TDK's Future StrategyNew Medium - Term Plan

Starting from fiscal 2016, TDK has enacted a New Medium
-Term Plan which covers the three-year period to fiscal 2018. While building on the results of the structural reform of the past three years, the new plan actively targets further enhanced corporate value through sustainable growth.

Looking back on the previous Medium-Term Plan (Fiscal 2012 to Fiscal 2015)

Prior to the New Medium
-Term Plan, the TDK Group implemented a thorough structural reform in fisccal 2012,
with the aim of strengthening its corporate backbone and ensuring that it can deal properly with changes in the external environment.

From fiscal 2016 to fiscal 2018

New Medium - Term Plan

In accordance with its basic policy of fostering collaboration within the group to realize further growth,
the TDK Group is pursuing “zero defect quality” based on superior technological competence,
and promoting true globalization through speedy management.

Until fiscal 2015 Effect of Structural Reform

Balanced Earnings Structure Realized

  • Strength concentrated on five key business sectors: inductive devices, high-frequency components, piezoelectric material components, HDD magnetic heads, and rechargeable batteries
  • Stable earnings from three segments: passive components, magnetic application products, film application products Net Sales Exceed ¥1 Trillion for the First Time

Increased product delivery to three key markets

  • Automotive, ICT Network, and Industrial Equipment and Energy
  • Net sales in fiscal 2015: ¥1,082.6 billion Market capitalization exceeds ¥1 trillion in December 2014
After fiscal 2012 Structural
Reform

Optimization of Business Portfolio

  • Shedding non-central businesses such as OLED displays, LTO*, Blu-ray Reviewing
  • other businesses and individual products

*Short for “Linear Tape – Open” (a magnetic tape based data storage technology for computers)

Improving Overall Management Efficiency of the Group

  • Promote consolidation of domestic and overseas bases
  • Sell off idle assets
  • Optimize human resources and sites
  • Streamline organizations and business processes

Concentrate Management Resource on Growth Markets and Core Businesses

  • Offer thin-film products utilizing magnetics / HDD head technology
  • Strengthen materials technology and process technology (core technologies), Develop ultra-compact, high-performance passive components
Before fiscal 2012 Back
ground

Impact of Natural Disasters

  • Great East Japan Earthquake, Interruption of parts supply chain by Thailand floods

Economic Environment

  • European debt problems leading to economic recession and exchange rate fluctuations

Structural Problems of TDK

  • Delay in response to increased smartphone-related demand in ceramic capacitors business
  • Reduced competitiveness of major customer in RF modules business
  • Unbalanced earnings structure relying mainly on magnetic application products, in particular, HDD magnetic heads

Point 1 Priority Markets, Priority Businesses and New Businesses

As in the past, the New Medium - Term Plan defines a growth strategy for five key business sectors in the three key markets “Automotive,” “ICT Network,” and “Industrial Equipment and Energy.” It also puts the spotlight on new businesses.

Increasing automotive sales to 30% of total

As automobiles rely more and more on electrical and electronic equipment, demand will rise not only for conventional parts such as capacitors and inductors, but also for customized products including magnetic sensors and automotive chargers. The emergence of new markets such as for wireless power transfer systems is also on the horizon, which will further stimulate demand. In the course of actively promoting these developments, we aim to raise the share of the automotive sector in our total net sales from currently 17% to 30% by fiscal 2018.

Fiscal 2015 Fiscal 2015
Fiscal 2015
Fiscal 2018 Fiscal 2018
Fiscal 2018
Point 1 Priority Markets, Priority Businesses and New Businesses Point 1 Priority Markets, Priority Businesses and New Businesses

Point 2 New Businesses in Growth Fields

In the medium-to long-term perspective, it is important to not only focus on our five key business sectors but also to create new business opportunities. On the strength of our strategic global R&D framework, we are making full use of the rich and varied technological resources that the TDK Group has built up over time. In particular, advanced thin-film technology gained from the development of HDD heads is being adapted to thin-film components, magnetic sensors, SESUB products, energy units and other products. The target figures for these new businesses by fiscal 2018 are sales in excess of ¥100 billion and a ratio of 8% of our net sales.

