- Q1. Looking at results for the first quarter of FY March 2026, which specific businesses performed better than the base scenario plan and which performed worse?
- A1. Excluding the impact of yen depreciation, our results were in line with initial expectations, despite variation in performance by segment. Net sales were slightly higher than initially anticipated in the Passive Components and Magnetic Application Products segments, in line with the plan in the Sensor Application Products segment, and slightly less than expected in the Energy Application Products segment. On the profit front, the Passive Components segment posted lower profit, with increased sales of MLCCs and inductors for the automotive market offset by decreased sales of other passive components and decline in the average selling price of MLCCs. The Sensor Application Products segment achieved higher profit, with TMR sensors bolstering profitability, despite mostly unchanged net sales. The Magnetic Application Products segment achieved substantially higher profit, partly due to the effects of increased sales and increased productivity for HDD heads and suspension assemblies. The Energy Application Products segment underperformed slightly because we drew up a plan at the beginning of the current fiscal year that included the impact of front-loaded demand but then some shipments got pushed back to the second quarter. However, this profit will now be added on to the second quarter.
- Q2. Am I correct in understanding that there was not much impact from accelerated demand created by tariffs?
- A2. The situation differs depending on the product. If we look at the first-half performance of small capacity batteries in the Energy Application Products segment, the impact of front-loaded demand appears to have been greater than initially anticipated. We also recognize that front-loaded demand has had an impact on sales of TMR sensors, which are widely used in smartphone applications.
- Q3. In the second quarter, do you expect to post increased profit as usual in line with seasonality?
- A3. Our forecasts for the second quarter, excluding the foreign exchange impact, are increased profit on the back of increased net sales in the Passive Components segment, increases in net sales and profit in the Sensor Application Products segment, and an increase in net sales but a slight decrease in profit in the Magnetic Application Products segment. This is because first-quarter profit in this segment included a one-time gain recorded in connection with the sale of a welfare facility in the magnet business and there will be no such gain in the second quarter. The profit decline also reflects the impact of lower prices for HDD suspension assemblies in response to growing pressure toward lower prices, despite the strong sales performance of these products. In the Energy Application Products segment, higher profit on the back of increased sales volume can be expected. That said, raw material costs have been trending up recently. We will increase cost pass-through as usual but expect there will be a time lag in passing on costs in the second quarter and beyond. That said, despite these negative factors, we still expect to be able to generate increased profit on the back of increased sales, and believe we can maintain the profitability of rechargeable batteries at the same level as that a year earlier.
- Q4. In the Passive Components segment, profit appears to have deteriorated from the previous fiscal year. You attribute this to a lack of growth in demand for EVs. How do you intend to fix this?
- A4. We have an extensive lineup of products for AI-related business, specifically film capacitors, aluminum electrolytic capacitors, MLCCs and power inductors. Meanwhile, our infrastructure-related products other than accelerator boards include high-voltage components and high-power components used in back-up power supplies and air-conditioning system power supplies. Given there are still plenty of areas where TDK can use its strengths, we are going to actively target the AI market. Our aluminum electrolytic capacitators in particular are ahead of the game and have already been adopted in components used at high voltages in AI servers.
- Q5. Sales to the industrial equipment market have increased groupwide. I believe the industrial equipment category includes products for game consoles. Is it sales of products for game consoles that are increasing? Or is it sales of industrial equipment in general? Are the products for game consoles that are achieving sales growth MEMS motion sensors?
- A5. Game consoles are included in the industrial equipment category. With the exception of sensors for game consoles and film capacitors for renewable energy applications, recovery in this category is slow. The products for game consoles with increased sales are MEMS motion sensors.
- Q6. You said that in the Magnetic Application Products segment, improvement in the product mix effects positively on its performance. What is the situation in relation to HDD heads and suspension assemblies respectively? Also, what is the potential for growth in the second quarter and beyond?
- A6. The sales volume of HDD heads fell from the preceding fourth quarter; however, this reflects the replacement of core products in our product mix. As we transition to the new products in the future, our product mix will become more profitable. We lowered the breakeven point for HDD heads through restructuring implemented in the past, and we expect sales volume close to the breakeven point in the second quarter. We are pursuing further efficiency improvements, including reducing fixed costs, and will achieve a level of efficiency such that HDD heads can make an adequate contribution to profitability on a full-year basis. Sales volume of HDD suspension assemblies is going to increase steadily in line with expansion of demand for nearline HDDs. We expect our product mix will improve through an increase in the share of Tri-SA suspensions that are essential for high-capacity nearline HDDs.
- Q7. What is your roadmap of small capacity batteries for the adoption of silicon anodes? Also, is there any change regarding the manufacturing base in India for small capacity batteries as a result of supply chain changes caused by tariffs?
- A7. We began introducing third-generation silicon anodes to the market in the first quarter. Things are progressing according to plan. Silicon anodes were previously used mainly in high-end smartphones but some customers have now also started using them in midrange and low-end smartphones. They are also being more widely adopted for other applications besides smartphones such as PCs and watches. As regards a manufacturing base in India, we plan to start volume production at a new manufacturing plant from the third quarter. Given the geopolitical situation recently, we are receiving inquiries about products for export, especially to the Indian market.
- Q8. I believe you supply medium capacity batteries for use in back-up power supplies for data centers and BESS (battery energy storage systems). What progress have you made? Adoption of LFP(Lithium Iron Phosphate) lithium-ion batteries will probably increase next year. What is your outlook for the future?
- A8. Batteries used in data centers consist of batteries for BBUs (battery back-up units) and batteries for UPS (uninterruptible power systems). We have high output products for UPS, and sell these to top brands in the UPS market. For the BBU market, TDK is developing a high output battery using a battery platform for high output battery cells called Jumbo Power as a product specifically for BBUs. We are pressing ahead with development, aiming for next fiscal year. As you point out, we have used LFP as a basis for development, aiming to differentiate ourselves from our competitors. As for the large-scale ESS known as BESS, in a region like Japan, there are some places where container size batteries will not fit and so we have already commercialized products that are more compact than container size batteries. We also intend to launch more cost competitive container size batteries from next fiscal year and beyond.
