Minebea Mitsumi pauses acquisitions to chase AI returns

Minebea Mitsumi, one of Japan’s biggest corporate dealmakers, is hitting pause on acquisitions to focus on its output of ball bearings, motors and actuators for AI hardware to chase lucrative returns from the emerging technology.

The key supplier to Nintendo is eyeing climbing market forecasts for data centers and humanoid robots, and sees “unlimited” upside ahead, according to Chairman Yoshihisa Kainuma, who said the company has no current plans for deals.

“We are so busy,” he said in an interview. “It’s more important for us to focus on the volume of work in front of us, rather than on M&A and pouring managerial resources into a new arena.”

The Tokyo-based company, which supplies parts such as haptic devices used in Nintendo consoles, is among a plethora of hardware makers such as Fujikura whose businesses have been transformed by AI’s hunger for all kinds of formerly mundane mechanical components.

Minebea Mitsumi is now fielding ballooning orders for its ball bearings, used inside AI server fans and humanoid joints. Nvidia’s next-generation Vera Rubin platform, which relies on direct liquid cooling, is expected to spur demand for a wider range of Minebea Mitsumi components: The list includes stepping motors once used to feed paper in fax machines that can now help control the exact flow of liquid in AI servers’ cooling systems.

Soaring orders are supporting Minebea Mitsumi’s newfound preference for organic growth. “We will need a staggering number of bearings if what people are predicting today about robots and AI servers is to come true,” Kainuma said. “Even if it turns out to be only half that, our capacity would be nowhere near enough to meet demand.”

In June, the company’s shares rose close to 70% since the start of the year, but they’ve since given up almost all those gains amid growing sector-wide fears about an overcapacity of computing power and rising debts, coupled with calls by AI leaders to slow the pace of development.

Minebea Mitsumi’s capital expenditure plans remain modest, despite some investors’ calls to boost spending. The company plans to invest ¥58 billion ($377 million) to bring up ball bearing manufacturing capacity to 500 million units a month by 2030, up from a little over 400 million units now, a spokesperson said separately.

Kainuma said he prefers to be cautious, adding that the company can lift production capacity significantly in under a year, if necessary. “We never know whether what we’re talking about today will actually materialize, and we shouldn’t take on all of that risk today,” he said.

Since taking the helm in 2009, 70-year-old Kainuma has relied heavily on acquisitions for growth, overseeing 30 deals. Last year, he waged an unsuccessful takeover battle against Taiwan’s Yageo for Japan’s Shibaura Mechatoronics whose high-precision thermistors are key for monitoring the temperatures of devices inside data centers to keep them from overheating.

The buyout spree stemmed from Kainuma’s prior concern that demand for mechanical components in his portfolio would wane as the world shifted toward semiconductors, sensors and capacitors. But now, dealmaking is no longer on the agenda, he said, although he wouldn’t rule out the possibility of an acquisition.

“Back then, we couldn’t see what lay ahead and we were struggling to figure out how we could keep growing,” Kainuma said. “Now, that fog has lifted, and we can see what will become major growth areas over the next 10 to 15 years.”