Japanese hardware stocks are having a moment — again

{"text":[[{"start":3.3,"text":"It’s not just in the US that AI is producing some surprising winners: Asia’s tech hardware makers are enjoying a degree of investor love not seen since laptops and 3G iPhones were hot properties. In Japan’s case, the current surge plays to the country’s industrial strengths — and could be a test of its ability to move past traditional governance weaknesses. "}],[{"start":25,"text":"Shares in Tokyo-listed chipmaker Kioxia have surged sevenfold this year, making the doubling of South Korea’s $1.5tn Samsung Electronics look positively pedestrian. Earlier this week, SoftBank ended Toyota’s 20-year reign as Japan’s most valuable company, aided by a €75bn pledge on Monday to help build new AI computer clusters in France. "}],[{"start":null,"text":"

"}],[{"start":50.5,"text":"It’s fair to be nervous about the sustainability of this rally, given both the speed and the concentration. Consider the tripling of South Korea’s benchmark index in the past 18 months, led by Samsung and rival SK Hynix who, combined, account for more than half of its value. Similarly, chip foundry TSMC accounts for two-fifths of Taiwan’s blue-chip index. "}],[{"start":75.05,"text":"Japan is concentrated too, in its way. The top 10 gainers in the Nikkei 225 last month were all companies with AI links, from optical fibre to silicon wafers, and the scale of their advance pushed the excitable index’s gains to 36 per cent since January. That produced a record gap with the rival Topix, which is less driven by significant single-company share moves and has gained just half that amount."}],[{"start":100.19999999999999,"text":"Overall, Japan’s market still looks pretty broadly based. The 10 biggest companies in the Topix make up just over a fifth of the index and include Uniqlo owner Fast Retailing as well as Sony, Toyota and two giant banks plus AI-geared stocks. That provides some counterweight should an AI correction come, especially with Japanese long-term bond yields nearing a healthy 3 per cent — a level not seen in 30 years. "}],[{"start":128.79999999999998,"text":"Governance reforms, too, are some comfort. While South Korea is following a similar path, Japan is further along in its efforts to focus on profitability, not corporate relationships. Executives are targeting average returns on equity of almost 11 per cent, Nomura observes, and are discussing divestments and returns at levels that feel almost western. "}],[{"start":150.74999999999997,"text":"Asia has seen hardware booms that have ended painfully before. Remember the Walkman and the CD player? Both had their moment, which then passed. Better governance won’t defend Japan and its peers from the tech cycle, but it should at least encourage investors to stick around — even if those considerable AI gains falter. "}],[{"start":175.29999999999998,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780550783_6340.mp3"}