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When most people think about artificial intelligence, the spotlight competes with us and Chinese startups to build the next best model. On the surface, it’s an algorithmic battle, a powerful image generator, a billion dollar valuation.
However, Japan has been following a quiet path. Its local AI scene is shaped by strict data privacy laws and language barriers that mean limiting access to open source tools and datasets that enhance most of today’s generative AI. As a result, Japanese AI development remains primarily behind the scenes, focusing on business tools for manufacturing and automation.
Ironically, however, this global AI arm race is now not software, but a physical infrastructure that enables AI, driving new growth in some of Japan’s most overlooked sectors.
Companies that make precision motors and fans, which were once the backbone of Japan’s industrial economy, have seen their fate shaking in recent years. Many of these companies, such as NIDEC, were betting on electric vehicles and supplying motors and components for EV drivetrains as major growth drivers. Local peers such as Sanyo Denki, a manufacturer of cooling fans and power systems, and Murata Manufacturing, known for their electronic components, have traditionally served industrial and automotive clients.
However, the slowdown in adoption of EVs, especially across Europe, has been hitting NIDEC hard in recent months. Due to production cuts and weakening demand from major automakers, NIDEC’s automotive segment has suffered, reflecting more than a third of its stock price declines over the past year.
However, as AI infrastructure expands, its extreme heat and electricity demand is increasing global demand for cooling and electricity supply. These are regions led by these Japanese companies. And suddenly, demand revived for the very companies that struggled to find growth in EVs.
NIDEC’s pivots for AI infrastructure already provide results. The company reported record operating profit of 175.5 billion yen ($1.2 billion) over the nine months ended December. Long seen as part of Japan’s aging industrial bases, the Japanese, Dunes and Murata peers are well suited to profit from the global build-out of AI infrastructure.
While Japan may be lagging behind AI development for consumers, its industrial engineering groups have proven increasingly useful in building physical infrastructures that will drive the global expansion of technology. And along the way, some of its most modest companies find an astounding second act.
june.yoon@ft.com
