Akira Okamoto, Ph,D. General Manager
Public Relations for Technology Corporate Communications Dept.
Good afternoon ladies and gentlemen. My name is Akira Okamoto. I'm General Manager of Public Relations for Technology, part of TDK's Corporate Communications Dept.
The electronics market in which TDK operates is witnessing a number of trends. These include higher volumes of mobile phones and flat-panel televisions, as well as the uptake of wireless broadband and the increasing use of electronics in automobiles. Up to now, the number of components used per finished product has decreased due to the use of more integrated circuits and other advances with every new generation of finished product. So while demand for finished products grew, there wasn't commensurately large growth in demand for components. That situation has changed in recent times, however. An increasing number of functions in high-end mobile phones, larger screen sizes in flat-panel TVs and other developments are driving growth in key finished products as well as the number of components used per finished product. This favorable trend is expected to continue through to at least the Beijing Summer Olympic Games in China.
LCD TVs are forecast to experience growth of close to 90% compared with last year. And the volume of multilayer ceramic chip capacitors, or MLCCs, used in each finished product is increasing 25%. As a result, demand for MLCCs for LCD TVs is expected to soar by 136%.
On the other hand, growing competition from other Asian countries is making it difficult to generate profits from an increasing number of commodity components because prices are falling. To grow in the face of this market trend, companies must add greater value to their products by creating new products and technologies, so that they remain ahead of the pack in the race to develop technologies.
Today, I would like to talk about our progress with developing technologies in three core TDK operations-HDD heads, capacitors and inductors. I will also talk about business fields we are trying to grow going forward.
To begin with, let's look at heads for hard disk drives and discrete track media for high-density recording.
In October last year, we announced that we had demonstrated an areal recording density of 300 gigabits per square inch, in the laboratory using perpendicular recording and tunneling-MR technology for reading. Last month, exactly a year later, we achieved an areal recording density of 437 Gbpsi by using CPP-GMR heads for the read element and combining this with disks employing discrete track media technology. We believe that this combination of technologies will enable a recording density of 1 terabit per square inch in the future.
While we are continuing to shift to TMR heads at present, the CPP-GMR heads developed recently have adequate sensitivity even with smaller track widths. We therefore regard them as next-generation reader elements that will enable high-speed reading even as recording densities increase.
This slide shows the structure of discrete track media. The track pitch is extremely small to facilitate high density recording. However, grooves have been formed in the recording magnetic layer so that side-writing of unnecessary signals in adjacent tracks is reduced when recording. These grooves are filled with non-magnetic materials, creating a mechanical separation between recording tracks.
The width of the recording magnetic layer is 40nm and the groove width is 25nm. When you consider that the latest semiconductor processes are 65nm, you can appreciate just how impressively small these figures are. This technology has allowed the formation of 391 thousands tracks per inch, yielding the world's highest recording density.
This slide contrasts conventional continuous film media with media where the recording tracks are separated in terms of the difference in the quality of the recording signal when recording at high density. In the case of the latter, the point I want to make is that recording quality is much better because there is a reduction in side-writing of unnecessary signals to adjacent tracks. This technology is vital to raising track density.
This roadmap shows the areal recording density in actual products and the areal recording density that has been achieved in the laboratory. The recording density announced today is nearly 50% higher than the 300Gbpsi achieved last year. Our roadmap aims to increase the recording density at this pace moving forward.
The increase in recording density determines the speed of reductions in cost per bit of HDDs. It will thus ultimately determine the competitiveness of HDDs against the challenge presented by NAND flash memory.
As I have just explained, the roadmap for increased recording density looks a fair way into the future and will see us cross from the gigabit era into the terabit era. As a HDD head manufacturer, TDK will not limit its approach merely to heads. We fully intend to build up our knowledge of disks and other components from the same point of view as drive manufacturers. We feel that this is important to advancing our head business-and holds the key to success in the future. TDK is continuing to develop technology toward achieving its roadmap and we are determined to maintain our leading position in the industry in the future.
We are committed to working to spur growth in this industry by increasing areal recording density in cooperation with our customers-hard disk drive manufacturers-and disk suppliers.
Next, I would like to discuss the latest trends in multilayer ceramic chip capacitors.
As I mentioned at the beginning of this speech, the electronic device market is expanding and this expansion is driving growth in demand for electronic components. Demand for multilayer ceramic chip capacitors, in particular, is increasing considerably. Spurred by this market demand, all companies are ramping up production. However, amid a widening array of applications for these components, it is vital to develop products with as much added value as possible and to increase the share of sales from these products in one's product mix.
Let's turn now to low ESL capacitors that are a key to multi-core CPUs.
As you well know, clock frequencies have increased and CPUs have become more powerful as design rules have shrunk in accordance with Moore's Law. Because design rules have approached their limits, companies are attempting to increase performance even further by aligning cores in parallel. At present, dual-core CPUs are commonplace and we are heading toward the use of four and even eight cores.
This multi-core push is driving expansion in demand for low ESL capacitors. While dual cores don't double the number of capacitors used, they will support substantial growth in demand. Because the amount of current handled will increase dramatically, various demands will arise. From the perspective of packaging, capacitors will need to be smaller and thinner. There is also a need to reduce costs. We are pulling out all the stops to capture share in this market by quickly responding to these needs.
On this slide, you can see advances that have been made in terms of making products that are thinner and have more terminals, for example. We have developed products with 10 terminals, as opposed to 8 in the past, helping to create lower-ESL products.
We believe that it is extremely important to develop products while strengthening their competitiveness to secure a competitive edge in this market. We are doing this by delivering solutions in a timely manner to the different demands of each application.
