Semiconductor factories, crypto assets, stable coins, games, Osaka Digital Exchange (ODX), Saudi Arabia… SBI Holdings made headlines in business magazines several times last year with its bold ventures in areas that are the source of global economic growth.
In particular, if the agreement between SBI and Saudi Arabia’s state-owned energy company Aramco for a business partnership takes shape, it will have an impact not only on semiconductors but on all industries including finance, digital assets, blockchain, and gaming. will be given.
Saudi Arabia is a kingdom that has been enriched by oil money, but it currently has a national strategy called “Saudi Vision 2030”, and while thoroughly promoting the digitalization of the country, it aims to improve finance, healthcare, industrial creation, We are accelerating the creation of the foundation for the next generation of the kingdom in all areas such as education, human resource development, urban and housing development, and investment.
How did SBI, led by Chairman and President Yoshitaka Kitao, proceed with negotiations with Aramco, the world’s largest energy company with a market capitalization of over 2 trillion dollars (approximately 290 trillion yen)? I spoke to Mr. Kitao in a conference room at SBI’s headquarters in Roppongi, Tokyo.
Kitao’s Saudi diplomacy takes place in Japan
–Among the projects announced by SBI in 2023, the basic agreement with Aramco is particularly noteworthy. Do you imagine that if the construction of a semiconductor factory or business partnership in the digital asset field takes shape, it will have a global impact?
Kitao:For two and a half months, I have been doing extensive diplomacy with 50 to 60 Saudi people. Fortunately, the other party came (to Japan). A minister even came. The question is, why are they putting so much effort into it?
During the oil crisis (in the 1970s), I went to Saudi Arabia a lot. At the time, when he was working at Nomura Securities, the world’s money was concentrated in countries such as Saudi Arabia and Kuwait. I wondered if there was a way to repatriate that money, so I started selling Japanese stocks and bonds.
Since then, ties with Saudi Arabia, Kuwait, and Abu Dhabi have been severed, but they have been revived. Furthermore, more funds than ever before have been flowing into the Middle East, and the nature of Middle Eastern society has changed significantly. In particular, social change in Saudi Arabia is significant, and the person driving this change is Crown Prince Mohammed bin Salman.
For example, the lives of Saudi women are restricted in many ways compared to those in Western countries. However, they are now able to drive a car and work. Naturally, the country’s working population will increase, and Saudi Arabia’s economic structure will undergo major changes.
Aramco: It was listed on the Saudi Stock Exchange in 2019, and at that time became the world’s largest company in terms of market capitalization, overtaking Apple in the United States. The company then acquired a majority stake in the Saudi Basic Industries Corporation (SABIC), a major petrochemical company, in an effort to diversify its business. Annual sales in fiscal 2022 will be approximately $535 billion (approximately 77 trillion yen), and net profit will be approximately $161 billion (approximately 23 trillion yen). Approximately 38% of the crude oil that Japan imports comes from Saudi Arabia, and Aramco sells it to major oil distributors.
SBI semiconductor factory construction plan: In October 2023, SBI and Taiwan’s PSMC will select Ohira Village, Kurokawa District, Miyagi Prefecture as the planned construction site for a semiconductor foundry. The company has already established JSMC, a preparatory company for establishing a semiconductor foundry in Japan, and has been considering locations for the factory. SBI, PSMC, JSMC, and Miyagi Prefecture have signed an agreement for the construction of the factory on the premise that they will receive a certain amount of subsidies from the government.foundryis a company that receives design data from semiconductor manufacturing plants and semiconductor manufacturers that place orders, and manufactures semiconductor chips according to that design.
Basic agreement with Aramco: SBI and Aramco are currently considering a business alliance in three areas. ① Launch specific projects regarding investment in the semiconductor field, such as establishing factories in Japan and Saudi Arabia.
② Collaboration in the digital asset field and joint investment using both parties’ investment portfolios related to digital assets.
③Discover Japanese startups in the digital asset field that are interested in expanding their business in Saudi Arabia and support their expansion and growth.
“Semiconductors are the rice of industry, and what the crown prince desires most.”
Believing that “if the Middle East changes, the world will change,” they decided to strengthen their Middle East strategy. I’m just about to start working on semiconductors. What the Crown Prince (Prince Mohammed) wants most is semiconductors. When he thought about what industry to create in his country next to oil, he thought semiconductors were the rice industry. Semiconductors are needed to make anything.
For the past two and a half months, we have been concentrating on discussions. In the future, of course, we will implement the memorandum (basic agreement) that we have concluded. We also proposed the idea of building a semiconductor factory in Saudi Arabia.
