A smart focus meets evolving market needs

A smart focus meets evolving market needs

Annual Report 2012 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Financial Highlights (millions of yen) Years ended March 31 or as of March 31 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Net sales 564,286 604,865 655,792 657,853 795,180 862,025 866,285 727,400 808,858 871,943 814,497 (Overseas sales) 399,508 439,381 487,169 473,828 621,522 690,673 714,172 610,944 704,874 763,046 702,469 Cost of sales 463,331 459,552 476,407 484,323 585,780 622,819 635,529 605,943 617,776 654,180 634,257 Selling, general, and administrative expenses 115,696 115,569 122,875 119,886 142,052 159,106 158,921 159,878 160,386 153,442 161,715 Transfer to the government of the substitutional portion of the Employees’ Pension Fund: Subsidy from the government (33,533) Loss on settlement 27,347 Gain on sales of business to Imation Corp. (15,340) Restructuring cost 25,489 5,197 — — 6,825 510 — 15,884 4,922 — — Production realignment costs 6,570 Realignment-related gain; Sale of properties (6,732) Operating income (loss) (40,230) 24,547 56,510 59,830 60,523 79,590 87,175 (54,305) 25,774 64,321 18,687 Income (loss) before income taxes 88,665 91,505 (81,630) 21,907 Income (loss) from continuing operations before income taxes (40,230) 20,552 55,847 60,728 66,103 60,620 12,245 Income taxes (15,679) 6,193 12,133 23,284 21,057 16,985 19,948 (17,041) 9,025 15,105 11,486 Loss (income) from discontinued operations 2,152 1,574 1,254 3,665 310 (511) (2,460) Net income (loss) attributable to TDK (25,771) 12,019 42,101 33,300 44,101 70,125 71,461 (63,160) 13,520 45,264 (2,454)

Per common share (Yen): Net income (loss) attribute to TDK basic (193.91) 90.56 317.80 251.71 333.50 529.88 551.72 (489.71) 104.82 350.90 (19.06) Net income (loss) attributable to TDK diluted (193.91) 90.56 317.69 251.56 333.20 529.29 551.19 (489.71) 104.74 350.57 (21.42) Net cash flow 264.94 521.05 700.46 650.47 775.50 1,022.45 1,101.11 204.75 753.83 948.98 601.68 Net assets 4,395 4,176 4,352 4,832 5,311 5,759 5,557 4,297 4,215 4,142 3,957

Dividends per common share (Yen) 50.00 50.00 55.00 70.00 90.00 110.00 130.00 130.00 60.00 80.00 80.00 Payout ratio (%) — 55.2 17.3 27.8 27.0 20.8 23.4 — 57.2 22.8 —

Total assets 749,910 747,337 770,319 808,001 923,503 989,304 935,533 1,101,036 1,091,458 1,060,853 1,072,829 Stockholders’ equity 583,927 553,885 576,219 639,067 702,419 762,712 716,577 554,218 543,756 534,273 498,159

Working capital 288,865 315,948 360,555 379,746 397,131 449,830 300,859 281,536 286,370 199,186 219,918 Capital expenditures 58,347 41,026 44,471 61,005 73,911 70,440 84,312 98,425 64,370 78,638 99,653 Depreciation and amortization 60,981 57,132 50,726 52,806 58,540 65,337 71,297 89,567 83,788 77,264 79,918 Research and development 35,530 30,099 32,948 36,348 45,528 50,058 57,387 57,645 53,942 52,608 52,551

Ratio of overseas production to net sales (%) 53.3 55.8 58.6 59.0 61.7 62.2 70.1 74.0 80.6 83.7 80.2 Number of employees 32,249 31,705 36,804 37,115 53,923 51,614 60,212 66,429 80,590 87,809 79,175

Notes: 1 TDK has adopted the Emerging Issues Task Force Issue 01-9 (“EITF01-9”), “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products),” since the fiscal year beginning April 1, 2002. As a result, figures for the fiscal year ended March 31, 2002, have been reclassified to conform to the fiscal year ended March 31, 2003 presentation. 2 Effective from fiscal year ended March 31, 2012, TDK has shown earnings related to the display business as discontinued operations in the consolidated statements of operations, in accordance with the provisions of Accounting Standards Codification (“ASC”) Subtopic 205-20, “Presentation of Financial Statements—Discontinued Operations,” issued by the U.S. Financial Accounting Standards Board (“FASB”). Consequently, fiscal year ended March 31, 2011 figures have been restated to match the presentation in fiscal year ended March 31, 2012. TDK Corporation Annual Report 2012 2 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Profile History of TDK

