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In this article, we delve into the recent developments of Sakura Internet, a domestic company that has been at the forefront of GPU cloud services in Japan.

Founded in 1996 by current president Kunihiro Tanaka while he was still a student, Sakura Internet has grown significantly since its inception. In 2011, the company constructed the Ishikari Data Center, one of Japan’s largest suburban data centers, and strengthened its physical infrastructure and cloud services. From the dawn of the internet, Sakura Internet has adapted its services to meet the evolving needs of its customers. 

Competition with Foreign Services and Market Changes

As discussed in a previous article, Japanese companies have become increasingly reliant on foreign services for AI development. Sakura Internet has been no exception, facing intense competition from foreign IT giants over the past five years.

The impact of foreign services is substantial on a national level. Japan’s “digital deficit,” the outflow of funds due to payments for overseas digital services, has more than doubled in the past decade, reaching 5.5 trillion yen. With the limited presence of domestic services, the situation has led to concerns that “the more advanced cloud services become, the more Japan’s trade deficit will increase.” The recent depreciation of the yen has further exacerbated this issue.

However, the market environment surrounding Sakura Internet is undergoing significant changes. With the digital transformation (DX) initiative gaining momentum, all companies are aspiring to become IT companies. The COVID-19 pandemic accelerated the digitalization of society, leading to a substantial expansion of the market.

Moreover, the rising costs of foreign cloud services due to the weakening yen and the growing expectations for the government cloud market have increased demand for domestic public clouds like Sakura Internet.

Against this backdrop, Sakura Internet was selected by the Digital Agency as the sole domestic provider qualified to offer government cloud services, albeit with a condition to meet certain functional requirements by the end of 2025. Prior to this certification in November 2023, only foreign providers such as AWS, Microsoft, Google, and Oracle were eligible. Sakura Internet’s certification marked a significant milestone as the first domestic company to achieve this recognition.

Expansion into Asia through Partnership with Equinix

Sakura Internet is further expanding its business operations. On October 1st, the company announced a partnership with Equinix, a leading data center operator, aiming to enter the Asian cloud services market. Sakura Internet plans to lease space in Equinix’s data centers and install its own servers, enabling it to provide cloud services overseas. The company also intends to strengthen its cloud services in Japan using a similar approach.

Equinix operates data centers in countries such as Singapore and Indonesia. While the specific countries and timelines for Sakura Internet’s services have yet to be finalized, the company is moving forward with detailed plans.

A Growing Sense of Expectation

With its aggressive stance and focus on expanding into the Asian cloud market, where US IT giants hold a significant share, Sakura Internet is generating increasing anticipation. We will continue to follow the company’s progress and provide updates on future developments.

We’ve previously reported on Sakura Internet’s active involvement in the AI data center business within Japan. Now, another domestic company has made a significant move in this space.

Japan Policy Investment Bank and Mizuho Bank Invest in Highreso

The Japan Policy Investment Bank and Mizuho Bank, among others, have announced a combined investment of 10 billion yen in the startup Highreso. Japanese companies have been insufficiently providing the high-performance computing infrastructure necessary for AI development, leading to a heavy reliance on overseas services. This investment, which is unprecedented in scale for a startup, aims to bolster domestic AI development.

Highreso operates a GPU-dedicated data center and provides a cloud service called “GPUSOROBAN.” The company has established Highreso Kagawa Co., Ltd. in February 2024 to open a generative AI data center in Kagawa Prefecture.

Highreso Kagawa is a special purpose company established to open a generative AI data center in Kagawa Prefecture. The company plans to develop the data center by partially renovating existing research facilities like “RIST Kagawa” and the gymnasium of the former Ayakami Middle School.

Amid concerns about the excessive concentration of data centers in metropolitan areas, this project aims to reduce development costs by utilizing existing regional facilities and provide services to a wide range of domestic businesses.

The project has been certified under the Ministry of Economy, Trade and Industry’s cloud program and is expected to utilize approximately 7.7 billion yen in subsidies from NEDO (New Energy and Industrial Technology Development Organization).

Highreso CEO Yoshiyuki Shikura expressed his enthusiasm, stating, “We will build a solid domestic infrastructure from the regions and revolutionize the AI industry.”

Moving Away from Overseas Dependence

Until now, Sakura Internet has been the most prominent domestic company actively involved in the GPU cloud service business. The announcement of this new domestic company’s plans has garnered significant attention. It remains to be seen whether Highreso’s project will be a game-changer in reducing dependence on overseas services. We will continue to follow the progress of this project and also provide updates on Sakura Internet’s efforts.