Ratio Target of New Business
Ratio Target of New Business Ratio Target of New Business
New Business New Business
Thin-Film Components

Fusion of thin-Film technology and materials technology derived from the passive components field enables expanded marketing of new products

  • Thin-film power inductor Thin-film power inductor
    Thin-film power inductor
  • Thin-film capacitor(TFCP) for embedding in organic package Thin-film capacitor(TFCP) for embedding in organic package
    Thin-film capacitor(TFCP) for embedding in organic package
Wearable and Health Care Devices

Increased sales of batteries utilizing semiconductor embedded substrate (SESUB) technology and miniature module technology

  • Semiconductor embedded substrate (SESUB) Semiconductor embedded substrate (SESUB)
    Semiconductor embedded substrate (SESUB)
  • Wireless power transfer coil units Wireless power transfer coil units
    Wireless power transfer coil units
Sensors for Automobiles and Industrial Equipment

Sophisticated sensing technology, TMR / GMR angle sensors, atmospheric pressure sensors etc.

  • TMR angle sensors TMR angle sensors
    TMR angle sensors
  • MEMS pressure sensor dies MEMS pressure sensor dies
    MEMS pressure sensor dies
Energy Units for Automobile and Industrial Equipment

Highly efficient bidirectional DC-DC converters for renewable energy applications, constant current power supplies for battery-based power storage systems etc.

  • Power supplies Power supplies
    Power supplies
  • Bidirectional DC-DC converters Bidirectional DC-DC converters
    Bidirectional DC-DC converters

Point 3 Monozukuri Innovation — (Zero defect quality based on high technology) —

TDK is pursuing a “zero defect quality” policy, based on the “Industry 4.0” concept. This is a collective term for an approach currently being promoted by the German government, aimed at revolutionizing the way things are made, by drastically intensifying the level of digitization, automatization, and virtualization. At TDK, we are incorporating “Industry 4.0” concepts such as sensor based monitoring and real-time control of production processes, and we are combining these with upstream management, narrowed tolerances, and other aspects of our quest for zero defects, leading to TDK's unique Monozukuri revolution.

In 2016, we plan to implement these at new plants in Akita Prefecture. Subsequently, the approach will be expanded to other plants and bases around the world, with the aim to achieve “location free” whereby the same quality can be achieved regardless of the actual production location.

Point 3 Monozukuri Innovation — (Zero defect quality based on high technology) Point 3 Monozukuri Innovation — (Zero defect quality based on high technology)

Point 4 Growth Investment and Achieving Management Target in Mid Term

We are actively engaged in enhancing productivity in existing fields, rationalizing manufacturing processes, expanding investments in new products and new businesses, and pursuing M & As. Including the construction of new plants in Akita Prefecture, total facilities investments over the 3-year period of the Medium-Term Plan are planned to be ¥350 billion to ¥400 billion.

For fiscal 2016, the budgeted figure is ¥130 billion. With regard to R&D investment, ¥230 billion are planned for the 3-year period of the Medium-Term Plan, and ¥77 billion for fiscal 2016.

Point 4 Growth Investment and Achieving Management Target in Mid Term Point 4 Growth Investment and Achieving Management Target in Mid Term

“Location free” from New Plants in Akita Prefecture

“Location free” from New Plants in Akita Prefecture

Management Target in Mid-Term

TDK will realize growth through a combination of expanding its operations in the five key business sectors, pursuing new businesses, reforming Monozukuri processes, and making growth-oriented investments. Returns to shareholders are pursued through the growth of EPS (earnings per share) to achieve a stable increase in dividends. The target for the dividend payout ratio has been set to 30%.

We are conducting business with a target of exceeding an operating income ratio of 10% and ROE of 10% by fiscal 2018.

Management Target in Mid-Term Management Target in Mid-Term

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TDK's Future Strategy