Goldman Sachs says Japanese electronic components/semiconductors may be in the early stage of a historic AI cycle, remains bullish on Murata, Taiyo Yuden, Renesas, and Ibiden

Overview

This is a Goldman Sachs report updating ratings and earnings forecasts for its coverage universe of 22 Japanese electronic components/semiconductor companies. The core view is that AI servers and data center infrastructure are bringing the first wave of demand, while the diffusion of new devices such as edge AI, physical AI, autonomous driving, robots, and smart glasses could constitute a second wave of demand, giving the current cycle the potential to become one of the largest and longest in history.

Core views

The report believes that by FY28, industry-wide earnings, operating margins, CROCI, and ROE are likely to exceed historical peaks, but the gap in earnings growth across companies will widen further. The most attractive companies are those with high AI/DC profit contribution, limited negative impact from material costs, and the capability to expand capacity and execute governance effectively; by contrast, companies with less obvious AI benefits, greater material cost pressure, or slowing growth in automotive/smartphone end demand may see limited upside in valuation.

Analysis framework

Goldman Sachs mainly screens stocks along three dimensions: first, how much AI will increase earnings contribution in the short term and medium to long term; second, how large the drag on short-term earnings will be from rising costs such as materials; third, whether the company has the management structure and governance capability to operate successfully in a rapidly changing environment. On valuation, the report rolls the earnings base year for most companies from FY27E to FY28E, raises the sector EV/DACF multiple from 8x to 10x, and adjusts premiums or discounts based on each company’s growth profile.

Methodology notes

• Industry cycleTwo-stage cycle of AI infrastructure-device diffusion

  The first stage is driven by AI servers and data center infrastructure, and the second stage is driven by the adoption of edge AI and physical AI devices.

  The report believes semiconductors have already been the first to benefit from AI infrastructure investment, while electronic component companies usually benefit with a lag; as rising power consumption and high-speed data transmission increase component content, the related earnings impact has started to emerge.

• Stock selectionThree axes: AI/DC profit contribution, cost pressure, and governance capability

  Company value differentiation depends on AI/DC profit contribution, material cost pressure, and management execution capability.

  Goldman Sachs pays particular attention to companies with higher AI/DC operating profit contribution in its FY28 forecasts and smaller incremental negative impact from material costs, believing these companies are more likely to achieve high growth and high valuations.

• Valuation methodsEV/DACF, P/E, P/B-ROE, and CROCI cross-check

  Update target prices through rolling the earnings base year, raising sector multiples, and adjusting individual stock premiums/discounts.

  The report raises the sector EV/DACF multiple from 8x to 10x; for high-growth companies it references changes in operating profit and CROCI, the upper end of historical P/E, and EV/DACF premiums, while for low-growth companies it references historical P/E, P/B, and discount levels.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Ibiden

  Core AI/DC beneficiary; ABF substrate manufacturer; maintain Buy and substantially raise 12-month target price.

  Strengths

  FY28 AI/DC profit contribution is expected to exceed 50%; utilization of the new Ono line may ramp faster than the company assumes; assumptions on pricing and product mix are more optimistic than the company’s plan.

  Weaknesses

  High growth expectations are already partly reflected in valuation, and further capacity expansion still depends on company decisions.

  Comparison

  It belongs to the group with the highest AI/DC earnings contribution in the coverage universe, and Goldman Sachs believes the market has viewed the stock positively since 2025.

  Risks

  AI/DC demand, pricing, yields, or capacity expansion may fall short of expectations.

• Murata Mfg. (6981.T)

  Core MLCC and AI server beneficiary; maintain Buy and keep on the Conviction List.

  Strengths

  AI servers drive higher MLCC content and ASP/product mix improvement; FY26-FY28 MLCC sales growth forecasts were raised to +23%/+27%/+25%.

  Weaknesses

  It needs to successfully expand capacity and allocate resources appropriately across multiple technology development projects.

  Comparison

  Its market cap has entered the top ten of the TSE Prime Market, and investor inquiry interest is high.

  Risks

  Capacity expansion pace, product generation price resets, cost control, or AI server demand may come in below expectations.

• Taiyo Yuden

  Core MLCC beneficiary; maintain Buy and raise target price.

  Strengths

  FY26-FY28 MLCC sales growth forecasts were raised to +24%/+23%/+22%; benefits from price resets and mix improvement in new-generation AI server products.

  Weaknesses

  Its scale and market attention are relatively lower than Murata’s, and earnings elasticity depends on capacity and penetration of high-end products.

  Comparison

  Along with Murata, it belongs to the core beneficiary group with 40%-49% AI/DC profit contribution in FY28.

  Risks

  MLCC pricing, capacity expansion, material costs, or the adoption of end AI devices may fall short of expectations.

