Fine porcelain maker Maruwa becomes the hottest bet for cooling AI data centres

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A Japanese company with more than two centuries of history in ceramic art and fine porcelain tableware has emerged as a surprise beneficiary of the rise of generative AI, electric vehicles and the technology sector’s intensifying war against heat.

Maruwa, which dominates globally in a range of specialist ceramics, has seen its shares almost double over the past year and leap to an all-time high since the start of April.

The Aichi-based company, virtually ignored by securities analysts previously, now has a market capitalisation of $28bn and has become the focus of a hefty report by Goldman Sachs, while other houses also say they are preparing coverage.

Their excitement is over how Maruwa has successfully transferred its traditional craftsmanship to the latest ceramic components. The company, once famous for exquisite dishes used in traditional Japanese banqueting, first moved into the business at the start of Japan’s “economic miracle” era in the 1960s. 

Its division produces ceramics for circuit boards and semiconductors and has a forte in materials used for heat dissipation in electronics operating at very high temperatures — the kind of temperatures prevalent in AI server farms and in the critically important inverter power modules of electric vehicles. 

Its hottest products in terms of demand currently are ceramic circuit boards used in high-speed optical communications, as tech giants build ever larger, heat-generating data centres as the hardware backbone of their generative AI projects.

“We expect that next-generation high-speed communications, including those related to generative AI, will be the biggest driver of our business growth over the next few years,” said Maruwa. 

Goldman Sachs analyst Mitsuhiro Icho calculates the company has 60 per cent of the global market for heat dissipation substrates for vitally important optical transceivers. He predicts this market will grow to be worth $12.3bn by 2027 as AI-related demand spirals.

Icho said Maruwa was insulated from competitors as it was “nearly impossible” for any non-ceramic supplier to enter the market at this stage by building a business from scratch. Its long history in ceramics had created deep competitive moats around the materials and the manufacturing processes. Its fundamental advantage, said Icho, was age.

“As the company has more than 200 years of history as a ceramic supplier, all the knowledge and technology accumulated since the early 1800s is the core competitiveness of the company,” he said.

Maruwa has been cautious in its sales forecasts, only raising them by a small notch in February for its financial year that ended in March. However, Goldman’s Icho believes its AI server-related sales of transceivers could have a compound annual growth rate of 60 per cent over the next five years.

However, its strong outlook now seems fully reflected in its shares, according to some analysts. In a note published last week by the UK-based boutique Storm Research, analysts argued that the significant recent increase in Maruwa’s share price meant its growth prospects had now been largely discounted by the market.