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[Financial Results for Fiscal 2003 Performance Briefing]TDK's Technology Strategy

Mr. Takeshi Nomura Director & Senior Vice President

Mr. Takeshi Nomura
Director & Senior Vice President

I would like to explain TDK's technology strategy.

TDK is targeting three growing sectors of the electronics market: IT Home Electronics Appliances, High-Speed, Large-Capacity Networks, and Car Electronics. To make a contribution to society in these three growth areas, we need to leverage and continuously improve our core technology.

TDK's core technologies are materials technologies, originating with ferrite, and the process technologies needed to fabricate products using those materials.

There are a number of prime examples of our materials and process technologies. These three illustrations show our ceramic materials technology and thick-film formation process technology used to make electronic components, and our ultra-fine process technology for magnetic heads.

In this time-critical age, very few customers require TDK to develop a material itself. Instead, they require solutions or a product with sufficient dynamic performance. Consequently, we need to improve technologies for evaluating and simulating dynamic characteristics, making them also core technologies. We are able to improve evaluation and simulation technologies based on our experience with anechoic chambers and EMC components. TDK must transform itself from a company that supplies stand-alone products into a solution provider.

How TDK Plans to Meet Market Demands

There a number of market demands. They are the need for smaller, lower profile, higher performance, reduced cost, additional functions, and a lower environmental impact. In terms of technological trends, these demands stem from the requirement for digitalization, higher frequencies, larger currents, and larger capacitance in the electronics industry, and from the use of electronics in automotive applications. To meet these demands, TDK is providing solutions in areas such as EMC, high-performance power supply systems, and high-density recording. Furthermore, we have a series of components for providing these solutions.

TDK must be recognized as an "e-materials solution provider" that can accurately understand the demands of its customers and use correct information to supply new products at the right times. To accomplish this, we must improve our core technologies much more. In the materials area, we are skilled in ceramics, including ferrite and capacitor materials. We are also skilled in metals and other materials used in electronic components, and in functional organic materials.

In process technologies, TDK is very familiar with powder metallurgy. We have a technical edge in thick-film formation technology, wire winding and connection technology, thin-film and nano-technology, too.

In evaluation and simulation technologies, TDK has expertise in electromagnetic environments and magnetic simulations, as well as material analysis.

TDK must improve these core technologies further, in order to meet the demands of its customers.



Materials Technology

I would now like to briefly discuss materials technology at TDK.

There are a multitude of factors that determine the properties of a material. TDK's advantage is its ability to control those factors as required. Actually, the characteristics of a material are largely determined by its overall chemical composition and physical structure. The overall chemical composition is made up of primary elements and microadditives. On a microstructural level, the sintering atmosphere has an enormous effect on the grain size and chemical quality of the grain boundary. For any given material, there is an infinite number of possible combinations of these variables.

The reason that TDK can say that materials is a core technology is that we have accumulated know-how on how to select the right combination over many years. We know how to narrow down the infinite possibilities to a finite number of experiments to achieve a desired improvement or develop an entirely new material.

Even though simulation technology is now highly sophisticated, simulators cannot take into account every variable in the world of sintered electronic materials. The knowledge of this world is precisely where TDK's core technology lies.

Process Technology

Next, I will briefly explain process technologies at TDK.

Process technology includes formation technology to create the desired shape of a product, sintering technology, and various other technologies to control the shape of a product.

One example of process technology is powder processing technology which employs ceramic powder granules. This technology requires the ability to control the formation of materials at the millimeter level during pressing and sintering. Micrometer level control is used in thick-film formation technology that is employed by stacking thin layers of sheet to produce multilayer capacitors and inductors. Furthermore, nanometer level control is required in the thin-film formation technology that is employed in manufacturing HDD magnetic heads.

There is always a need for electronic components that are lighter, more slender, shorter and smaller. This is why process technologies have improved from millimeters to micrometers and now to nanometers. To ensure that our expertise in these technologies is actually an advantage, we need to improve our technical level in respect of all aspects.

More Electronic Devices Means More TDK Products

In today's electronics and IT industries, magnetic materials and semiconductor materials must work together hand in hand. Magnetic materials are an essential part of electronics and IT products. The use of magnetic materials thus increases in proportion to the use of semiconductors. For example, all electronic devices require direct current. The optimal material for energy conversion devices is an oxidized magnetic material called ferrite.

Switching power supplies are widely used to produce high-quality direct current. Silicon steel, widely used as a magnetic material, is not suitable for this purpose because of an unacceptably high power loss. In contrast, ferrite works efficiently at the frequency range used and there is currently no substitute for ferrite. That means demand for ferrite products is likely to increase even more.

