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Nidec Shifts Focus to AI Data Center Cooling Systems, Dials Down on EV Components in China

Japanese motor giant pivots to water cooling for AI semiconductors, eyeing growth in U.S. tech and Global South markets
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n 6594.TSE Blue Chip 150
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Japanese motor supplier Nidec is recalibrating its growth strategy to prioritize water cooling systems for AI semiconductor data centers over electric vehicle (EV) component production in China, according to Nikkei. Facing fierce competition and slim margins in the EV sector, Nidec sees a lucrative opportunity in the burgeoning demand for advanced cooling solutions in data centers, driven by the heat generated from processing AI applications. The company plans to cater to major server manufacturers, anticipating orders for around 1,000 cooling systems monthly, which could translate into annual revenues of 20 billion yen ($133 million).

Nidec’s new direction involves a shift from traditional air-cooled to water-cooled devices for cooling graphics processing units (GPUs) in servers, offering a 20%-30% increase in power efficiency. This move not only aligns with the company’s expertise in cooling fan supply but also capitalizes on the growing need to reduce energy consumption in data centers. Nidec aims to serve U.S. tech giants actively investing in AI servers, indirectly supporting companies like GAFAM and Tesla.

Beyond the U.S., Nidec is setting its sights on the Global South, with plans to expand into India and Africa, markets reminiscent of China two decades ago. The company is exploring the construction of its first African factory by fiscal 2025 to produce motors for energy-efficient air conditioners, alongside a potential fifth plant in India. This strategy marks a deliberate shift from the company’s challenging experience in China’s EV component market, where it faces a significant operating loss. By diversifying its focus and leveraging emerging markets, Nidec aims to maintain its leading position in the motor industry while navigating the complex dynamics of global tech and manufacturing sectors.

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