Note: In accordance with the reorganization in the first quarter of fiscal 2016, certain products under Inductive Devices, Other Passive Components, and Other Magnetic Application Products were reclassified into “Other” that was not a part of these three reportable segments. The previous year's sales were also reclassified to conform to the new segmentation.
The passive components segment is TDK's mainstay, generating about half of its total net sales. The segment includes the capacitors business, comprising ceramic capacitors, aluminum electrolytic capacitors, and film capacitors, the inductive devices business with coils, etc., and other passive components including high-frequency components, piezoelectric material components, circuit protection devices, and sensors. As mobile devices become more powerful and incorporate a variety of functions, and as automobiles rely ever more heavily on electrical and electronic equipment, the demand for passive components continues to expand, a trend that is expected to remain strong.
In the passive components segment, we will be targeting new IoT-related business opportunities via the automotive, ICT, and industrial equipment and energy sectors, which are our priority markets.
In the area of automobiles, manufacturers are looking toward further heightened levels of fuel economy, safety, comfort, and sustainability. To these customers, we are offering comprehensive solutions made possible by our expertise in materials technology, process technology, evaluation and simulation technology, and packaging technology. Furthermore, in the ICT market the advent of large-capacity, high-speed communications with increasing data volumes means that support for higher frequency bands along with higher performance and multifunctionality are more important than ever. The TDK product portfolio is characterized by its wide scope, including not only the widely used conventional SAW filters but also BAW filters suitable for high-frequency bands. The demand for such products as thin-film common mode filters for smartphones is expected to grow further, which will allow us to demonstrate our strengths in this area. We are also continuing to develop strategic products for new markets in the industrial equipment and energy sector, including electronic components for wireless power transfer systems.
In fiscal 2017, we expect net sales to grow by 3%–6%. Among inductive devices, the share of thin-film products and multilayer products for the ICT and automotive markets is expected to increase. Regarding high-frequency components, we are aiming to expand sales of compact, high-performance discrete products as well as modular products. As for piezoelectric material components, the business volume of actuator type optical image stabilizers (OIS) used in smartphone camera modules to prevent blurry photos is expected to expand, and we plan on further increasing sales in this area.
TDK's magnetic application products segment mainly comprises HDD magnetic heads, a field where we hold high worldwide market share. The segment is divided into the recording devices business, comprising HDD magnetic heads and HDD suspensions, and the other magnetic application products business including power supplies and magnets. HDD magnetic heads handle the task of writing information to the magnetic media and reading the recorded information. Our mastery of thin-film process technology on the nanometer level has brought about an amazing increase in storage capacity. High-efficiency power supplies incorporating outstanding ferrite and transformer technology, and high-performance magnets also contribute significantly to the conservation of power and resources.
The scale of the HDD market is expected to shrink further due to reduced demand for personal computers and the shift to SSD storage. We are therefore facing a difficult business environment in this area. On the other hand, demand for HDDs in nearline and external storage applications and for surveillance camera systems is expected to remain solid. The demand for heads used in the internal HDDs of PCs will probably continue to contract, but the number of heads used per HDD unit is expected to increase, especially in nearline-type installations. TDK will continue to optimize the scale of production and utilize advanced technology to deliver superior products and services.
The magnet business also faces a severe business climate, but our advanced technological development continues. High-performance rare-earth-type magnets and next-generation ferrite magnets will be reaching the product stage, and we are also working on special magnets for hybrid and electric vehicles. We intend to improve profitability through the development of market-leading products.
The power supply business is expected to experience growth in demand for industrial equipment products. We will continue to develop high-efficiency power supplies that contribute to savings in energy consumption by industrial equipment overall.
In fiscal 2017, the magnetic sensor business for the automotive market is projected to expand, and we expect the acquisition of Micronas Semiconductor Holding AG in fiscal 2016 to contribute to business performance. By contrast, shipping volume of HDDs, which was in the order of 444 million in fiscal 2016, is predicted to drop to around 400 million in fiscal 2017, which means that sales of HDD magnetic heads will decrease. Due to the above factors, we expect net sales in fiscal 2017 to fall by about 11% to 14%, as compared with fiscal 2016.
The film application products segment covers energy devices such as rechargeable batteries primarily for smartphones, tablets, notebook PCs and other ICT devices, and similar applications.
In the film application products segment, the TDK subsidiary Amperex Technology Ltd. (ATL) in Hong Kong plays a central role in our business operations. With regard to energy devices for the ICT sector, the trend toward thinner mobile devices suggests that the demand for lithium polymer batteries will continue to rise. Taking advantage of this changeover, we intend to broaden our customer portfolio and thereby further increase our market share. An additional manufacturing line at the Hong Kong subsidiary will boost production capacity for rechargeable batteries, and we are also intensifying various other facility investments with similar aims.
Unlike passive components, batteries are the final form of the integrated product, requiring mastery not only of battery technology but also of design and packaging aspects. In order to strengthen our capabilities in packaging technology, we acquired the Chinese company Navitasys Technology in 2012, giving us an advantage in the lithium ion battery package business. We are strengthening our R&D power in the entire field, from development of new materials to manufacturing methods and design, which will enable us to offer comprehensive solutions to customers.
Going beyond batteries for mobile devices, we will also be focusing on demand for drones, AGVs, robots, and other types of industrial equipment, and even cars in the long term, to open up opportunities for further growth.
We expect net sales of applied film products to grow by 12%–15% in comparison with fiscal 2016. Driven by the trend toward thinner mobile devices, sales of lithium polymer batteries are set to grow, not only for delivery to major North American customers but also to customers in China and South Korea. Demand in new application fields, such as drones, is also projected to rise. The move toward a broader spectrum of customers will result in a more balanced customer portfolio and further contribute to the stabilization of our operations.
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Business Segment Strategies