Will 'Water' Become the Next Massive Industry? Investigating the Companies Supporting Climate Change, Agriculture, AI, and Semiconductors (Sunday Post)

When you hear 'water-related companies,' you might first think of water utilities or water treatment plants.

However, when you actually look into it, the scope of the water industry is surprisingly broad.

Pumps, piping, water purification, sewage treatment, desalination, ultrapure water, membranes, water quality analysis, sensors, industrial wastewater, cooling water, irrigation—the list goes on.

Moreover, recently,

• climate change

• heavy rain and flooding

• drought and desertification

• food security

• data centers

• semiconductor factories

• AI

• water quality issues like PFAS

many such social and industrial themes are connected through 'water'.

Water has always been important.

However, the water industry of the 21st century is no longer just about 'providing safe water from the tap'.

In this article, I would like to organize the structure of the 'water-related industry' by looking at companies in Japan and abroad.

Water-related companies do not belong to a single industry.

The first important point is not to lump all 'water-related companies' together.

For example, Ebara Corporation and Organo Corporation are both deeply involved with water.

However, their businesses are quite different.

Ebara Corporation is strong in fluid machinery such as pumps.

Meanwhile, Organo is strong in ultrapure water systems used in semiconductor factories and other facilities.

Kubota has significant touchpoints with agriculture, in addition to water pipes, valves, pumps, and water treatment.

Suido Kiko and Metawater are strong in the design, construction, and operation and maintenance of water purification plants and sewage treatment plants.

Kurita Water Industries handles industrial water treatment, chemicals, ultrapure water, and water recycling.

Toray Industries supplies 'water separation materials' such as RO membranes.

HORIBA, Shimadzu Corporation, and Yokogawa Electric are on the 'water measurement' side.

In other words, the water industry is...

moving water
transporting water
treating water
purifying water
recycling water
measuring water
controlling water

a massive ecosystem composed of multiple combined industries.

1 Climate Change — It's not just water scarcity, there is also the problem of 'too much water'

When people think of climate change and water, they easily imagine droughts and water shortages.

However, on the other side, there are heavy rains and floods.

If a large amount of rain falls in a short period, rivers and sewage systems alone cannot handle it.

That is where large-scale drainage pumps become important.

Pump manufacturers such as Ebara Corporation, Xylem, Grundfos, KSB, and Sulzer are involved not only in water and sewage systems but also in rainwater drainage and flood control.

The water industry has...

a market for securing water

and at the same time,

a market for safely discharging excess water

It also exists.

I think this is extremely important.

When people talk about climate change responses, they tend to focus only on renewable energy and EVs, but in reality, investments in rivers, drainage pump stations, sewage systems, pumps, and water storage facilities are also an important part of 'climate adaptation'.

2 Desertification and Agriculture—The World's Largest Water Demand Lies in Agriculture

When considering global freshwater usage, the existence of agriculture cannot be ignored.

Agriculture accounts for the majority of global freshwater withdrawals.

Therefore, if we are serious about thinking about water issues,

'Let's save water at home'

is not enough.

A bigger theme is

how to make agricultural water use more efficient

.

Kubota is interesting in this field.

Kubota is known as an agricultural machinery manufacturer, but it also possesses pumps, water treatment systems, and water pipes.

Therefore,

agricultural machinery
+ irrigation
+ water management
+ agricultural DX

is a combination that can be achieved.

Overseas, companies like Grundfos are also deploying irrigation pumps.

On the other hand, irrigation is not simply about spraying large amounts of water.

In arid regions, excessive use of groundwater and salt damage are becoming problems.

While supplying water, it is also necessary to manage soil moisture, salinity levels, groundwater levels, and drainage.

Soil moisture
salinity levels
groundwater levels
drainage

Future smart agriculture has the potential to become an industry involving not just autonomous tractors, but also

sensors, pumps, irrigation, weather data, and AI.

sensors + pumps + irrigation + weather data + AI

3. Seawater Desalination: The Giant Industry of 'Making Water'

If there isn't enough water, turn seawater into fresh water.

