- Q1. You have revised up the full-year operating profit projection for the fiscal year March 2025 by 40.0 billion yen, to 220.0 billion yen. Please explain how it changed from the previous projection, including the relationship with the restructuring expenses of approximately 10.0 billion yen, on a segment-by-segment basis.
- A1. We have revised upwards the full-year operating profit projection for the fiscal year March 2025 by 40.0 billion yen. It increased by 20.0 billion, to 30.0 billion yen, when forex effects are excluded. Profit from Energy Application Products will boost overall company profits, more than offsetting a decline in sales of Passive Components. In addition, we expect the increase in revenue linked to higher sales of HDD heads in Magnetic Application Products to have an effect. We expect the results of the Sensor Application Products to be on par with the level assumed at the beginning of the fiscal year. Restructuring expenses at the respective segments are as follows.
- Passive Components: Slightly more than 1.0 billion yen
- Sensor Application Products: Slightly less than 1.0 billion yen
- Magnetic Application Products: Approx. 5.0 billion yen
- Energy Application Products: Approx. 2.0 billion yen
- Other: Slightly less than 2.0 billion yen
The expenses for the first half and the second half are as follows.
- First half: Approx. 3.0 billion yen (Second quarter: Approx. 3.0 billion yen)
- Second half: Approx. 8.0 billion yen (Third quarter: Approx. 3.0 billion yen, Fourth quarter: Approx. 5.0 billion yen)
- Q2. Please comment on the factors for the upswing in the battery business in the second quarter and projection of profit in the third and fourth quarters.
- A2. The volume of small-capacity batteries in the second quarter was roughly 2% above the projection. Initially, we expected that material prices in the second quarter would not change greatly from the first-quarter level and would rise slowly toward the second half. In fact, they declined further from the first-quarter level in the second quarter.
We expect the volume in the third quarter to remain flat from the second quarter. This is because sales of products for North America have peaked in the second quarter and will decline in the third quarter, while sales of products for China will peak in the third quarter. We expect that, in the fourth quarter, there will be a significant decline from the third quarter due to the impact of the Chinese New Year, as in preceding years.
- Q3. I think you have heard that in North America tariffs will begin to be imposed on non-EV batteries as well in 2026. I think that the United States will grow going forward as a market for medium-capacity batteries for data centers, energy storage systems (ESS), and others. What are your thoughts about measures to deal with the tariffs?
- A3. As you pointed out, in 2026 an additional tariff of 25% will begin to be imposed on batteries made in China and exported to the United States. We cannot increase the cost accordingly, so we are also looking at using our manufacturing sites outside China. We believe that manufacturing in India is among the options.
- Q4. It has been found that battery performance is improved by cooling and heat dissipation, and I infer that the performance of lithium ferrous phosphate (LFP) batteries will also be significantly improved by combining battery pack technologies. At present, medium-capacity batteries from TDK are focused mainly on residential energy storage systems (RESS) and electric motorcycles. Do you regard large ESS, or what you might call ESS for grids, as a future opportunity?
- A4. We have been finding more opportunities to talk about even larger ESS, although they are not as large as those for grids. We believe that the technical issues lie in systems rather than cells. We would like to expand the business by resolving these issues.
- Q5. Profit from Sensor Application Products improved significantly compared with the first quarter. Please comment on what changes are taking place on a product-by-product basis. Please also tell us when MEMS microphones will turn profitable.
- A5. Significant growth was achieved due to an increase in demand for magnetic sensors for ICT applications. Among temperature sensors, products for automobiles saw a slight decline in demand from the projection at the beginning of the fiscal year, but we expect it to recover toward the third and fourth quarters. With respect to MEMS microphones, we were able to begin mass production and shipment of a new product in the second quarter. We anticipate that it will begin to contribute to improving sales and profit in from the third quarter. It will not be profitable this fiscal year due to the heavy burden of capitalized development costs. However, we believe that the number of finished goods equipped with the product will begin to increase next fiscal year. We will therefore strive to make it profitable by the second half of next fiscal year.
- Q6. Please comment on HDD-related business. We hear that demand for large-capacity HDD has become substantial, and that supply of suspensions and heads is tight. What impacts will this situation have on TDK? Regarding the head business, do you also expect sales of heads for captive head makers in the future?
- A6. Demand for both suspensions and heads has been recovering. However, we have already made sufficient capex, so we believe that we can certainly cater to the demand with the current equipment capacity. It is difficult to comment on captive head makers, but because we are the only independent manufacturer, we would like to make sure that we capture opportunities when they arise. For example, we offer samples for HAMR, but they are not aimed only at a specific corporate customer. We definitely want to capture broad opportunities in the medium to long term.
