Kioxia and SanDisk (SNDK.US) collaborate to boost Japan's NAND production capacity, with a six-year investment of 5 trillion yen aiming to address the AI storage gap

According to Zhihu Finance APP, Japanese NAND flash memory manufacturer Kioxia Holdings and its manufacturing partner SanDisk (SNDK.US) plan to invest over 5 trillion yen (approximately $31.4 billion) in Japan to dramatically expand their production capacity, aiming to ease the tight supply of key storage components for AI data centers.

Kioxia CEO Hiroo Ota said on Thursday that the Tokyo-based flash memory giant intends to complete the planned investment over the next six years, with 1.8 trillion yen allocated solely to the new Kitakami factory. This plant will produce the latest generation of high-density 3D flash memory chips, optimized specifically for the massive workloads generated by AI services.

The Kioxia-SanDisk production expansion plan reflects mounting pressure on leading global storage chip manufacturers—they must accelerate capacity release to help mitigate rising electronics costs driven by current chip shortages. At present, global storage chip prices continue to surge, squeezing the profit margins of Nvidia (NVDA.US), major automobile producers, and mobile device manufacturers. Earlier, during an earnings call, Nvidia executives also warned about supply strains and mounting pressure on profit margins.

After meeting with Japanese Prime Minister Sanae Takaichi, Ota stated: “The Kitakami plant will become our core production site for cutting-edge NAND chips, and we expect significant business growth at this facility.” He also revealed that Kioxia hopes the Japanese government will cover about one-third of the expansion costs.

SanDisk CEO David Goeckeler, also attending the meeting, invited Sanae Takaichi to visit the factory and commented: “With today’s joint venture announcement, coupled with government support, we are helping to establish Japan’s global leadership in this critical technology.”

Buoyed by the news, Kioxia’s share price closed up 5% on Thursday in Tokyo trading.

Currently, major technology companies from Alphabet (GOOGL.US) to Meta (META.US) are signing multi-year agreements to secure storage supply for data centers. This has prompted Kioxia’s Korean rivals Samsung Electronics (SSNLF.US) and SK Hynix (SKHY.US) to roll out large-scale capital expenditure plans. Meanwhile, China’s Yangtze Memory Technologies is aggressively capturing market share in the consumer segment with lower margins. However, there are mounting concerns that Kioxia’s expansion comes just as the market could tip into a glut, which has pressured its share price—down by half from its June peak.

Citi analyst Takero Fujiwara believes Kioxia is well-positioned to comfortably support multibillion-dollar capital expenditures with its available cash. “While the company remains prudent with spending, we believe it has shown a decisive willingness to invest when needed,” he said.

In recent years, the Japanese government has continued to provide financial support to chip manufacturers with plants in Japan, including TSMC (TSMC.US), Sony Group (SONY.US), and Micron Technology (MU.US), in a bid to reclaim Japan’s former leadership in semiconductors. Just last month, Kioxia began shipping its tenth-generation stacked BiCS flash chips. In the future, the Kitakami site will focus on producing high-end NAND chips for data centers, while another main manufacturing base in Yokkaichi, Mie Prefecture, central Japan, will focus on supplying chips for smartphones and other consumer electronics.