The concept is simple, but implementing it on a large scale requires highly sophisticated equipment.

Here, one company does not build everything.

For example, the work is divided as follows:

RO membranes: Toray, DuPont, LG Water Solutions

Pumps: Grundfos, Ebara, Sulzer, KSB, etc.

Plant construction and operation: Veolia, SUEZ, ACCIONA, IDE Technologies, etc.

This is the interesting part of the water industry.

Toray and pump manufacturers are both 'water-related companies,' but they are not necessarily competitors.

Rather, they can be partners in constructing a single desalination plant.

In the future, if urban populations increase in regions with severe water shortages, the reuse of sewage and industrial wastewater will become even more important, not just desalination.

4. Data Centers: AI is an industry of 'water' as well as 'electricity'.

The demand for water for cooling data centers is growing rapidly.

This is a critical issue for the future of AI infrastructure.

With the spread of generative AI, interest in data centers is rising rapidly.

Usually, discussions about data centers focus on power consumption.

However, there is also the issue of how to handle the heat generated by massive numbers of servers.

That is where water and pumps come in.

In data centers,

cooling water
circulation pumps
heat exchangers
chillers
cooling towers
water treatment
water quality monitoring

and other components are combined.

In this market, companies like Xylem and Grundfos are active.

Among Japanese companies, connections are also emerging with pump and cooling/heating-related firms like Ebara Corporation, water treatment companies like Kurita Water Industries, and water quality measurement manufacturers.

However, caution is also necessary.

One cannot simply say that 'because AI is growing, data center water usage will increase forever.'

Companies like Microsoft are advancing data center designs that circulate cooling water in a closed loop, significantly reducing new water intake during operation.

In other words, what might increase in value in the future is not

equipment that consumes large amounts of water

but rather

equipment that circulates, reuses, and controls water with high efficiency

perhaps.

Here too, the digital transformation (DX) of the water industry is progressing.

5 Semiconductor Factories—Water Becomes Something Close to a 'Manufacturing Material'

Looking at the relationship with water, even more interesting than data centers are semiconductor factories.

Large amounts of ultrapure water are used in semiconductor manufacturing.

It is not ordinary tap water.

It is water from which ions, organic matter, fine particles, etc., have been removed to the extreme, and it is used to clean silicon wafers and the like.

Japanese companies have a significant presence here.

Organo
Kurita Water Industries
Nomura Micro Science

and others handle ultrapure water equipment.

Furthermore, membrane manufacturers like Toray, and analysis and measurement technologies from companies like Shimadzu and HORIBA are also involved.

It does not end with just making water.

How is the large amount of water used recovered?

How is it reused?

To what extent can valuable materials be recovered from factory wastewater?

If you include this,

semiconductor factories = massive water circulation facilities

can also be seen as such.

The AI boom makes this structure even more interesting.

AI demand is increasing.

This leads to a need for high-performance semiconductors such as GPUs.

Ultrapure water is required to manufacture those semiconductors.

Cooling equipment is also required for the data centers that operate the completed GPUs.

In other words,

AI
→Semiconductors
→Ultrapure water

and,

AI
→Data centers
→Cooling water

connect to the water industry through these two paths.

In fact, AI has a quite deep relationship with the water industry as well.

6 Water Quality Testing—It's not just about creating water, 'being able to measure it' becomes important

In water treatment,

"It should be clean"

is not enough.

Water quality must be measured and safety must be confirmed.

In this market,

HORIBA
Shimadzu Corporation
Yokogawa Electric
Hach
Metrohm

and others exist.

Furthermore, Eurofins, SGS, ALS, and others are global testing companies that receive water samples from outside for analysis.

Recently, extremely trace amounts of chemical substances like PFAS have also become an issue.

As the number of measurement targets increases and the required detection accuracy rises, the value of analytical equipment, reagents, and testing services also increases.