• Renesas

  Major PMIC company; maintain Buy and raise valuation multiple.

  Strengths

  Goldman Sachs has highlighted its AI-related benefits since early 2026; target EV/DACF multiple raised from 12x to 13x.

  Weaknesses

  It needs to continue proving AI-related profit contribution and support from global peer valuations.

  Comparison

  The valuation update references global peers such as TXN, NXPI, IFX, and STM.

  Risks

  A downturn in the global semiconductor cycle, weaker-than-expected AI-related PMIC demand, or declining peer valuations.

• Rohm (6963.T)

  Upgraded from Neutral to Buy as the impact of AI-related semiconductors and SiC expands.

  Strengths

  FY30 AI/DC sales target raised from ¥30bn to ¥100bn; SiC losses are expected to narrow and may break even in FY27; Toshiba-related assets are also viewed as valuation support.

  Weaknesses

  SiC previously saw large impairment charges due to changes in EV demand, and the business transformation still requires execution validation.

  Comparison

  Among companies able to redirect EV-related high-voltage/high-heat-resistant capabilities toward AI server power applications, Goldman Sachs believes Rohm has strong operating leverage.

  Risks

  AI server SiC demand may fall short of expectations, EV demand may remain weak, or Toshiba integration/cost reductions may disappoint.

• TDK、MinebeaMitsumi、Nidec

  Maintain Buy; classified as a broader diffusion group benefiting from AI, data centers, and semiconductors.

  Strengths

  FY28 AI/DC profit contribution is in the 20%-39% group; MinebeaMitsumi management said the largest technological change and demand wave in the company’s history is approaching.

  Weaknesses

  Nidec has not yet disclosed FY3/26 results, and the report did not update its earnings forecasts or valuation base year.

  Comparison

  Their AI/DC profit contribution is not as high as Ibiden, Murata, and Taiyo Yuden, but investors are watching whether they become the next batch of beneficiary stocks.

  Risks

  Insufficient capacity preparation, slower-than-expected rollout of AI server or robotics applications, or untimely updates to earnings forecasts.

• MARUWA

  Maintain Buy; benefits from AI server thermal substrates.

  Strengths

  FY28 AI/DC profit contribution is classified in the high 40%-49% group.

  Weaknesses

  The report provides less detail than for Ibiden, Murata, and Taiyo Yuden.

  Comparison

  It is in the same high AI/DC contribution group as Murata and Taiyo Yuden, but the investment narrative is more focused on thermal substrates.

  Risks

  Changes in AI server thermal solutions, customer concentration, or valuation pullback.

• Hirose Electric、Nichicon、NGK Corp.、Niterra

  Mostly Neutral or names seeing rising attention; viewed as companies whose AI and semiconductor-related benefits may increase.

  Strengths

  Some companies have FY28 AI/DC profit contribution in the 10%-39% range, and investor discussion about the next batch of beneficiaries is starting to increase.

  Weaknesses

  NGK Corp. and Niterra’s AI/DC contribution may be overstated because it includes materials for semiconductor manufacturing equipment.

  Comparison

  They belong to the second tier after the core beneficiaries and need further validation of the quality of profit contribution.

  Risks

  AI/DC exposure may be overstated, material costs may rise, or end demand may fall short of expectations.

• Kyocera

  Maintain Buy; although direct AI benefits are smaller, the risk-reward is still considered attractive.

  Strengths

  Earnings improvement may come from restructuring and ongoing buybacks; the valuation methodology returns to EV/DACF, using the sector average 10x multiple.

  Weaknesses

  AI benefits are smaller than for core beneficiary stocks.

  Comparison

  Goldman Sachs views it as a relatively lagging Buy name rather than a high AI/DC contribution name.

  Risks

  Restructuring effects may disappoint, cash flow improvement may be slower than expected, or it may fail to create new AI-related products.

• Nitto Denko

  Downgraded from Buy to Neutral.

  Strengths

  Still has solid earnings growth.

  Weaknesses

  Lacks visibility on nonlinear change, and its benefit from the large AI cycle is less clear than that of core names.

  Comparison

  Compared with high AI/DC beneficiary stocks such as Murata, Taiyo Yuden, and Ibiden, its valuation rerating potential is relatively limited.

  Risks

  If material costs or end-demand pressure rises, earnings and valuation may face further pressure.

• Japan Aviation Electronics

  Downgraded from Neutral to Sell.

  Strengths

  Its existing automotive and smartphone applications still provide a business base.

  Weaknesses

  Earnings growth in automotive and smartphone applications is slowing, and AI benefits are not obvious.

  Comparison

  It is placed in the group that is sensitive to material costs and less likely to benefit from AI.

