🏭 Once the world's most advanced LCD panel factory, built with a ¥430 billion investment, Sharp's Sakai factory is now undergoing a dramatic transformation. Telecommunications giants KDDI and SoftBank are converting this massive facility into one of Asia's largest AI data centers. This is the story of "LCD Sharp's" twilight and the dawn of the AI era— a powerful symbol of Japan's industrial transformation.
What Was the Sakai Factory? A Journey from Glory to Decline
Sharp's Sakai factory began operations in 2009 as the world's first Generation 10 (G10) LCD panel manufacturing facility. With the capability to produce eight 60-inch panels simultaneously from a single mother glass sheet, it represented the pinnacle of Sharp's LCD business following the success of the "Kameyama Model."
However, the 2008 financial crisis, intense price competition from Chinese and Korean manufacturers, and the industry shift toward OLED technology caused the LCD panel market to rapidly contract. The Sakai factory struggled with profitability almost immediately after opening, and by 2012, Sharp accepted investment from Taiwan's Hon Hai (Foxconn) group.
In 2016, Sharp itself became a subsidiary of Hon Hai. While this initially led to a business recovery, prolonged weakness in the LCD panel market resulted in consecutive losses exceeding ¥100 billion in fiscal years 2022 and 2023. In May 2024, Sharp announced the cessation of LCD panel production at Sakai, and on August 21, 2024, approximately 15 years of manufacturing operations came to an end.
Acquisition by Two Telecom Giants: Unprecedented Speed
Plans for repurposing the factory site began even before production ceased.
SoftBank reached a basic agreement with Sharp in June 2024 and completed the acquisition in March 2025, paying approximately ¥100 billion for about 60% of the site (approximately 450,000 square meters) and buildings (840,000 square meters of floor space). They plan to construct an AI data center with a power capacity of 150 megawatts, targeting operations by 2026, with potential expansion to over 250 megawatts.
KDDI reached its basic agreement in December 2024 and completed its acquisition in April 2025 for ¥10 billion, obtaining a portion of the site (approximately 33,000 square meters) and buildings (57,000 square meters). Remarkably, the "Osaka Sakai Data Center" began operations in January 2026—just about nine months after acquisition.
The "Turnkey" Approach: Key to Success
KDDI President Koji Matsuda described this rapid implementation as a "turnkey" conversion.
LCD panel manufacturing requires massive amounts of electricity and precise temperature control, so the Sakai factory was already equipped with substantial power infrastructure and cooling systems. Multiple transformers capable of receiving 77,000 kilowatts from Kansai Electric Power, along with extensive piping systems throughout the buildings, could be directly repurposed for data center operations.
Typically, large transformers take about three years from procurement to installation and cost several hundred million yen each. By reusing this existing equipment, KDDI dramatically shortened construction time and "made it in time for the AI era," as Matsuda put it.
State-of-the-Art AI Infrastructure
The Osaka Sakai Data Center features NVIDIA's latest "GB200 NVL72" GPUs—high-performance chips optimized for generative AI training and inference, capable of supporting the development of large language models with trillions of parameters.
The cooling system employs a hybrid approach combining direct liquid cooling and air cooling. This efficiently cools high-heat GPU servers while minimizing power consumption. Additionally, 100% of the facility's electricity comes from renewable energy sources, contributing to carbon neutrality.
KDDI positions this data center as infrastructure for "Sovereign AI"—AI systems whose governance and control remain within national borders. The facility enables secure processing of sensitive data within Japan and includes "Gemini for GDC (Google Distributed Cloud)," allowing on-premises use of Google's generative AI model.
Industrial Applications on the Horizon
Several use cases have already been announced.
In pharmaceuticals, KDDI is partnering with Takeda Pharmaceutical Company and its subsidiary Medical Engineering Institute (MEI) to conduct medical big data analysis projects starting in April 2026. They will develop healthcare-specialized LLMs in a domestic-only environment to securely train on data and visualize indicators of rare diseases.
SoftBank also plans to use its data center for generative AI development and AI-related businesses while providing services broadly to universities, research institutions, and corporations. Their vision is to create "a model case for industrial clustering centered on AI data centers," advancing AI adoption across various industries including primary sectors.
Strategic Importance for Japan's AI Infrastructure
The Sakai AI data center was developed with support from the Ministry of Economy, Trade and Industry's "Cloud Program," positioning it as a crucial hub in Japan's national AI strategy.
Currently, data centers in Japan are concentrated in specific areas of the Kanto and Kansai regions, creating challenges related to power supply constraints and disaster risk. The government has set forth plans under the "Digital Garden City Nation Concept" to develop over a dozen regional data center hubs nationwide, with Sakai serving as a pioneering example.
According to the International Energy Agency (IEA), global data center electricity consumption is expected to double by 2030 due to AI proliferation. In Japan, consumption could increase more than fivefold by 2050. Meeting this massive power demand with renewable energy while securing domestic AI development infrastructure is directly tied to Japan's industrial competitiveness.
