(Yicai) Aug. 7 -- Panasonic Holdings's components, including artificial intelligence-related parts, have become the Japanese electronics giant's largest revenue driver in China and Northeast Asia, followed by home appliances, with the firm transforming into an AI infrastructure provider.

Panasonic's China & Northeast Asia arm reported sales of JPY2 trillion (USD12.6 billion) in the 12 months ended March 31, with AI and other parts accounting for 28 percent, while home appliances made up 27 percent. Residential gear, industrial production equipment, and new energy accounted for 14 percent, 11 percent, and 3 percent, respectively.

For the first quarter of fiscal year 2026, Panasonic posted record-high profits, driven by the continued growth in demand for AI-related products.

Panasonic has been expanding its AI business and investments in China, focusing local efforts on components, solutions, and smart living, Masaharu Nakayama, the company's country and Northeast Asia head, told Yicai.

Compared to four or five years ago, Panasonic's largest source of revenue in China has shifted to AI-related businesses, surpassing home appliances, Nakayama noted. Its management has also identified AI as one of the most important investment priorities for the next three years, he added.

The rapid development of AI computing infrastructure has allowed Panasonic to be among the first to benefit from this wave of industrial dividends, further strengthening its expansion in China.

Panasonic Industry China primarily focuses on AI edge computing, AI computing infrastructure, and AI + manufacturing, said President Yin Zhiming. This has driven a year-on-year revenue growth of about 30 percent for the parent company's AI-related business in the country this year, Yin stressed.

The multilayer printed circuit board materials used in AI servers and conductive polymer capacitors are in continuous short supply, with demand for electronic components soaring to 10 times the previous levels, leading to supply shortages and contributing to the income surge, Yin pointed out.

The prices of upstream materials for PCBs have continued to rise since the end of last year, increasing around 5 percent to 20 percent every couple of months, Yin said, noting that Panasonic's PCB materials can only passively follow the price jumps, with cost pressures being transmitted along the supply chain to PCB and server manufacturers, and ultimately borne by AI cloud service providers.

Thanks to the expanded revenue base, Panasonic's profits from the PCB business segment jumped in the first quarter from a year earlier, Yin noted.

Panasonic has electronic materials factories in Guangzhou, Suzhou, and Shanghai. In 2020, the Guangzhou plant began construction while targeting the fifth-generation telecommunications technology market, but its start of production in September 2023 coincided with the explosive growth of AI.

The Guangzhou factory has reached 100 percent capacity utilization, yet it is still in short supply, while the Suzhou plant has laid out the substrate materials for semiconductor packaging, with mass production expected by the end of this year. The Shanghai factory primarily produces semiconductor packaging materials.

Panasonic's AI software business in China is also developing rapidly, with its software development center in Dalian achieving software income of several hundred million Chinese yuan (tens of millions of US dollars) in just one year, General Manager Zhang Xue told Yicai.

The center's main focus is on software and services for AI products, such as smart home appliances, covering the Chinese and overseas markets, Zhang noted. In addition, it is collaborating with Panasonic Energy to provide energy solutions for China's robotics industry, managing software development for battery packs, Zhang pointed out.

Editor: Martin Kadiev