Because of this, it is imperative that TDK retain its position at the leading edge of the market for value-added magnetic products as well as preserve our competitive edge in existing markets, where competition is always fierce.

Now I would like to provide you with a few examples of how TDK uses its materials and process technologies.

Materials Technology for Small, High-Efficiency Power Supplies

TDK's evaluation, simulation and materials technologies all came together to make possible our power supplies for Hybrid Electric Vehicles (HEVs) and Fuel Cell Electric Vehicles (FCEVs). We needed to achieve precisely the right balance among efficiency, cost, noise, reliability, and heat generation. To do this, we used evaluation and simulation technology for the design process, including magnetic circuitry.

But attaining the highest possible efficiency in an automotive power supply mandates a transformer that has very low loss. By using its materials technology, TDK achieved a low-loss material that has a higher saturation magnetic flux density at 100 and even 150 degrees Celsius. Because of this achievement, the loss in the third-generation power supply was cut to only about half of the first-generation loss. Also, TDK's material exhibits extremely stable characteristics across a wide temperature range.

I believe that one of TDK's greatest advantages is the ability to merge power supply circuit design technology, transformer design technology and ferrite materials technology to create a value-added product like this. By integrating these skills, we have captured the leading share of the market for HEV and FCEV power supplies.

World's Smallest Chip* Varistor

Now I would like to show you an example of how we raised the performance of a product by improving its microstructure.

Varistors are used to protect electronic devices from discharges of static electricity and other potentially dangerous surges. Many varistors are employed in the input and output connectors of portable and mobile devices. By applying materials and process technologies, TDK developed the world's smallest* chip varistor. This component meets two demands for mobile devices at the same time: smaller size to suit increasingly smaller mobile devices and the need for protection against static electricity.

These extremely small varistors must be able to continue to perform even after being subjected to an extremely powerful surge from static electricity. TDK's answer is a ZnO-Pr varistor material that is virtually unaltered by a surge current.

As you can see in this photograph, TDK leveraged its various process technologies to create a ceramic structure in which crystals are several degrees of magnitude smaller than in conventional varistor materials.

Here, TDK applied its precision multilayer stack technology developed in chip capacitors and other multilayer components. As a result of the application of these core technologies, TDK was able to develop the world's most advanced chip varistor.

TDK Survey, as of May 7, 2003

Ferrite Magnet

Next, I will tell you about a material that is now under development.

The production volume of ferrite permanent magnets has increased together with the remarkable growth of the entire electronics industry. Today, these permanent magnets are used in a variety of electric motors, including electric motors in automobiles.

Currently, there is rising demand for high-performance permanent magnet materials that realize greater energy efficiency. By using its materials technology, TDK achieved a major breakthrough with the development of FB9. This remarkable material has a performance extremely close to the theoretical limit of a conventional ferrite permanent magnet material with a magnetoplumbite crystal structure. We are manufacturing this material to help reduce the size and weight of motors.

At this time, we are rapidly increasing production of FB9. But our customers are demanding even higher levels of performance. To meet these demands, we are working very hard on high-performance materials with characteristics beyond FB9. I cannot say when we will complete this development process because of the many obstacles that must be overcome. In any case, we are trying to develop such materials so that we can play a part in making motors even smaller.

HDD Head Using Nano-technology

The last product I will talk about today is HDD magnetic heads, a product that is currently a major component of TDK's earnings.

Due to the extremely aggressive development of technologies, there has been a surprising improvement in hard disk areal recording density. In fact, the speed of this progress has exceeded even Moore's Law, which shows improvement of integration density in semiconductors. TDK is developing new HDD heads by utilizing its unique process technologies and sophisticated magnetic simulation technology. In GMR/TMR heads, nanometer-order layers of magnetic and non-magnetic materials are deposited layer by layer to obtain higher magnetic sensitivity. The thickness of the thinnest layers is about the same as the height of several dozen atoms.

To achieve a high areal recording density, the width of the write pole must be reduced. Current TDK ultra-fine processing technology is capable of forming a pole width of 75 nanometers. I can say that this achievement is the most outstanding example of TDK's manufacturing process technology, because this is a finer processing rule than that employed in the advanced ultra-fine processes used to manufacture semiconductor devices.

Furthermore, TDK supplies HDD heads as assembly units that require the precision assembly of sliders, and suspensions. TDK performs this assembly at a level of accuracy that goes beyond the micron level.

As you can see from these examples, TDK is improving its core technologies: materials, processes, and evaluation and simulation. At the same time, we will be making full use of this expertise to contribute to society.

This completes my presentation. Thank you very much.