Company history

Kokusai Electric was incorporated in 1949 to make telecommunications and high-frequency equipment. Radio gear was the main trade, but as early as 1956 the company took orders for germanium and silicon single-crystal pullers — an entry into semiconductor production equipment made while the semiconductor industry itself barely existed. It listed on the Tokyo Stock Exchange in 1961 and moved to the First Section the same year.

For half a century the company carried two legs of quite different character: radios sold to broadcasters and disaster-response agencies, and process tools sold into semiconductor fabs. As volume production took hold, the equipment side became the one with high unit prices and high margins, and its weight inside the company grew. Two businesses that demanded different investment rhythms and different judgement were, structurally, always candidates to be separated.

The core of the equipment business was batch thermal deposition — a vertical furnace holding dozens of wafers at once, laying down the thin films from which circuits are built. Kokusai spent decades refining atomic-layer deposition (ALD) in that batch form, getting throughput and film quality at the same time. As geometries shrank, the ability to stack films one atomic layer at a time became decisive, and the company built an accumulation in batch ALD that its main rival, Tokyo Electron — a competitor at nearly every customer — could not easily follow. That lead would later read as roughly 70% of the world market.

In 2000 Kokusai Electric merged with Hitachi Denshi and Yagi Antenna and took the name Hitachi Kokusai Electric (TSE 6756) — wireless and video communications, antennas and semiconductor equipment in one listed Hitachi subsidiary. Within that three-segment structure the equipment division, built on its deposition engineers and its plant in Toyama Prefecture, was the profit engine.

It was also the volatile one. Semiconductor capital spending swings on a multi-year silicon cycle: booming order books in the investment years, losses in the down years. In January 2009 会社四季報 reported all three segments — communications, broadcast/video and semiconductor equipment — in operating loss together. For a parent whose centre of gravity was social infrastructure, a high-earning asset that made consolidated results unforecastable was an awkward thing to hold.

From the late 2000s Hitachi pruned a portfolio that had once run to some twenty listed subsidiaries. In April 2017 it agreed to sell Hitachi Kokusai Electric to KKR and Japan Industrial Partners; Sakuma Kaichiro, who would head the video-and-communications remainder, said there had been almost no operational synergy with Hitachi and that no one had forced the sale. In 2018 the company was delisted and taken private with KKR holding 60%, then split in two — Sakuma’s summary was that “the name has not changed, but the substance is half of what it was.”

In June 2018 the demerged equipment business passed to a KKR-owned company renamed KOKUSAI ELECTRIC Corporation — in substance a new firm, narrowed to batch thermal deposition and holding around 70% of the world market for batch ALD tools. Kanai Fumiyuki, whose career ran through Hitachi, Renesas and Hitachi Kokusai Electric, became president that month and rebuilt the business around the Toyama plant, now facing the world’s chipmakers without Hitachi behind it.

Independence lasted barely a year. In July 2019 Applied Materials, the largest semiconductor equipment maker in the world, agreed to buy the company from KKR for about $2.2 billion; Kanai’s reasoning was that sitting inside a firm with the full breadth of process tools would let KOKUSAI see the whole of semiconductor manufacturing, and would spare it the long, costly road to a listing. The price was raised to about $3.5 billion in January 2021.

Then the deal simply ran out of time. China’s competition authority did not clear it within the agreed deadline, and in March 2021 the acquisition was terminated, with Applied paying KKR a $154 million break fee. The route into the industry leader closed, and the company was pushed back onto the path it had tried to avoid — listing on its own.

The IPO was postponed repeatedly as the pandemic and the invasion of Ukraine soured the market, but on 25 October 2023 KOKUSAI ELECTRIC listed on the TSE Prime Market at an offer price of $13 (¥1,840) a share, valuing it at roughly $3.4B (¥480bn) at the opening print — one of the largest Japanese IPOs of the year. The shares came from existing holders, KKR foremost among them, which has since stepped its stake down. A business that had spent its entire life inside a parent now answered to the capital market directly.

What the market bought is also the constraint. Revenue for the year to March 2023 was about $1.7B (¥246bn), of which roughly 40% came from NAND flash — the application where deep, high-aspect-ratio structures make batch ALD indispensable, and the reason the 70% share exists at all. Kanai treats the concentration as the company’s strength while openly calling the dependence its problem, and points growth at adjacent ground: chemical vapour deposition, thermal processing, and DRAM and logic customers, toward a medium-term revenue target of ¥300–330 billion. How far a single deposition technology can be widened is the question the listing left open.