Technology

Palliser Capital recently sent a letter to Toto, the $7 billion Japanese toilet maker. They called the company "the most undervalued and overlooked AI memory beneficiary." That might seem strange at first, but the connection is in materials science.

Toto is famous for its bidet toilets, but its deep expertise is in advanced ceramics. According to the FT, Toto's chuck technology uses ceramics engineered to remain perfectly stable at extremely low temperatures. This turns out to be really handy for holding silicon wafers firmly in place during cryogenic etching, which is becoming more important as memory chips get more layered and complex. Palliser believes Toto has about a five-year lead in this specific technology and should expand this side of its business.

Their advanced ceramics division already contributes 40% of the company's operating profit, despite making up less than 10% of its revenue.

Toto isn't even the most extreme example. Another company called Ajinomoto is known MSG, leveraged decades of amino acid research to development insulating film, called Ajinomoto Build-up Film (ABF), that is used in virtually every high-end GPU. They hold an estimated 95% global monopoly on this material. During the 2021 chip shortage, a major bottleneck was the supply of Ajinomoto's film.

It turns out that Japanese companies hold a majority global share in at least 14 critical semiconductor materials, showing how industrial processes are deeply connected. The sintering technique used to create a non-porous ceramic toilet is the same one used to create a contamination-free wafer chuck. The most foundational layer of computing hardware relies on companies whose public identity is built on consumer goods like toilets, food seasoning, and window glass. It's a good reminder that physical material science underpins digital advancement.

https://archive.ph/LhvNo