–The basic agreement with Aramco includes a business alliance related to digital assets. For example, is it possible to tokenize assets such as crude oil and petroleum products so that they can be traded digitally?
Kitao:More than a dozen people came from Saudi Arabia this time, including executives from mining development and aluminum production companies. We made proposals (businesses) to people in various industries. For example, Saudi Arabia currently hasPTSIt doesn’t exist, so let’s create one.
PTSWhat is: An abbreviation for Proprietary Trading System, which is a private trading system that allows you to buy and sell asset classes such as stocks without going through a stock exchange. SBI is the shareholder and Mr. Kitao is the chairman.Osaka Digital Exchange (ODX)uses stock PTS and real estate as backing assets.Security token (ST)The company operates PTS.
We also mobilized all the experts within the company and made all sorts of suggestions. I believe that tokenization and digitalization (based on blockchain) will significantly change Saudi industries, including oil.
If I were 10 years younger, I think I would be able to do a lot more energetically. I’m about to turn 73 years old. I also think that if I do too much, people who come after me will be in trouble. First, we will open our office, SBI Middle East, in Riyadh.
──If a digital exchange opens in Riyadh, does that mean it will be connected to Japan’s Osaka Digital Exchange? What do you think will be targeted when financial assets are tokenized in Saudi Arabia?
Kitao:I’ll connect everything. To this end, we have partnered with exchanges in Singapore, Stuttgart (Germany), and Switzerland. We plan to continue partnering with other overseas exchanges in the future.
(When considering the tokenization of assets in Saudi Arabia) There are many possibilities. Land prices have risen tremendously. Looking at Saudi Arabia’s new stock listings, stock prices are stable and huge amounts of money are flowing into Saudi Arabia. It’s become a huge market.
Collaboration between SBI and overseas exchanges:SBI and Swiss Exchange (SIX) have established a joint venture company, AsiaNext, in Singapore, which has already obtained an operating license (RMO) from the Monetary Authority of Singapore (MAS). Additionally, in 2019, SBI invested in Boerse Stuttgart Digital Exchange and Boerse Stuttgart Digital Ventures, which are headquartered in Stuttgart, Germany and conduct digital asset-related businesses in Europe.
In my mind, I think we have reached the 8th station (in terms of the Saudi business). If we continue to advance semiconductors properly, we will be able to see some progress. The question is how we and Taiwan will participate in the construction of a Saudi semiconductor factory.
Three things Mr. Kitao will focus on in 2024 when it comes to asset tokenization
──What is Mr. Kitao most interested in in the field of “tokenization (tokenization of assets)” in 2024?
Kitao:Starting with virtual currency, I have been involved in blockchain for a long time, taking leadership positions in the industry. The real movement has finally begun. The first oneETFWhat will happen?
This will determine whether asset management companies around the world will incorporate virtual currencies into their operations. Second,stable coinHow we handle this will be a major point this year.
Bitcoin spot ETF: Several asset management companies in the United States, led by the world’s largest asset management company BlackRock, have submitted applications to list Bitcoin spot ETFs (exchange traded funds). The US Securities and Exchange Commission (SEC) is said to be expected to decide whether to approve the application as early as this month (January). If a Bitcoin spot ETF is listed, investors will be able to invest in an ETF that tracks Bitcoin prices without having to hold Bitcoin.
stable coin: A digital currency linked to legal currency such as the US dollar and distributed on a blockchain. In the global crypto asset market, the US dollar-linked “USDT” issued by Tether and “USDC” issued by Circle in the US are widely used. Circle has investors including BlackRock and Goldman Sachs, and its stablecoin is backed by reserves made up of cash and short-term U.S. Treasury bills.
SBI and Circle: The two companies will conclude a basic agreement for a comprehensive business alliance in November 2023, and aim to popularize “USDC” in Japan. In the future, SBI VC Trade plans to handle USDC with the aim of registering as an electronic payment means trading business.
The third one is Security Token (ST). This means that a new financial product has been born. The idea of small-lot real estate has existed for a long time, but this is a product that uses blockchain to take it to the next level. This means that the product will be improved to make it easier for the general public to invest in.
Currently, ST, which uses real estate as the underlying asset, is leading the way, but from now on, we will enter an era in which various assets will be tokenized. At SBI, we will put more effort into this digital area than ever before.
2024 will be a year of innovation. Innovations are being made in various fields, but there are always resistance forces and friction. Our group has pushed forward regardless of this. We will continue to push forward even further.
｜Interview/Text: Shigeru Sato
｜Photo: Airi Okonoki