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This is the weirdest company winning in AI, part two.
Last time we talked about toilets, and this time we're talking about the people who make MSG.
Ajinomoto, the Japanese seasoning company that makes your food taste savory, also makes a tiny film layer that's almost invisible, and yet basically every high-performance chip wouldn't work without it.
Let me explain.
In order to get power into chips and data out of them, you need to connect them to PCBs.
In the olden days, you'd add metal legs around the edges of chips, but as chips advanced, you needed more and more, to the tune of thousands, so we ran out of space.
Instead, they started using multiple layers of copper wiring stacked underneath the chip, between it and the board.
This is called packaging substrate.
In order to have the copper not hit each other, you needed to insulate it with something.
That insulation layer has a bunch of really strict requirements.
It needs to be drillable to withstand thousands of perfect microscopic holes.
It can't move or expand too much when it gets heated up.
It has to be invisible to electricity.
And it needs to stay flawless at big lengths.
The film is thinner than one human hair and gets shipped in huge rolls that need to stay intact.
For years, the industry used ink between these layers of chips, but it went on unevenly and trapped air bubbles.
Meanwhile, this Japanese food ingredient company, Ajinomoto, had been selling MSG since 1909.
Around 1970, MSG had a big PR challenge, as people linked it to health scares.
So the company looked around what they had for R&D expansion opportunities beyond this single product.
Lucky coincidence, MSG's chemical structure is eerily similar to the plastics used inside electronics.
They're basically cousins.
So they studied it for 20 years with nothing to sell.
Then finally, in 1996, a CPU maker knocked on their door, basically saying, Hey, this ink is failing us.
Could you make us something better?
Ajinomoto did a four-month sprint and came up with this insulating film that was just perfect.
For the next 25 years, they held a 95% monopoly across the space.
And their insulating film is found inside virtually every single personal computer and chips made by Intel, NVIDIA, AMD, and more.
It's a sneaky good business, too, because it's super hard to copy.
They hold hundreds of patents and they co-develop each film layer alongside the chip maker.
So they get insider intel on all the requirements up to five years earlier than any competitor.
Over the last few years, the AI boom has meant bigger chips, more layers, and more film.
Ajinomoto's chip materials profit jumped 35% last year to about $350 million, now 30% of the entire company's profit, at margins above 50%.
They just raised prices, 30%, and nobody blinked an eye.
It's kind of the same story as toilets.
An old, boring product built the empire, but now a previously invisible side quest is printing all of the money.
Not that kind of chips.
First Charts & Crafts video with a prop 😏 this one was so fun to learn about.
#ai #semiconductors #technology #tech #explainer