TDK Develops Metal Invention of ferrite is the 1935 starting point 2009 Recognition as IEEE Milestone 2011 that Require Far Lower Amounts of Rare Earth Elements Tokyo Denki Kagaku Kogyo K.K. (later Work by the Tokyo Institute of Technology and Rare earth metals are produced by very few renamed TDK) was founded for the TDK to develop ferrite materials and their countries, so it is difficult to procure a stable commercialization of ferrite, a applications received recognition from the Institute of Electrical and Electronics Engineers supply. TDK has developed a new method for groundbreaking magnetic material (IEEE), an international academic society relating manufacturing metal magnets that requires invented in Japan. Ferrite was to electricity and electronics as an IEEE Milestone, less than half the amount of , a rare developed by Drs. Yogoro Kato commemorating historic earth element. Development is also currently and Takeshi Takei of the Tokyo achievements in electric and underway on new technologies to electronic technology. produce entirely Institute of Technology. TDK is Since the establishment of the dysprosium-free a pioneering university- award in 1983, this was the initiated venture. 89th IEEE Milestone worldwide magnets. Metal and the 10th in Japan. magnets The world’s rst ferrite cores The IEEE Milestone plaque

1930 1940 1950 1960 1970 1980 1990 2000 2010 2011

Development of the rst Development of the Launch of high-density recording 1966 Japanese-made cassette tape 1980 multilayer chip inductor 1994 MR magnetic heads for HDDs

TDK developed the first Japanese-made The multilayer chip inductor, Hard disk drives (HDDs) are used as cassette tape, greatly transforming music essential for making smaller, large-capacity recording media in devices life. The phenomenal success of the tape lighter electronic equipment, is a such as personal computers. TDK has led to TDK becoming a landmark product that was born world-leading technological strength household name from TDK’s original layering in the field of magnetic heads throughout the world. technology for three dimensional for HDDs, which require nano-level, spiral coils. thin-film technology. The Synchro cassette tape, Japan’s rst domestically made The structure of cassette tape a multilayer A magnetic head for HDDs chip inductor

TDK Corporation Annual Report 2012 3 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Profile Guide to Our Businesses

TDK continues to develop progressive, creative technologies based on materials technologies derived Growth Areas from the magnetic material ferrite, process technologies for manufacturing minute devices and other core Communications • SAW filter • SMD inductor • Base station isolator technologies. These technologies take form as electronic • RF module • Thin-film common mode filter • Circulator • Ceramic Filter • Multilayer chip varistor • Lithium battery components for a wide range of industrial fields and • MEMS microphone • Noise suppression sheet contribute to both progress in the electronics industry 1 • Multilayer ceramic chip capacitor • Power module and advancements in a highly-sophisticated information society. In recent years TDK has been focusing on areas that will continue to be in high demand worldwide, such Digital Home • Transformer • • Neodymium magnet for VCM as telecommunications, home information Appliances • Ferrite core • Ferrite magnet • PTC thermistor appliances, automobiles, and • Power supply inductor • Choke coil for power factor improvement • Power supply choke coil HDD magnetic head Mid voltage type ceramic capacitor Thin-film common mode filter industrial equipment/energy. We • • • • NTC thermistor • Multilayer ceramic chip capacitor • Ferrite beads have conducted R&D and 2 • Humidity sensor unit • Capacitor array • Lithium polymer battery Magnetic Piezoelectric developed technologies to solve issues being faced in these Materials Technology Process Technology DC-DC converter for HEV Gear tooth sensor Anechoic chamber fields, and have strived to Dielectric Organic • • • Neodymium magnet High temperature-guaranteed chip capacitor Transponder coil expand through new advanced Automobiles • • • Rechageable • Ferrite magnet • Power supply inductor • Current sensor for automotive use technologies and products battery material • Piezo actuator • Varistor • SMD gas arrestor acquired through corporate M&A • NTC thermistor • MEMS pressure sensor activities. 3 • Oil temperature sensor • CAN-BUS common mode filter An emerging synergy between TDK's core technologies and newly acquired advanced technologies has led to smartphones becoming smaller Industrial • Ferrite core • Arrestor • Bidirectional DC-DC converter Equipment/Energy and more multifunctional, data centers saving energy, • Neodymium magnet • Power line EMC filter • Front-end power supply • Aluminum electrolytic capacitor • DC-DC power module • Intermediate bus converter automobiles becoming more environmentally friendly, • Film capacitor • Digitally controlled power supply • Amorphous silicon film solar cell and an evolution to smart cities of the future. TDK's 4 • Power film capacitor • LED lighting power supply • Flip chip bonder technological innovation is leading to greater abundance throughout the world.

