‘Buy a company rather than a market’

The case of TDK exemplified by the motto “Buy a company rather than a market” shows another way of doing business in China for companies.

HAN WOO-DUKThe author is a senior reporter of the China Lab. We are already familiar with the name of the Chinese company, CATL. It is the world’s largest manufacturer of electric vehicle batteries. The company was founded in 2011, and its global market share, which was only 2 percent in 2013, rose to 20 percent in 2018 and is now over 36 percent. It is above LG Energy Solution, SK on, Samsung SDI and others.

There is one company that is indispensable to CATL’s remarkable growth. It is TDK, a Japanese electronics and chemical parts company. CATL founder Robin Zeng worked for a Hong Kong subsidiary of TDK. The engineer was sensitive to technology trends. In 1999, 10 years after joining the company, he paid attention to the mobile phone market and founded a battery company with two coworkers. The company was Amperex Technology Limited (ATL).

In 2005, TDK acquired ATL, which was founded by its former engineers. TDK bought the company for $100 million and incorporated it as a subsidiary. Armed with TDK’s technology, ATL is still an active player, supplying batteries for Apple’s iPhone and Samsung’s Galaxy.

Zeng noticed that the focus of the battery market was shifting from mobile phones to electric vehicles. Riding the trend, he founded CATL in 2011. But TDK did not sever its relationship with Zeng and bought a 15 percent stake in CATL. The name, CATL, stands for Contemporary Amperex Technology Co. Limited.

The company’s investment report shows that the relationship between the two companies has ended. But the industry believes TDK still has a stake in CATL, only hidden in order to avoid the Chinese government regulation banning foreign investment in battery companies. In fact, TDK still receives technology royalty from CATL. Recently, they also founded a joint battery venture.

That is a win-win. CATL uses TDK’s original technology, and TDK targets the Chinese market through CATL. They can avoid geopolitical risks between China and Japan. That can be compared to the situation where TDK is riding on the back of “running tigers” ATL and CATL. They are practicing the business maxim, “When a small trader seeks to buy a market, a big businessman buys a company.”

Many Korean companies are tapping the Chinese market again today. They are determined to capture the vast market with technology. The case of TDK exemplified by the motto “Buy a company rather than a market” shows another way of doing business in China for companies.