The little-known company behind TSMC’s most advanced semiconductors
The world’s most advanced and delicately fine-tuned semiconductors wouldn’t be possible without the aid of giant steel storage tanks built by a little-known Tokyo company founded in 1927.
Valqua Ltd. makes specialised, super clean containers for storing essential chipmaking chemicals, and it expects to hit its highest sales ever this fiscal year. It’s by far the world’s largest supplier of such tanks, dwarfing a clutch of smaller competitors in places like Taiwan, and providing almost every tank used by the world’s biggest contract chipmaker, Taiwan Semiconductor Manufacturing Co., according to Ichiyoshi Research Institute analyst Mitsuhiro Osawa.
Valqua is part of a loose network of Japanese manufacturers that dominate a niche but indispensable segment of the global chip supply chain. Disco Corp., for instance, is the industry’s go-to supplier of silicon wafer cutters, while JSR Corp. provides the high-purity chemicals that Valqua stores at chip plants.
“A molecular-level impurity would make the whole chemical solution in a tank useless, as it would drastically degrade the production yields of cutting-edge chipmaking,” Valqua President Yoshihiro Hombo said in an interview. “We and chemical makers support the complete supply chain by making, transporting and storing these solutions under ultra-clean conditions, and that is not something that can be easily replicated.”
Valqua gets more than half its sales from semiconductor makers and its close-knit relationship with the chip sector helps it stand out among industry peers. At $470 million, it’s Japan’s most valuable supplier of mechanical rubber products after doubling its share price over the past three years, from just before the pandemic. Valqua shares jumped in January after it reported a 41% leap in operating profit, and its president is confident revenue will grow by at least 30% over the next four years.
Chipmaking customers aren’t showing signs of slowing spending even as demand has fallen dramatically from its pandemic highs, Hombo said. Samsung Electronics Co., the other giant of chipmaking beside TSMC, makes its own containers. Valqua’s stock climbed as much as 2.1% Monday, outpacing a weak market.
“Sentiment actually remains intact as top players of the industry tend to accelerate their investment to distance themselves from rivals,” the 66-year-old executive said.
The various chemicals and acids used in semiconductor fabrication processes have to be free of contaminants. The required purity for the ones used in cleaning wafers is equivalent to taking a trip around the Earth without finding a dust speck wider than a tenth of a human hair. Those extreme specifications make it a tough business for a small company to enter and an unattractive one for bigger players, according to Hombo.
There’s no standardised tank shape or size, so each chip plant’s containers — which usually number in the hundreds per facility — have to be made to order. These tanks can be as large as 4 meters in diameter and 9 meters in height, and Valqua lines their interiors with fluororesin sheets. Applying the inflexible, non-adhesive sheets to curved surfaces perfectly requires the hands of skilled workers. Pipes connecting tanks to machinery must also be lined, and the whole tank production process is carried out in a clean environment.
Customers return to Valqua because of that bespoke manufacturing and the difficulty of replacing a tank, which might last for a decade or more.
Valqua may spend to accelerate its growth push as it moves toward its hundredth birthday. “Our balance sheet is healthy right now, and we may eye some acquisitions and expansions,” the company’s president said.
One step on that path is a new factory for storage tanks in Japan’s Aichi, which Valqua announced last month. It’s the company’s first new plant in Japan since 2008, underscoring the growing value placed on shoring up potential weak points in the chip supply chain. The move was driven in part by requests from customers wary of geopolitical risks around Taiwan.
“The cost of making tanks is higher in Japan, but some top chipmakers still favour Japan as the best place to source supplies from,” Hombo said. The country is rich on good providers of materials and machinery and is seen as a safe haven for a sector that “has become a big cluster of various geopolitical risks.” Valqua’s new factory, expected to start operations in January 2025, will be funded in part by the Japanese government.
Valqua shares are up 27% this year, but the supplier remains undervalued, according to Ichiyoshi’s Osawa.
“The company has products that are hard to match, and it’s launching multiple maintenance-and-check services that should add to the top line,” Osawa said. “What it needs is just more recognition by investors.” Bloomnberg
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