facility in Kanagawa Prefecture. The site focuses on supporting the production of logic semiconductors with target circuit line widths in the 1 nm range, considered several generations ahead of currently available technology. Generally, logic semiconductors achieve higher processing capabilities as circuit line widths become smaller. Currently, the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co., has mass-produced the most advanced logic chips using 2 nm technology. To boost production capacity, Toto will install new equipment at its plants in Oita and Fukuoka prefectures on the southwestern island of Kyushu. Both facilities are already operating at full capacity. Additionally, construction of a new firing building at the Fukuoka facility is scheduled for completion in January. If market demand still cannot be met after the expansion, Toto stated it would consider building a new factory. The company is targeting total investment of around ¥80 billion through the fiscal year ending March 2030. Of that amount, Toto has already committed ¥39 billion, with the remainder to be realised depending on market conditions. Toto entered the semiconductor materials business in the 1980s by leveraging its ceramic firing technology originally developed for sanitary ware. One of its key products is the electrostatic chuck, a device used to hold semiconductor wafers during the production process. The product is known for its high durability, achieved through the use of high-purity ceramics. Toto also holds an advantage in materials produced using the aerosol deposition method, a coating technique that sprays extremely fine ceramic particles directly onto a surface. Toto’s semiconductor business had been unprofitable for many years. However, demand surged from around 2020 amid the rapid growth of the AI chip industry, transforming the unit into the company’s main profit source and overtaking its core sanitary ware business. In the fiscal year ended last March, Toto’s New Domain Business division, which houses the semiconductor materials operations, posted a 34% increase in sales to ¥67.4 billion. Operating profit jumped 42% to ¥28.9 billion. Although the division contributes only about 10% of total company revenue, its profit has surpassed that of the housing equipment business, including ceramic sanitary ware. The unit now accounts for more than half of Toto’s total profit.