  Risks

  Automotive and smartphone demand may slow more than expected, and earnings growth may continue to weaken.

• Mabuchi Motor、Alps Alpine、Nippon Ceramic、Maxell、IRISO Electronics

  Goldman Sachs remains broadly cautious or in wait-and-see mode.

  Strengths

  Some companies still have foundations in their respective niche markets.

  Weaknesses

  Mabuchi Motor is seen as having high downside risk to 1H earnings; Alps Alpine is significantly affected by material costs and may post an operating loss in 1Q; Nippon Ceramic, Maxell, and IRISO Electronics are seen as less likely to achieve higher relative valuations.

  Comparison

  Compared with companies with high AI/DC profit contribution, these names are more likely to face valuation discounts or lack rerating catalysts.

  Risks

  Material costs, weak end demand, earnings missing expectations, and continued valuation pressure.

Key data

• Coverage22 companiesCoverage universe of Japanese electronic components/semiconductors.
• Report date2026-06-08Goldman Sachs Equity Research.
• FY26-FY28 operating profit forecast revisions+3%/+9%/+17%Goldman Sachs raised operating profit forecasts for the covered portfolio for FY26, FY27, and FY28.
• Industry average operating profit growthFY26-FY28: +36%/+24%/+20% yoyThe report expects the strong earnings growth trend to continue.
• Sector EV/DACF multipleraised from 8x to 10xBased on the report’s view that earnings and CROCI will exceed historical ranges and be more sustainable.
• High AI/DC profit contribution groupIbiden: expected above 50% in FY28; Murata Mfg., Taiyo Yuden, MARUWA: 40%-49%These companies are viewed as core AI/DC beneficiaries.
• Mid-to-high AI/DC profit contribution groupNGK Corp., Nidec, Renesas, TDK, MinebeaMitsumi: 20%-39%Investor attention is rising.
• Potential beneficiary diffusion groupHirose, Nichicon, Rohm, Niterra: 10%-19%Goldman Sachs believes these companies are likely to gradually benefit from AI- and semiconductor-related demand.
• Murata Mfg. market capabout ¥20.5tnAs of the June 3 close, it had entered the top ten of the TSE Prime Market, close to Sony and Hitachi levels.
• MLCC sales growth forecastsMurata FY26-FY28: +23%/+27%/+25%; Taiyo Yuden: +24%/+23%/+22%Goldman Sachs materially raised MLCC sales and operating profit outlooks for both companies.
• Rohm AI/DC sales targetFY30 target raised from ¥30bn to ¥100bnThe company target includes about ¥30bn for SiC; Goldman Sachs believes the high-voltage trend in AI servers could drive faster growth.
• Renesas valuation multipletarget EV/DACF raised from 12x to 13xMainly driven by mark-to-market against multiples of global peers such as TXN, NXPI, IFX, and STM.

Impact & implications

The implication for the sector is that the AI theme is no longer limited to large semiconductors or the data center capex chain; areas such as electronic components, MLCC, ABF substrates, PMIC, SiC, and thermal materials may also gradually enter an earnings upgrade cycle. However, in investing, it is necessary to distinguish real AI/DC profit contribution from thematic exposure and avoid simply treating all electronic component companies as equal beneficiaries.

Risks

• AI infrastructure investment or the adoption pace of edge AI/physical AI devices may be slower than expected.
• Estimates of AI/DC profit contribution may contain classification bias, and some companies’ true exposure may be higher or lower than the apparent figures.
• Rising costs for materials, components, and capacity expansion may compress margins.
• Valuations of core beneficiary stocks already reflect high growth expectations; if earnings upgrades fall short of expectations, valuation pullback risk will be significant.
• Capacity ramp-up, yields, and price resets for key products such as MLCC, ABF substrates, PMIC, and SiC may fall short of expectations.
• Slowing demand in traditional end markets such as automotive and smartphones may drag on non-AI beneficiary companies.
• Insufficient corporate governance, resource allocation, or organizational execution may prevent AI demand from being converted into profit.

What to watch

• Whether rising AI server power consumption and high-speed data transmission continue to drive higher component content.
• The actual launch and penetration pace of new devices such as edge AI, physical AI, autonomous driving, robots, smart glasses, and AI PCs.
• MLCC capacity expansion, product generation price resets, and ASP/mix improvement at Murata and Taiyo Yuden.
• Utilization of Ibiden’s new Ono line, pricing trends, and subsequent decisions on additional capacity.
• Rohm’s narrowing SiC losses, AI/DC sales progress, and integration of Toshiba-related businesses.
• Whether sector CROCI, ROE, and operating margins exceed historical peaks in FY28 as Goldman Sachs expects.
• Whether earnings forecasts and valuation bases are updated after Nidec and IRISO Electronics disclose results.