And what is interesting is that sensors lead to equipment control.

For example,

Water quality sensor
↓
Data analysis
↓
Anomaly detection
↓
Chemical dosage change
↓
Pump flow rate change

can all be automated.

If that happens, water treatment facilities will become massive IoT systems.

7. Looking at the world, there is another type of entity called a 'comprehensive water company'.

In Japan, water-related companies are relatively fragmented.

On the other hand, there are giant companies overseas like Veolia and SUEZ.

They are not just companies that manufacture water treatment equipment.

Water and sewage operations
water purification
wastewater treatment
industrial water
desalination
water reuse
digital waterworks

They handle a wide range of services.

Furthermore, Xylem is also interesting.

They are expanding their business from pumps to sensors, water quality analysis, water treatment, and digital management.

Future competition among water companies may become a battle over

'making the best-performing pumps'

'making the best-performing membranes'

but also,

equipment + sensors + data + maintenance + services

how far they can integrate these elements.

Looking at water-related companies by function

As I have organized it, the representative companies are as follows.

Moving water

Ebara Corporation, Grundfos, Xylem, KSB, Sulzer

Transporting water

Kubota, GF, Mueller Water Products

Treating water

Swing, Metawater, Veolia, SUEZ

Managing industrial water

Kurita Water Industries, Ecolab/Nalco Water

Producing ultrapure water

Organo, Kurita Water Industries, Nomura Micro Science

Separating water with membranes

Toray, DuPont, LG Water Solutions

Measuring water

HORIBA, Shimadzu, Yokogawa Electric, Hach

Testing water

Eurofins, SGS, ALS, and regional water quality testing companies

Just looking at this classification shows how broad the terms 'water-related stocks' and 'water-related companies' are.

Kubota and Nomura Micro Science are both water-related companies, but their business structures are almost entirely different.

There are surprisingly many strong Japanese companies

What I found interesting while researching is that Japan has companies present in quite a large portion of the water value chain.

For pumps, there is Ebara Corporation.

For agriculture and pipelines, there is Kubota.

For public water treatment, there are Swing and Metawater.

For industrial water treatment, there is Kurita Water Industries.

For ultrapure water, there are Organo, Kurita Water Industries, and Nomura Micro Science.

For membranes, there is Toray.

For measurement, there are HORIBA, Shimadzu, and Yokogawa Electric.

There is no need for a single company to become like Veolia.

Rather, Japanese companies are each embedding themselves into global water infrastructure through specific technologies.

While the water business may look like a mature industry in Japan,

when you broaden your perspective to the global market,

Climate Change
× Food
× Urbanization
× AI
× Semiconductors
× Environmental Regulations

it begins to look like an industry where multiple growth themes intersect.

From 'Companies that Sell Water' to 'Companies that Optimize Water'

The most important concept going forward,

I believe,

is not 'making it possible to use more water'.

Rather,

How many times can we use the same water?
Can we deliver the necessary amount to the necessary place?
Can we reduce water leakage?
Can we monitor water quality at all times?
Can we drain water quickly during heavy rain?
Can we avoid using more water than necessary in agriculture?
Can we return industrial wastewater to the production process?

is likely the direction.

In that sense, the water industry is a machinery industry, but at the same time,

it is also becoming an environmental industry, an infrastructure industry, a semiconductor-related industry, and a data industry.

as well.

Precisely because we are in the AI era, we should look not only at the cloud and GPUs, but also at the power, cooling, semiconductor manufacturing, and even water that support them from behind the scenes.

When you do, you can see that a group of companies that usually don't get much attention are in a crucial position supporting the global economy.

'Water' is an industry that has existed for a long time.

However, that old industry may now be starting to transform once again due to the two massive changes of climate change and AI.

*This article is a corporate study intended to help think about the structure of the water-related industry and does not constitute an evaluation of specific companies or a recommendation for stock investment.