Key facts
- South Korean chip giants Samsung and SK Hynix have a structural advantage over Japanese companies due to their chaebol conglomerate structures, according to Yuji Sugimoto of Bain Capital.
- Sugimoto stated that the decisive top-down leadership and ability to make massive, rapid investments are critical in the semiconductor industry.
- He believes this type of management is difficult to achieve under the governance of large Japanese corporations.
- Sugimoto led Bain Capital's acquisition of Toshiba Memory, now Kioxia, which has seen significant share price growth since its listing.
- Bain Capital has since exited its investment in Kioxia.
South Korean semiconductor giants Samsung and SK Hynix possess a structural advantage over their Japanese counterparts, primarily due to the decisive, top-down leadership and ownership structures inherent in their chaebol conglomerates. This allows for rapid decision-making and substantial, consistent investment, even through market downturns, according to Yuji Sugimoto, Bain Capital's Japan representative.
Sugimoto, who led Bain's acquisition of Toshiba Memory (now Kioxia) from Toshiba in 2018, explained that such large-scale, long-term investments, especially during periods of significant losses, would likely face insurmountable opposition within the governance framework of typical large Japanese corporations. He noted that Kioxia's successful turnaround, particularly in capitalizing on the recent AI boom, would have been improbable had it remained under Toshiba's umbrella.
Bain Capital's strategy of continuing to invest in Kioxia despite mounting losses during a memory downturn ultimately proved successful as AI-driven demand surged. Kioxia's shares have since seen remarkable growth, rising over 4,000% since its December 2024 listing. Bain Capital has since divested its stake in the company.
On Thursday, Kioxia's stock performance contributed to a 2% rise in Japan's Nikkei 225 index, while South Korea's Kospi saw a 1.7% decline. This movement was influenced by major index components, with Samsung Electronics falling 2.3% and SK Hynix rising 2.3%.