The notion that capacitors are commodities doesn't entirely wash. To make products with a high degree of customization, that is, special-purpose products, an extremely advanced level of production technology is necessary. Only a handful of Japanese manufacturers are capable of operating in the market for special-purpose products at the present time. The technological difference between Japanese companies and other manufacturers naturally leads to a business difference. We don't think this gap can be easily closed in the foreseeable future. Even if one looks back over the past few years, the gap in market share between the top three companies and the rest has not narrowed. This situation is expected to continue for some time.
Next, I would like to talk about inductive devices, which are becoming the third pillar of TDK's operations.
TDK was the first company in the world to commercialize a magnetic material called ferrite as a university-originated venture formed to produce ferrite that was discovered at the Tokyo Institute of Technology 71 years ago on a commercial basis. Most of the inductors used today use ferrite in the core.
For some time after its foundation, TDK sold ferrite cores, which other companies used to manufacture inductors by winding wire around them.
A major turning point came with the advent of surface mounting technology. Up to this point, components had a lead attached. But, as you can see from this slide, connection terminals were then incorporated as part of the structure. Manufacturing these products demanded a wider array of core technologies. It was around this time that TDK became a supplier of inductors at the same time as ferrite cores. Subsequently, the race to develop smaller and lighter high-performance portable electronic devices like video cameras led to smaller and thinner components. The pace of this race quickened with the advent of mobile phones.
Ceramic multilayering technology has made a significant contribution to the development of smaller and lighter components. In 1980, TDK invented the monolithic inductor, a multilayer-type inductor without winding Cu wire, and has applied this inductor technology to various products since. This technology has enabled use to reduce the size to the extent that these products cannot be seen well with the naked eye. Current products measure a minute 0.4mm by 0.2mm. Incidentally, components measuring 0.6mm by 0.3mm are commonplace in high-end mobile phones. Compact, thin inductors and noise-countermeasure components used in portable devices are the core of this business.
TDK's vertically integrated business model, whereby we are involved in everything in-house from materials to the development of production equipment, gives us a huge edge in capturing market position. This vertical integration is a key factor in determining materials, production methods and the properties and costs of end products. Production methods, that is to say, process technologies, in particular, are a key. Without outstanding process technologies, a company cannot hope to meet the constant demands from customers for smaller products with lower profiles.
At present, TDK's inductor business is a growth driver, recording annual growth of around 15%. This is only possible because of our materials and process technologies. The process technology that will allow us to stay on top of the trend for smaller products with lower profiles is thin-film technology. This is a forte of TDK's as you will know from our HDD heads. We are thus fully prepared to respond to customers' needs in the inductor business. From this explanation, I think you will see why we have positioned the inductor business as our third main pillar after the HDD head and capacitor businesses.
This is a thin power inductor announced this year. With this inductor, we formed coils using a special plating technique on both sides of polyimide film and sandwiched these coils between thin ferrite cores. This structure yielded an inductor that is just 0.8mm thick. What's more, with this plating technique it is possible to create even thinner inductors.
Today's digital circuit designs must pack many small components on circuit boards. As a result, it is impossible to completely avoid the generation of noise. Controlling noise, which can interfere with the functions of a device, is a particularly vexing problem. As a result, a considerable proportion of passive components are used for noise reduction.
Using simulations in the circuit design process, when trying to realize a certain function, can yield more optimal designs. However, it is extremely difficult to come up with the optimal design using simulations in terms of reducing and/or eliminating noise. In other words, a cut-and-try approach is necessary to optimize performance in this regards. In this field, TDK has won plaudits from customers for the inductors and noise solution technologies it provides based on many years of accumulating technology.
At present, advances are being made in networking using in-vehicle LANs to make automobiles lighter. TDK has a very high share in noise countermeasure components for CAN-BUS, which is a relatively simple LAN. Flex-Ray is becoming established as the de facto standard in LANs used for vehicle control and other applications as it offers high speed and reliability. TDK has participated in the standardization group since it was formed and has delivered optimal solutions for noise reduction in conjunction with automakers and semiconductor manufacturers. Through this process, it is possible for TDK to accumulate reliability and other data. This is another example of providing non-commodity solutions for specific applications.
At this meeting last year, I said that TDK would aggressively advance into the power electronics field.
Last year TDK acquired Densei-Lambda, which is strong in industrial-use power supplies, and Amperex Technology Limited, or ATL, a Hong Kong-based company that produces and sells polymer lithium batteries. Both acquisitions were made with the aim of capturing synergies from TDK's strength in its core materials and process technologies and Densei-Lambda's and ATL's product strengths. We are steadily seeing the results of a number of different projects that were initiated following these acquisitions.
Let me give you one example. One project has created battery electrodes using TDK's outstanding coating technologies. Prototype electric double-layer capacitors and large capacity batteries have been developed using these electrodes for use in industrial applications and electric vehicles.
The quality of materials has a direct effect on the storage, transformation and generation of electricity in this field. TDK is therefore determined to rise to the challenge of creating even better materials with its material and process technologies.
Some investors seem to be under the impression that the electronic components industry is a cyclical industry, and that profit margins are low because electronic components have become commodities and the market is crowded with Asian manufacturers who are competing solely on price.
This view isn't entirely wrong, so I won't refute it. But, in my opinion, the investment stance toward standout individual companies in the industry should be different to the stance taken toward the industry as a whole.
TDK is one of those individual companies that stand out in the industry. Today, I have showcased our technologies.
TDK provides best-fit solutions by leveraging application technologies and through close communication and collaboration with customers. These solutions are grounded on our core materials and process technologies.
Delivering TDK's key components and solutions on a timely basis to realize new products and functions that are always ahead of their time is the key to achieving high growth even in a cyclical industry. That's why TDK works to enhance its core technologies through repeated innovation.
These technologies give TDK a strong ability to grow. This is the message I want you to take away from today's presentation.
Thank you.
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