In early June, Japanese telecommunications company KDDI announced it would work with Sharp to transform its LCD panel manufacturing plant in Sakai City into a data center for artificial intelligence (AI). Four days later, SoftBank – the telecommunications company of Masayoshi Son's SoftBank Group – announced it had secured "exclusive negotiations" to acquire a majority stake in the facility from Sharp.

SoftBank and KDDI are just two of the companies vying to transform Sharp's factory into a massive AI data center. According to Nikkei , a third company has recently been in talks on the matter.

The Sakai plant is located in an industrial complex spanning approximately 700,000 square meters, built on reclaimed land in Osaka Bay. It is Sharp's primary manufacturer of large-screen TVs. However, the company will cease production in September due to competitive pressure from Chinese rivals.

This decision sparked a scramble to repurpose the plant.

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Sharp's LCD factory has become a target for major Japanese companies vying to convert it into data centers for AI services. Photo: Kyodo

SoftBank announced it is in talks to acquire up to 60% of the Sakai facility, including the main TV panel manufacturing plant as well as gas and power plants. SoftBank said it will convert the plant into a data center as it seeks to boost its AI businesses.

In May, Nikkei reported that SoftBank Group planned to spend 10 trillion yen (US$63 billion) to transform itself into a major AI player. In a previous meeting, Junichi Miyakawa, Chairman and CEO of SoftBank, shared ambitions to become a "market leader in generative AI" and stated that new technologies would be "a cornerstone of the company's long-term vision," shifting the focus to AI in the future.

SoftBank is also developing its own large-scale AI language model tailored to the Japanese language.

For its part, KDDI stated in a press release that it had been in negotiations with Sharp, along with companies including US server builder Super Micro Computer, to build "one of the largest AI data centers in Asia," utilizing 1,000 advanced Nvidia AI system units. However, this will become more difficult with SoftBank stepping in. KDDI may negotiate to purchase the remaining portion of the Sakai facility that SoftBank did not acquire.

According to a KDDI spokesperson, the company remains committed to its original goals, and what matters is computing power, not the size of the land where the data center will be built.

However, Nikkei 's sources revealed that the negotiations appeared to be very tense. A director of another Japanese company who recently negotiated with Sharp said that discussions had stalled because Sharp changed its offer midway and suggested he use other LCD factories, instead of the Sakai facility, to house data centers. He heard that SoftBank initially wanted to acquire all available space at the Sakai factory.

The bidding war for Sharp's LCD factory to convert it into an AI data center highlights Japan's urgent need for AI computing power, as establishing data centers from scratch can take years. Furthermore, the data center market is currently experiencing a supply shortage and is unlikely to improve in the short term due to strong demand and limited electricity supply. The power consumption per square meter of these facilities is at least 10 times higher than that of a typical office, making it difficult to find ideal locations.

SoftBank aims to begin operations in Sakai by 2025. What makes the Sakai facility particularly suitable for conversion into an AI data center is the availability of electricity and water resources that can be used for cooling purposes.

The Sakai facility, which opened in 2009, was considered Sharp's crown jewel. However, Sakai failed to live up to expectations as South Korean and Chinese competitors entered the market and new technologies like OLED emerged. Despite nearing the end of production, its ability to handle the high energy demands of LCD manufacturing remains.

A SoftBank spokesperson said Sakai is also promising due to its location. With many data centers located near Tokyo, it would be useful to distribute computing power to prevent disruption in the event of a disaster. That is why the company is also planning to build an AI data center in Hokkaido.

(According to Nikkei)