Goal: 1nm process! "Toilet King" TOTO invests 80 billion yen betting on semiconductor materials

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Japan's TOTO, which originally specialized in bathroom ceramics, is quietly undergoing a transformation thanks to the AI chip boom.

TOTO plans to invest 80 billion yen (approximately $4.95 billion USD) over the next five years to expand its semiconductor materials business, with the goal of providing key support for the next generation of chip manufacturing at the 1-nanometer process level. This investment far exceeds its core bathroom equipment business, highlighting a fundamental shift in the company’s strategic focus.

The explosion in demand for AI chips has turned TOTO’s semiconductor-related business into its main profit engine. In the fiscal year ending March this year, its new business sector (including semiconductor materials) saw a 34% year-on-year increase in sales to 67.4 billion yen, with operating profit up 42% to 28.9 billion yen. Profits from this sector now account for more than half of the company’s total profit, well above that from its iconic bathroom ceramics business.

This capacity expansion means TOTO is embedding itself deeply in the core of the global advanced chip supply chain, directly linking with the technological roadmaps of top foundries such as TSMC.

Aiming at 1 Nanometer, Surpassing Current Process Generations

TOTO’s research facility in Kanagawa Prefecture is focusing resources on developing support technologies for the production of 1-nanometer logic semiconductors. This goal is several generations ahead of current mass production levels.

For comparison, the world’s largest foundry, TSMC, is currently mass-producing at the 2-nanometer leading process node. The basic rule for logic semiconductors is: the narrower the circuit line width, the higher the chip performance. By betting on 1 nanometer, TOTO aims to lay down the material infrastructure required for the next-generation process in advance.

The focus of the capacity expansion is on Kyushu, in southwestern Japan. TOTO will install the latest equipment in its factories in Oita and Fukuoka Prefectures to increase capacity; both factories are already running at full capacity. A new firing workshop in the Fukuoka site is expected to be completed in January next year.

Regarding financial arrangements, TOTO plans to complete the total investment of 80 billion yen by the fiscal year ending March 2030, of which 39 billion yen has already been secured, with the rest to be deployed depending on market demand. If market demand remains unmet after this production expansion, TOTO will consider building new factories.

Ceramic Firing Technology: The Logic from Toilets to Wafer Chucks

TOTO’s move into semiconductor materials is no coincidence. As early as the 1980s, the company extended its expertise in ceramic firing, accumulated through sanitary ceramics R&D, into the semiconductor field. Its core product, the electrostatic chuck (used to fix wafers during chip manufacturing), achieves high durability through high-purity ceramic technology—this is its technological moat. Additionally, TOTO holds a differentiated advantage in the field of aerosol deposition; this process involves directly spraying fine ceramic particles to form coatings, which can be applied to multiple semiconductor manufacturing steps.

However, this business was not all smooth sailing. After years of continuous losses, around 2020, with the sharp rise in demand for AI semiconductors, the business saw a fundamental turnaround, ultimately surpassing the main bathroom business to become the company’s top profit source. Although the new business segment accounts for only about 10% of TOTO’s total revenue, its profits have far outpaced the traditional bathroom equipment segment.

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