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Profile Global Development

Corporate Name TDK Corporation Share of Overseas Production Share of Overseas Sales Corporate Headquarters 1-13-1, Nihonbashi, Chuo-ku, Tokyo, 103-8272, Japan Japan Japan Date of Establishment December 7, 1935

¥814.5 billion (FY March 2012) 19.8% 13.8% Consolidated Net Sales Outside of Japan Outside of Japan Number of Employees Consolidated: 79,175 (March 31, 2012) 80.2% 86.2% TDK Group’s Main R&D and Production Centers

Europe Americas Asia

Japan

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Interview with the President

contents

How were business results in the Q1 past year?

How specifically was TDK affected We are focusing on growth markets, Q2 by the Great East Japan Earthquake and the flooding in Thailand? moving ahead with restructuring, Q3 What effect has consolidation in and shifting to a structure that will the HDD industry had?

encourage high earnings. How are structural reforms Q4 progressing?

Please tell us your goals and Takehiro Kamigama President and CEO Q5 product strategy for the new Applied Film Products segment. Profile 1981 Joined TDK 2001 General Manager, Recording Device Business Group Q6 What is the state of progress with 2002 Corporate Officer the company’s growth strategy? 2003 Senior Vice President 2004 Director, Executive Vice President How is TDK performing in Next- Q7 Generation Information and 2006 Representative Director, President and CEO Communications and what is the company’s outlook in this category?

How is TDK’s performance in Q8 Energy-related sector such as automobiles and ?

Q9 Could you tell us about upcoming R&D efforts and your stance on M&A?

Q10 What is TDK’s approach to corporate social responsibility?

Q11 What is TDK’s outlook for fiscal 2013?

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Interview with the President

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 for HDDs and magnets, sales dropped the electronics market and HDD industry significantly in our Magnetic Application overall, which had a major impact on How were business results in the Products business. Sales were also How specifically was TDK TDK's business results. past fiscal year? stagnant in our Passive Components affected by the Great East Japan business due in part to a slowdown in Earthquake and the flooding the home information appliance industry, in Thailand? The past fiscal year marked the Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 start of structural reforms but which includes flat panel TVs and PCs, as well as production adjustments among we were also affected by Japan's The electronics industry and some major clients. External factors also HDD industry as a whole saw What effect has consolidation in earthquake and tsunami and had a direct negative impact, including the HDD industry had? drops in production, which had a the flooding in Thailand, so both the Great East Japan Earthquake, flooding revenue and profits were down. in Thailand, and the appreciation of significant negative impact. the Japanese yen. As a result, our We see industry consolidation The electronics industry as a whole in consolidated net sales for the year ended First of all, I would like to express my as a move in a positive direction, the past fiscal year (ended March 2012) March 2012 were 814,497 million yen deepest sympathy to those who suffered rather than a negative one. saw a year-on-year drop in production (down 6.6% year-on-year), with operating in the Great East Japan Earthquake and of hard disk drives (HDDs) as a result income of 18,687 million yen (down flooding in Thailand. I pray for the repose HDD industry will be consolidated to of the flooding in Thailand and other 70.9%), and a current term net loss of of the souls lost in those tragedies. three HDD manufacturers, but we see adverse factors. However, the market 2,454 million yen. Although there was little immediate the market for HDD heads that TDK is for data communication devices such In an effort to shore up our damage to our business from the involved in moving in a positive direction. as smartphones and tablet computers operating base we have already begun earthquake, aftershocks and the Quality is the greatest strength of our grew steadily. Also, in the auto industry, to take measures regarding unprofitable uncertainty of electric power supply HDD head business, and our high yield is production of hybrid electric vehicles businesses, sell off idle properties, and ended up affecting operations at highly regarded by HDD manufacturers. (HEVs) and electric vehicles (EVs), which optimize our business locations and our plants in the region. Some of our As data volumes continue to rise, there feature high environmental performance, personnel system. Also, to boost profits operations took measures quickly to is a growing demand for HDDs of data grew year on year. we are aggressively implementing a minimize damage, while others were late centers, which use 4 to 5 platters (disks) Under these market conditions business structure reform plan. Estimated in taking action. as opposed to 1 to 2 in HDD for a home TDK did well in rechargeable batteries costs for restructuring will be 13,000 Overall, the experience provided computer. Overall, the number of heads for smartphones and tablet computers, million yen this year and 5,000 million a good lesson in business continuity used per HDD is rising. The greater this but our sales in magnetic heads for yen next year—a total of 18,000 million planning, which was put into effect later number the greater the need for higher HDDs dropped in step with the fall in yen. We are expecting the improvement in the year with the flooding in Thailand. performance, high-quality heads that production in the HDD market due to effects of 16,900 million yen this year and In any case, these major natural disasters, have a low rate of failure and don't easily the flooding in Thailand. The flooding 16,500 million yen next year—a total of combined with the slowdown of the break down. This is where TDK's proven also damaged our production facilities, 33,400 million yen. global economy, caused downturns in quality and yield offer such high value. and with the drop in sales of suspensions Also, with higher HDD recording

