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When most people think about artificial intelligence, the spotlight is on US and Chinese start-ups racing to build the next best model. On the surface, it is a battle of algorithms, powerful image generators and billion-dollar valuations.
Japan, however, has taken a quieter path. Its local AI scene is shaped by strict data privacy laws and a language barrier that means limited access to the open source tools and data sets that power much of today’s generative AI. As a result, Japan’s AI development has remained mostly behind the scenes, focused on business tools in manufacturing and automation.
But ironically, this global AI arms race is now fuelling new growth in some of Japan’s most overlooked sectors — not in software, but in the physical infrastructure that makes AI possible.
Companies that make precision motors and fans, once the backbone of Japan’s industrial economy, have seen their fortunes waver in recent years. Many of these companies, such as Nidec, had been betting on electric vehicles, supplying motors and components for EV drivetrains, as a key growth driver. Local peers such as Sanyo Denki, a maker of cooling fans and power supply systems, and Murata Manufacturing, known for electronic components, have also traditionally served industrial and automotive clients.
Yet a slowdown in EV adoption, especially across Europe, has hit Nidec hard in recent months. With production cuts from major carmakers and weakening demand, Nidec’s automotive segment has suffered, reflected in a share price drop of more than a third over the past year.
But as AI infrastructure scales, its extreme heat and power demands are fuelling global demand for cooling and power delivery — areas where these Japanese companies lead. And suddenly, the very companies that were struggling to find growth in EVs are back in demand.
Nidec’s pivot towards AI infrastructure is already delivering results. The company reported record operating profit of ¥175.5bn ($1.2bn) in the nine months to December, driven partly by rising orders from data centre clients. Peers Hitachi, Sanyo Denki and Murata, long seen as part of Japan’s ageing industrial base, are now well positioned to benefit from the global buildout of AI infrastructure.
Japan may be lagging behind in consumer-facing AI development, but its industrial engineering groups are proving increasingly useful in building the physical infrastructure driving the technology’s global expansion. And in the process, some of its most unassuming companies are finding a surprising second act.
june.yoon@ft.com
