- Q1. What is the background behind your decision to revise your full-year operating profit projection for the FY March 2026 upward by 20 billion yen?
- A1. We view around 10 billion yen of that 20 billion yen upward revision as being foreign exchange impact. About 7 billion yen of that accounts for the third quarter, with the fourth quarter responsible for the remaining 3 billion yen.
For the approximately 10 billion yen of upward revision due to non-forex factors, most is due to positive factors during the third quarter. One of those positive factors in the third quarter was the impact from increased sales and profit that included a favorable product mix, which was particularly significant in the area of batteries. For HDD heads, average sales prices enjoying better than expected was a factor driving increases in sales and profit. Overall utilization has also increased, and we have seen utilization-related gains, including passive components and HDD heads as well.
In the fourth quarter, on the surface it appears that our projections mirror those of the previous projections; however, since one-time expenses have increased roughly 3 billion yen from the previous projection, in actual terms we project that performance will swing upwards by between 3 and 4 billion yen. To accelerate the development of batteries and HDD heads (including heat-assisted magnetic recording, or HAMR), we expect R&D expenses to increase. However, we have been passing on the price of cobalt battery materials in sales prices, including those for the third quarter. In addition, the increased average sales price of HDD heads is another factor behind the upward revision.
- Q2. What is the background behind your upward revision to your capital expenditure (CAPEX) forecast?
- A2. The changes are mainly due to compact rechargeable batteries. For other segments there are no major changes from our previous forecasts. In the area of compact rechargeable batteries, we have been investing in production equipment for smart glass and smartphone applications. We have also been investing to deal with the increased production of pack products. Some of the investment required based on predictions about business in the next fiscal year has been brought forward into the current period.
- Q3. What impact will be rising memory prices and supply shortages have on your business?
- A3. For batteries, we have not seen a major impact in the fourth quarter. From the next fiscal year and beyond, we believe there could be an impact. For example, for smartphones, there is a risk that the supply of memory for low-end products could decline. There is also a risk that customers will step up requests for discounts on components, including batteries, in order to offset the rising price of memory. We will continue to pursue the development of cutting-edge technologies while working to maintain and expand our competitive advantage. We are also thinking about systems that will enable us to further reduce costs.
In terms of sensors, we have not seen an impact, and as with batteries, we believe this is an area that requires careful assessment. As our sensors are often used in high-end equipment, we don't expect to see a direct impact in the next fiscal year.
- Q4. From the next fiscal year and beyond, how do you see the positioning of medium-capacity batteries for data centers? Additionally, where do TDK's LFP batteries have an advantage with respect to competing ternary lithium-ion batteries?
- A4. We expect growth to further accelerate from the next fiscal year and beyond. The advantage of our batteries that use lithium iron phosphate, known as LFP batteries, is the cell structure that is able to suppress temperature rises, as well as their extremely high output. For battery backup unit (BBU) applications in particular, it is necessary to cater to facilities whose power output fluctuates wildly, such as AI data centers, and the battery cells we are preparing to produce in volume have extremely high instantaneous power output. As this aligns with BBU needs that are expanding in the future, we plan to expand the business while fully exploiting this competitive advantage.
- Q5. What is your growth forecast for magnetic application products in the next fiscal year?
- A5. To start with, there are three factors behind our expected increase in HDD heads. The first is an increase in the total addressable market (TAM) of nearline HDDs. Second is an increase in volume due to the full-scale launch of new products by our customers in Japan, increasing the market share of our HDD heads. Third is the start of production and sales to captive manufacturers.
For HDD suspensions, we have always maintained a high market share, including captive manufacturers, and due to the increased TAM, we believe we will maintain that share. As our production capacity is currently in full operation, we have decided to increase CAPEX to further boost capacity, which we are in the process of implementing.
- Q6. What is behind the significant increase in operating profit in the third quarter for passive components, and what are your projections in terms of market sentiment and utilization rates going forward?
- A6. Our results improved from the effects of restructuring costs for aluminum electrolytic capacitors and the impact of flooding in Akita clearing up. We also slightly improved utilization rates in the third quarter, and together with utilization-related gains, operating profit increased. We have been receiving a high level of inquiries about aluminum electrolytic capacitors for AI data center applications, and we expect orders to continue to increase. We have also seen growing demand in the infrastructure-related areas of AI data centers for inductive devices and other passive components. At the moment, AI data center-related demand has not increased to the point where it is significantly driving earnings, but it is definitely on the rise.
