TDK's Strategic Divestiture of Automotive Power Supply Business: Implications for Core Focus and Long-Term Profitability

In September 2025, TDK Corporation announced a definitive agreement to transfer its new development business for automotive power supply to Astemo, Ltd. via a simplified absorption-type split, effective April 1, 2026. This move, part of TDK's broader “TDK Transformation” strategy, marks a pivotal shift in the company's business portfolio management. By divesting a segment that includes the development of DC-DC converters and On-Board Chargers for hybrid and electric vehicles (xEVs), TDK aims to realign its resources with higher-growth opportunities in passive components, sensors, and energy applications. The transaction, valued at 4.3 billion yen in monetary consideration, underscores a strategic recalibration in response to evolving automotive industry dynamics and TDK's own financial performance trends.

Strategic Rationale: Portfolio Optimization and Focus on Core Competencies

TDK's decision to exit the automotive power supply development segment aligns with its long-term vision to prioritize businesses with sustainable growth potential. The company has faced challenges in the automotive sector, including a 50.53% decline in Passive Components Segment Profit in FY2025, driven by sluggish demand for battery electric vehicles (BEVs) and a dip in sales of ceramic capacitors and other componentsTDK is Changing the Game—Here is How^[4]. By transferring this business to Astemo—a joint venture owned by Honda, Hitachi, and JIC Capital—TDK is offloading a segment that no longer aligns with its strategic priorities. Astemo, which is preparing for an IPO in 2026, is better positioned to leverage its expertise in electrification and advanced mobility solutions to scale the technologyAnnouncement on transfer of the new development business for automotive power supply^[1].

This divestiture reflects a broader trend in the automotive industry, where companies are reconfiguring portfolios to focus on core competencies. For TDK, the move allows it to redirect capital and R&D resources toward areas like sensor applications and energy products, which contributed to a 19.8% year-on-year increase in operating profit for the Energy Application Products segment in FY2025Fiscal Year March 2025 Full Year Performance Briefing | TDK^[5].

Financial Performance and Market Context

TDK's FY2025 financial results highlight both strengths and vulnerabilities. The company reported revenue of $15.2 billion and operating income of $1.8 billion, with net income reaching $1.2 billionTDK Corporation’s FY 2025 Earnings Call: Insights from the …^[3]. However, the automotive power supply segment's performance was mixed. While industrial power supplies showed some recovery, EV-related components continued to underperform, reflecting broader industry headwinds. The global automotive sector is navigating a slowdown in EV sales growth, with projections for 2025 at just 7.4% compared to 48% in 2024, driven by economic uncertainty and policy shiftsAnnouncement on transfer of the new development business for automotive power supply^[1]. Automakers are increasingly favoring hybrids and plug-in hybrids (PHEVs), a trend that TDK's divestiture acknowledges by exiting a segment with limited near-term growth potential.

The divestiture also addresses TDK's recent profitability concerns. In Q1 FY2026, the company reported a 2.5% decline in operating profit, partly attributed to automotive sector challenges and foreign exchange headwinds. By shedding the automotive power supply business, TDK aims to reduce operational complexity and focus on segments with stronger margins, such as sensors for ICT applications and energy storage solutions.

Implications for Core Business and Long-Term Profitability

The divestiture's primary implication is a sharper focus on TDK's core competencies. The company's “TDK Transformation” strategy emphasizes cutting-edge R&D, strategic venture capital investments, and a human-first approach to innovationTDK is Changing the Game—Here is How^[4]. By exiting the automotive power supply segment, TDK can accelerate investments in areas like digital and green transformations, which are central to its long-term value proposition. For example, the company plans to expand production capacity for magnetic components in Japan and Thailand to meet growing demand in the industrial and automotive sectorsFiscal Year March 2025 Full Year Performance Briefing | TDK^[5].

However, the move carries risks. If the automotive market rebounds—particularly with the rise of software-defined vehicles (SDVs) and Level 3 autonomous driving technologies—TDK may miss out on opportunities in electrification. Yet, given the current industry landscape, the decision appears prudent. Astemo's absorption of the business, including intellectual property and fixed assets, ensures continuity for existing customer orders while allowing TDK to avoid the capital-intensive challenges of scaling EV infrastructureAnnouncement on transfer of the new development business for automotive power supply^[1].

Market Trends and Competitive Positioning

The automotive industry's shift toward hybridization and software-defined vehicles further validates TDK's strategy. Chinese automakers, now dominant in EV production, are expanding PHEV offerings, while U.S. automakers face policy headwinds. TDK's exit from a segment with declining margins aligns with its goal to avoid overexposure to volatile markets. Instead, the company is doubling down on its strengths in passive components and sensors, which are critical to the growing demand for ADAS and autonomous driving systemsAnnouncement on transfer of the new development business for automotive power supply^[1].

Astemo's role in this transition is also noteworthy. The company's recent integration of its electric motor systems subsidiary and expansion in the Detroit area signal a commitment to electrification. By transferring the business to Astemo, TDK is partnering with a firm poised to capitalize on the hybridization trend, reducing its own exposure to supply chain disruptions and rare earth material restrictionsSupplier Astemo Seeks To Deal With Automotive Industry’s Future^[2].

Conclusion

TDK's divestiture of its automotive power supply development business to Astemo is a calculated move to streamline operations, enhance profitability, and align with industry trends. While the segment's underperformance in FY2025 justified the exit, the transaction also positions TDK to capitalize on higher-growth areas like sensors and energy applications. In a market where electrification is slowing and hybridization is accelerating, this strategic pivot reflects a pragmatic approach to long-term value creation. Investors should monitor TDK's ability to execute its transformation strategy, particularly as it expands production capacity and invests in R&D to maintain its competitive edge in the electronics and automotive sectors.