From "LCD Sharp" to "AI-Era Infrastructure"
The site that once led Japanese manufacturing as "LCD Sharp" will now take on a new role as digital infrastructure for the AI era.
The factory is located in Sakai City's "Takumi-cho" (Craftsman Town)—a name chosen through public nomination in 2007 when Sharp decided to build the factory, expressing hopes for development through "monozukuri" (manufacturing). While physical manufacturing of LCD panels has ended, this location will continue to support Japanese industry as a hub for creating new value through AI.
Japan is simultaneously navigating manufacturing sector transformation and adaptation to the AI era. The rebirth of the Sakai factory symbolizes these larger trends. How is your country approaching factory site repurposing or AI infrastructure development? We'd love to hear your thoughts!
References
- https://www.itmedia.co.jp/aiplus/articles/2601/22/news115.html
- https://k-tai.watch.impress.co.jp/docs/news/2080020.html
- https://www.nikkei.com/article/DGXZQOUC208II0Q5A021C2000000/
- https://www.softbank.jp/corp/news/press/sbkk/2025/20250314_01/
- https://xtech.nikkei.com/atcl/nxt/news/24/02365/
- https://en.wikipedia.org/wiki/Sharp_Corporation
Reactions in Japan
Sharp's Sakai factory transforming into a data center in just six months—the turnkey strategy is brilliant. Skipping the usual 3-year wait for transformer procurement was huge.
So 'LCD Sharp' is finally completely withdrawing from panel production... As someone from the generation that admired the Kameyama Model, it's sad, but that's the way things go.
Selling a factory built for ¥430 billion for just ¥10 billion—isn't that a massive investment failure? But if it's being used as an AI hub, at least the equipment won't go to waste.
Having sovereign AI infrastructure in Japan is important for national security. I welcome infrastructure development that doesn't rely too heavily on foreign clouds.
They say it runs on 100% renewable energy, but where is it actually sourced from? It's not just certificates, right? I wonder if it's really contributing to decarbonization.
Learning the origin of 'Takumi-cho' (Craftsman Town) made me sad. It was expected to be a manufacturing town, but now it's a data center. I wonder if jobs will remain?
It's interesting that KDDI and SoftBank are competing on the same site. I hope this healthy competition accelerates AI infrastructure development.
I have high hopes for its use in medical data analysis. I want to see it used for things only AI can do, like early detection of rare diseases.
Power consumption is going to be massive. I hope they don't start talking about restarting nuclear plants just for data centers.
With NVIDIA's GB200 being installed, I wonder how many engineers in Japan can actually utilize it. Having cutting-edge hardware is meaningless without the talent to use it.
Sharp has been struggling since coming under Hon Hai, but if the site is being properly utilized, maybe it worked out in the end.
This is a major industrial shift for Sakai City. LCD factory jobs are being replaced by data center operations staff—what's the impact on the local economy?
The shift from manufacturing to data centers really symbolizes Japan's industrial structural change. Where is the 'manufacturing superpower' heading?
A hybrid of liquid and air cooling means they're really focusing on heat management. GPU servers are truly a battle against heat.
Being able to use Google Gemini in a domestic environment is great news for companies. Not having to send confidential data overseas is a huge benefit.
Since it's receiving METI support, tax money is involved. I hope it's used in a way that benefits the public.
From a Taiwanese perspective, it's bittersweet to see the Sharp factory that Hon Hai invested in end up like this. But converting to a data center seems like a smart decision.
In the US, there's a similar trend of converting old Intel and IBM semiconductor plants into data centers. It's a global phenomenon.
Germany has strict regulations on data center locations. I'm envious of how Japan is cleverly utilizing existing infrastructure.
It's true that Japan lost to Chinese LCD panel makers, but I appreciate that they're developing new strategies for the AI era.
Running on 100% renewable energy is a great initiative. In the UK, the environmental impact of data centers is a major topic of debate.
Korea is also seeing Samsung and LG's LCD businesses shrink. Japan's example might be instructive for us.
Data center demand is surging in India. I'm interested in Japanese technology and know-how. Are there partnership opportunities?
Poland is also advancing AI infrastructure investment, but we don't have such large-scale factory conversion examples like Japan.
Ireland is a data center powerhouse, but we have serious power issues. I'm curious how Japan is handling this.
In France, factory closures often become social issues, but in Japan, the transition seems smooth. Is it a cultural difference?
Mexico has many factories too, but conversion to data centers isn't being considered. Maybe it's a difference in infrastructure quality.
Vietnam is still focused on attracting manufacturing, but we might need such transitions in the future. This is a helpful case study.
Australia has a movement to distribute data centers to regional areas. Is Japan heading in the same direction?
Sweden has many data centers leveraging the cold climate. Isn't Osaka hot? I'm worried about cooling costs.
AI infrastructure in Brazil is still developing. Seeing Japan's example, I hope my country will push forward too.