Bain Capital-backed Kioxia said on Tuesday it expects demand for flash memory to increase by about 2.7 times in the five years to 2028 on the back of the boom in artificial intelligence.

The chipmaker, which was hammered by a downturn in the market for memory chips, is readying a major capacity expansion at its new fab at Kitakami in Iwate prefecture, north of Tokyo.

Kioxia, formerly Toshiba Memory, had planned to begin production at the fab last year but has delayed that to autumn 2025.

The chipmaker has seen years of upheaval including its carve-out from scandal-hit Toshiba by the Bain-led consortium.

Kioxia also makes chips at Yokkaichi in Mie prefecture in central Japan and in July said it has begun sample shipments of its latest generation of NAND flash memory.

The growth of AI is driving investment in servers and the introduction of AI features is seen as having the potential to drive renewed demand for smartphones and PCs.

Kioxia has space in Yokkaichi and "by having the Kitakami factory operating next autumn we should have sufficient room to respond," said Tomoharu Watanabe, executive vice president at Kioxia, following a ceremony to offer prayers for the safety of the new fab.

Bain scrapped plans for an initial public offering for Kioxia in October after investors pushed it to almost halve the valuation it was seeking, Reuters has reported.

Kioxia is a test case for buyout firms in Japan and is a key player as the government looks to revive its formerly world beating chip industry.

In February, Japan said it would provide subsidies worth as much as $1.64 billion to Kioxia and partner Western Digital to expand capacity at Yokkaichi and Kitakami.