Outline of Toyota Motor Corporation

(b) Materials for LIB

As the second largest business, materials for LIB for automotive use centered on high nickel exist. The business handles the cathode materials for lithium-ion batteries, precursors before sintering as a cathode material, precursor raw materials, etc. Sales in the fiscal year ending March 2024 are 360 million yen (20% of the segment), with most of it being dominated by precursor sales of consolidated subsidiaries. The company started investigating LIB positive electrode materials using existing technology against the rapid market shrinkage of the magnetic iron oxide market, represented by magnetic tapes and began cobalt lithium oxide (LiCoO2) operations in 2000. Since then, it has quickly established a business of three-component cathode materials for LIB due to acquisition of licenses for nickel cobalt aluminum acid lithium (LiNiCoAlO2), Ni(OH)2/CoOx, spinel-type manganese acid Lithium (LiMn2O4), and lithium-rich nickel cobalt manganese acid lithium (Li-Rich NCM). It has also started constructing factories in Michigan, USA, in JV with Itochu Corporation (8001) for production of precursor and cathode materials in 2015 with BASF, a leading European chemical company, at its base in Japan and established BASF Toyota Battery Materials, Ltd. (BTBM). It conducts various research, development, manufacturing, and sale of cathodes such as NCA and NCM, and in 2017, significantly strengthened its production facilities for high nickel-based cathode materials. LIB materials are developed by BTBM (in which BASF Japan Ltd. owns 66% and the company owns 34% of the shares, and the equity method is applied), and the sales in the fiscal year ending December 2023 are 1.8453 billion yen (14.7% decrease from the previous period), and the net income for the period is 229.5 million yen (50.8% decrease from the previous period). Currently BTBM has started delivering NCM-based cathode materials to Prime Planet Energy & Solutions Inc. (PPES), a joint venture company for rectangular vehicle batteries established by Toyota Motor Corporation (7203) and Panasonic Corporation (6752) in April 2020. It also plans to increase the annual production capacity of high nickel-based cathode materials to 0.06 million tons, equivalent to 45 GWh battery cell capacity, and start production in the second half of 2024. Also, since BTBM is an equity method affiliate, it is a consolidated contribution in equity income, and the disclosed 3.6 billion yen includes precursor sales of Toda Advanced Materials Inc. (Canada), a consolidated subsidiary that handles precursor for lithium-ion battery cathode materials. Toda Advanced Materials' main user is for EVs, the precursor business is decreasing, and sales in the fiscal year ending December 2023 are 3.228 billion yen (43% decrease).

(c) Dielectric materials

In March 2024, the revenue was 1 billion yen (flat compared to the previous year), but the MLCC dielectric material business, which is expected to grow in the future, is the main focus. Capacitors are one of the three major passive components, and ceramic capacitors account for nearly 80% of the domestic capacitor production value. Currently, they are used in all electronic devices such as smartphones (500 units / set), xEVs (5,000 units / set), PCs / tablets (1,000 units / set), and home appliances, and in the fiscal year 2023 the domestic production value was 774.6 billion yen (an increase of 3.3% from the previous year). The main raw material for ceramic capacitors is barium titanate, and Murata Manufacturing Co., Ltd. <6981>, which led the practical use of it, succeeded in making it a core business, followed by Japanese companies such as Taiyo Yuden <6976> and TDK <6762>, until Samsung entered the industry in the 2000s. The company installed barium titanate manufacturing equipment in 2004 and made a full-scale entry into this field, but the characteristic lies in its manufacturing method. The barium titanate production method is mainly the solid-phase reaction method of calcining the raw material, and mostly companies like Murata Manufacturing Co. have internalized this method. In contrast, Japan Chemical Industrial Co., Ltd. <4092> and Fuji Titanium Industry Co., Ltd. utilize the oxalate method which is a combination of wet reaction and calcination, and the characteristic is that the resulting particle size is small compared to the solid-phase method. On the other hand, the company uses a unique hydrothermal synthesis technology to react the raw materials at high temperature and high pressure, and uses a hydrothermal synthesis method that can uniformly control the particle size of fine particles of less than 100 nm. Currently, in ceramic capacitors, miniaturization, high capacity, and high dielectric constant are required, and the 0603 size has already surpassed the 1005 size to become the largest ratio. The ratio of 0402 size is also increasing, and the use of 0201 size has begun in specific applications such as communication modules and wearable devices. The company mainly supplies for co-firing for electrode layers. Currently, production is sluggish due to poor sales of smartphones, but demand for ultrafine particle barium titanate is expected to rapidly increase in the future.

(d) Soft magnetic materials

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Soft magnetic materials

The functional pigment business has mainly been involved in the paint, copier / printer, and environmental markets, and has been expanding its business centered on pigment for paint, toners and carrier materials for copiers / printers. Pigments have steadily expanded their uses such as coloring materials for buildings and structures in the paint market since the establishment of the business, while the copier / printer market has matured due to factors such as paperless and digitization. The company has been working to expand its market share, complementing new product groups such as cosmetic pigments and transparent iron oxide, and soil and groundwater purification materials for the environmental market to secure sales. However, regarding this business, aiming for future development, the company transferred Toda Ryohe's investment share to Zhejiang Huayuan Pigment Co., Ltd. (hereinafter Zhejiang Huayuan), its equity-method affiliate, to achieve business recovery and transformation. The impact of Toda Ryohe, which is excluded from consolidation, is included, so the revenue for March 2024 is greatly reduced.

(Written by FISCO Guest Analyst Hiroshi Okamoto)