A Japanese food company best known for its monosodium glutamate is becoming a new target for activist investors because of its key materials in artificial intelligence infrastructure. Palliser Capital, a British-based activist investment institution, recently took a position in Japan's Ajinomoto, saying that the company has an almost monopoly on a material that is critical to AI infrastructure, but has not fully realized this advantage through price increases.
Ajinomoto is world-famous for its MSG and condiments, and its company name means "essence of flavor" in Japanese. Relying on the discovery of "umami", this company commercialized umami, regarded as the "fifth taste", in the form of MSG, which is widely used by chefs around the world and can be called a "taste bomb."
However, it is not MSG that really attracts the attention of investors, but Ajinomoto's functional materials business. One of the star products - Ajinomoto Build-up Film (ABF) - is a high-performance insulating material used to manufacture packaging substrates. The substrate is the "bridge" that transmits thousands of electrical signals between the chip and the terminal device. ABF is used to form tiny layer structures on the substrate and is a key material in many advanced chip packaging processes.
Without ABF substrates, a large number of the world's most advanced chips would not be produced at all. Because of this key position, Palliser, one of Ajinomoto's top 25 shareholders, is putting pressure on the company to "maximize the value of this severely undervalued AI infrastructure monopoly asset."
Palliser recommended that Ajinomoto increase the price of ABF products by more than 30%, and pointed out that compared with its client companies, Ajinomoto's valuation in the capital market still has a significant discount. The agency also emphasized that for downstream customers, this price increase will have a limited impact on costs, because ABF accounts for less than 0.1% of the selling price of a graphics processor (GPU).
Ajinomoto responded that the company "very much values the feedback and suggestions from investors" and promised to use these opinions to further achieve sustainable growth in corporate value.
Driven by the AI wave, Ajinomoto is not the only traditional Japanese manufacturing company to be re-examined. Toto, which is famous for its sanitary products, has also entered investors' attention because of its special ceramic materials used in advanced chip manufacturing. Palliser has established holdings in both Ajinomoto and Toto, describing both as "neglected, undervalued targets."
The capital market has given phased feedback. Since the beginning of this year, Ajinomoto's stock price has performed brilliantly: in February, the company's stock price soared due to better-than-expected performance and optimistic profit guidance, and the current year-to-date increase has exceeded 40%.
In the ABF segment, Ajinomoto has almost an overwhelming advantage, which makes it have an important impact on the semiconductor supply chain. Only a few companies in the world have the ability to process ABF raw materials into the ultra-high-density packaging substrates required by technology giants such as Apple and NVIDIA.
However, historically, many traditional Japanese manufacturing companies have often chosen to raise prices only when supply is severely tight or cost pressure has increased significantly. Take Nittobo, a Japanese textile company that is also involved in the supply of AI hardware materials, as an example. The company is currently increasing the price of its T-glass fiberglass cloth products due to raw material shortages and soaring production costs.
Some analysts pointed out that if Ajinomoto actively uses its bargaining power to significantly raise prices when supply is relatively stable, it may damage long-term relationships with customers, and this seems to be a risk that the company is currently unwilling to take. Qiu Shifang, a senior researcher at the Taiwan Economic Research Institute, said that as there has been no serious shortage recently, ABF prices have remained stable overall.
味之素则强调，公司是通过与客户“共创价值”的方式稳步扩展业务。不过，随着对高阶AI芯片的需求快速攀升，ABF 的供需平衡可能正在发生变化。
公司透露，已开始提升 ABF 产能，并计划进一步扩产，以满足不断攀升的需求。 As AI chips become larger and more complex in structure, the demand for packaging substrates used to connect chips and devices is rapidly expanding. Industry forecasts show that the supply and demand gap in this field will continue to expand until 2028.
Several major substrate manufacturers said that AI-related production lines are currently close to or already at full capacity, and it is expected that by 2027, the industry's overall production capacity will obviously be unable to meet market demand. Jukan Choe, an analyst at Citrini Research, pointed out that if substrate factories consume ABF faster than Ajinomoto's production capacity, the company "will inevitably be forced to increase selling prices."
In his view, Ajinomoto must find a better balance between "maintaining its reputation as a long-term stable supplier" and "facing the reality that demand for ABF is growing far faster than supply."