Once known for making cassette tapes, TDK Corp. is now a world leader in supplying the electronic components that are indispensable in products such as smartphones, computers and electric cars. Just how have they been able to respond to the changing times? For this installment of Leaders, a column featuring corporate management and senior executives, The Yomiuri Shimbun asked President and Chief Executive Officer Shigenao Ishiguro about the company's strategy.
Products and services continue to evolve in response to changes in society. Yet, the technology behind them is lasting.
TDK is a pioneer of university-originated ventures. Its predecessor was Tokyo Denki Kagaku Kogyo which was established in 1935 for the purpose of commercializing materials developed by researchers at the Tokyo Institute of Technology. TDK utilized ferrite, a material that is highly magnetic and has low electrical conductivity, in a range of applications, creating various products. Experimenting with this material is something that we continue to do today.
[TDK began producing cassette tapes in the 1960s, and by the 1980s these audio and video tapes had become their main business, accounting for around half of all sales. But the sector began to decline with the appearance of CDs and other digital media. In 2007, the company virtually withdrew from the cassette tape industry.]
Cassette tapes were a product that applied the technology and techniques that have been available since the company's founding. For a period of time, cassette tapes were the mainstay that supported our company. However, the recording formats used for music and other kinds of media eventually changed to CDs and DVDs. Ever since I joined the company, I have witnessed firsthand the major impact digitization has had on the departments I have worked in.
In the analog field, it was natural for a company to undertake all aspects of production, from design to manufacturing, assembly and packaging of the final product, to ensure consistency. In the digital world, however, the most important thing is to obey the standards. There is no way to reflect a company's characteristic strengths on a metal disk.
In the era of tapes there was competition among manufacturers from Japan, the United States and Europe, but once we entered the digital era, China and South Korea joined the fray; anyone is now able to participate as long as they are able to manufacture things cheaply. TDK had to change our business structure. After withdrawing from the cassette tape market, magnetic heads for hard disks and later parts for smartphones took over as our main businesses.
Nonetheless, our mission to supply products that blend seamlessly into the life of consumers, making it more comfortable and convenient, remains the same. On computers, you often see a sticker that says "Intel Inside," showing that the American semiconductor giant Intel Corp.'s chips have been used.
Our products are also adopted in such a wide range of applications that TDK can be considered to be on the same level as Intel. We also produce parts used in smartphone batteries and PC hard disk drives. Once again, these products are based on the same ferrite technology that we have had perfected since the founding of the company.
Expanding business
[Since 2000, TDK has been actively pursuing mergers and acquisitions, with a primary focus on overseas enterprises.]
We are an adaptable company, expanding into various spheres like a chameleon. That's what is said about us at least, but it is simply the result of continually reconstructing the business as we eagerly explore what is possible. Mergers and acquisitions are an effective means in this endeavor.
In 2016, I was involved in negotiating the acquisition of a Swiss company that manufactures sensors used to control motors automatically. This is a business that will be responsible for our success in the next generation.
The Swiss company wasn't offering themselves for sale, nor were they in financial difficulty. I simply told them over the phone that I wished to work together, and dove straight into sounding out the possibility of an acquisition.
At first, my offer was rejected. After gently explaining what my intentions were, and why I wanted to work together, they finally granted me the opportunity to speak with the management, and I was asked what would happen to the employees. With an executive of a German company we bought in 2008, who is also now a managing director at TDK, we had detailed discussions. As a result, the Swiss company accepted our proposal for the acquisition.
In both acquisition negotiations and subsequent business operations, it is essential to construct a relationship of trust.
A person's nationality is irrelevant when assigning personnel. The current manager of our human resources department is German. Company meetings take place in English, although we do also use professional interpreters if needed. In order to increase employee motivation, and allow each and every person to demonstrate their own strengths, I believe it is vital to mutually recognize diversity while deepening discussions.
[In the new three-year medium-term management plan that was formulated in April of this year, TDK laid out a policy goal to "Emerge from manufacturing."]
Although the production of electronic components for smartphones has been supporting our success, there are signs that market growth is waning. However, as AI and IoT become more commonplace, we can hopefully expect demand for electronic components to increase exponentially.
This also presents us with opportunities to contribute toward solving problems in society. For example, the switch to renewable energy will require an adequate means of regulating the supply and demand of electricity. We must be able to harness the knowledge we have gained in making smartphone batteries in order to accomplish this.
In the future, the idea that if you make a good product, it will sell, will no longer pass muster. Rather, you need to be aware of what consumers want to accomplish and consider what kind of product might sell. We are shifting from an era of selling established products to one of selling products that have not previously existed.
Eighty years have passed since our founding, but how will we shape the next 80 years? I believe that we have reached an important turning point.
European adventure
I joined TDK during the golden age of cassette tapes and traveled around as a salesman. I wanted to work at TDK because I liked music, but I didn't enter as a graduate. The company culture was one that welcomed you as long as you demonstrated motivation and ability. I think at the time, they needed all the help they could get. I really felt grateful that they snapped me up without me falling by the wayside.
After I transferred to the main office, Europe imposed heavy tariffs on exports from Japan due to trade friction. This made the export of cassette tapes difficult, so I wrote a proposal suggesting that we should establish a production base in Europe.
My proposal came to the attention of my boss, who sent me to Luxembourg to establish a factory. I was 32 at the time. I couldn't speak a word of English, but I had no choice but to go. Therefore, I prepared my mind and set off on the new assignment.
I arrived in Europe in 1989 and stayed there for 14 years. When I first surveyed the empty lot where the factory was due to be constructed, I was at a loss. I was able to get the factory built, procure the necessary machinery, and get production and sales up and running, but experienced various problems with the outbreak of the Gulf War in the 1990s, which caused delays of supply shipments, and prevented Japanese engineers from coming over.
I worked frantically in response. At times when I was exhausted, my junior colleague would sometimes create production plans by watching my example and place them on my desk.
Why had I tried to undertake everything myself, without relying on my colleagues? It was clear that combining our strengths produced results. That factory, which I had built with difficulty, closed when we withdrew from tape manufacturing, and although it no longer exists, what I learned there is still instilled in me to this day.
--Key Numbers
91.1%
Consolidated sales for the fiscal year ending March 2018 totaled 1.27 trillion yen, topping the previous year's results for the fifth consecutive year. Overseas sales accounted for 91.1 percent of that figure: With Asia accounting for 69.1 percent; Europe, 13.1 percent; and the Americas, 8.9 percent. TDK has expanded its business to over 30 countries and regions across the globe. It has a total of 102,883 employees, 90.7 percent of whom are from countries other than Japan.
--Shigenao Ishiguro / President & CEO of TDK Corp.
Ishiguro, a Tokyo native, was born in 1957. In 1981, he withdrew from a science degree program at Hokkaido University and joined Tokyo Denki Kagaku Kogyo (now TDK) a year later. After having worked in departments involved in the manufacturing of cassette tapes and magnetic heads, he became a corporate officer in 2014. He became a senior vice president in 2015 and has been in his current position since June 2016. Ishiguro spent 17 years at TDK divisions overseas.
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