TDK: Lithium battery business revenue will double in the next five years

TDK Corp TDK.N aims to double revenue from its lithium-ion battery business in the next five years by expanding its use beyond smartphones and personal computers, executives said.

The Tokyo-based electronics component maker, a key supplier to many of the world’s top smartphone, tablet and game console brands, has been boosted by a surge in sales triggered by the coronavirus pandemic. As that demand begins to fade, it hopes to maintain sales growth by expanding its product lineup to include larger battery packs for electric motorcycles, residential systems and cellular base stations, President Shigenao Ishiguro said.

Half of TDK's revenue comes from its Amperex Technology Limited (ATL) battery business. ATL achieved revenue of 740 billion yen (about $6.4 billion) in fiscal 2021. In April last year, Hong Kong-based ATL formed a joint venture with Chinese technology giant CATL to develop medium-sized battery packs for electric motorcycles, industrial use and residential applications.

(More than one-third of the world's mobile phone batteries come from TDK's ATL)

“We will be a challenger in the mid-sized battery market, and I believe we can quickly become a major player in this field,” said Ishiguro, 64. “In five to six years, the revenues from these new areas will be as large as the revenues we currently get from small devices.”

Currently, CATL is the world's largest electric vehicle battery producer and a supplier to Tesla Inc. It was spun off from ATL before TDK acquired it. Ishiguro, who has 40 years of experience at TDK, said electric vehicle batteries are not currently being considered because the business is costly and it is too late to enter the field.

Ishiguro said the move into new battery markets would not come at the expense of TDK's existing small device market. He said the scale-up was necessary to capture the fastest-growing rechargeable battery market opportunities, such as mid-sized batteries and electric vehicles. He added that if it did not expand its product range, it would face greater risks in the future, even though the company currently has a strong position in the small device supply market.

For applications such as 5G wireless applications, IoT devices, and VR and AR glasses, Ishiguro said the potential for these applications is still great because these technologies will be indispensable at some point in the future, but relying on them for short-term growth is not a good option. "We have been hearing for the past five years that they are on the verge of exponential growth, but I haven't seen any signs of that yet," he said.

Ishiguro said VR glasses are still a niche product, too bulky for most people to pick up, let alone wear. VR headsets will have to be at least smaller if they are to become mainstream. Similarly, IoT devices are unlikely to replace consumer smartphones and are best suited for narrow-purpose industry applications.

TDK has also not been immune to the impact of the global chip shortage and supply chain disruptions, and the company has been forced to use more expensive air cargo to deliver electric vehicle converters and chargers to customers. In addition, Ishiguro does not expect the impact caused by the new crown epidemic to ease in 2022.