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Interview with the President

density the amount of data that can capacity to 1 TB. TDK will continue to Lehman Brothers' collapse in 2008, the advantage of TDK's cumulative expertise be stored on each server will increase, contribute to the increase of HDD storage influx of overseas enterprises in the and technological strengths. At the same making it possible for data centers to keep capacity by taking advantage of thermal market, the inflated yen, and falling prices. time, we aim to optimize our human power consumption under control as their assist magnetic recording technology for We have already announced the resources and personnel from a global capacity rises. In recent years data centers the future. plan to consolidate 7 locations among standpoint at our group locations both in have been expanding worldwide and TDK distinguishes itself from 19 locations in the Tohoku district, which Japan and around the world. their ballooning power consumption and its competitors through quality and involves not merely consolidating plants CO2 emissions have become a societal advanced performance, and we but converting them into cutting-edge Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 problem. So, we feel that to further boost constantly seek to firm up our position factories that can handle integrated HDD recording density is an important as the only magnetic head manufacturer production from materials to final societal mission for HDD manufacturers that offers external sales in the industry. product processes. We are adding Please tell us your goals and and for TDK, which produces components further automation to production lines product strategy for the new used in HDDs. To significantly increase Q1 Q2 Q3 Q4 Q5 Q6 Q7 toQ8 improveQ9 productivityQ10 andQ11 boost Applied Film Products segment. recording density, we are developing competitiveness. At the same time we magnetic heads using thermal assist strive to minimize CO2 emissions in We are focusing resources on magnetic recording technology. Today's How are structural reforms manufacturing as part of our goal of top storage capacity is around 500 GB progressing? achieving carbon neutrality (see Q&A 10 functional films that include per 2.5-inch HDD platter, but using this for more details). These are fundamental areas of expected growth such as rechargeable batteries and films new technology we aim to double that We are pressing ahead with reforms to our manufacturing processes. for touch panels. streamlining efforts at our The aim is to shorten lead times, reduce inventory, and slash energy consumption business locations both in Japan in production, thereby creating a and overseas, and building production system capable of responding Previously, recording media was classified a production system that is quickly to the changing demands of the into the Magnetic Application Products capable of responding rapidly to marketplace. segment, but some recording media fluctuating market demand. Also, on April 1, 2012 we completed product lines were terminated, and the sale of our display business, which with the acquisition of production had been a non-core business area. We capabilities in battery separators, the We are currently putting a great deal of will continue to reevaluate unprofitable main products in recording media have effort into streamlining operations at businesses and narrow down the product shifted to functional film products; hence our domestic business locations, which areas we handle, while concentrating we changed the name to Applied Film I consider a top priority. We are focusing our management resources on highly Products. We have also moved energy urgently on restructuring in the category specialized product areas such as devices devices (rechargeable batteries) into this of capacitors in particular, where business for communications, automobiles, and segment from "Other" because they share performance has been down since the industrial equipment that take best similar core technologies and markets.

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Interview with the President

In the fiscal year ended March 2012, our response to changes in the market components are needed that offer low hardware used for data storage because sales of rechargeable batteries grew environment and to technological loss and higher energy density. Also, of their availability in large capacities steadily and further growth is expected advances, which will strengthen our to improve the performance of hybrid and low cost per unit of storage capacity. in the coming year. To improve our overall business operations. electric vehicles (HEVs), plug-in hybrid Demand for HDD heads in the year ended production system for applied films, we One category is Next-Generation electric vehicles (PHEVs), and electric March 2012 dropped temporarily due to have set closely integrated connectivity Information and Communications, where vehicles (EVs), two key issues are boosting the effects of the flooding in Thailand, but between our functional film mother plant, market growth is strong, with a focus on the energy product of the magnets began to recover in the fourth quarter. the Mikumagawa Plant in Oita Prefecture, cloud computing. We continue to develop used in drive motors and improving the The sector was buttressed by strong with Nitto Denko (Shanghai) Electro- electronic components that meet market efficiency of the power supply. We supply demand in the market related to data Energy Co., Ltd., acquired in November demands for smaller, lighter devices that products for these energy-related markets centers, and growth can be expected in 2011. This move will boost our overall use less power, high-frequency, multi- using TDK's proprietary materials and the fiscal year ending March 2013. strength in Applied Film Products. We also band modules, etc., for smartphones and magnetic technologies. In the market for smartphones plan to expand sales of products such as tablet devices. Also we plan to expand and tablet devices we are currently films for electrostatic and resistive type sales of HDD heads and power supply- Q7 implementing sales expansion tactics touch panels, and hard coat films. related products to data centers. to major device manufacturers. To this The other category is Energy-related. point, the Group has had business Q6 To improve the generating efficiency of How is TDK performing in dealings with a large number of major solar power and wind power facilities, Next-Generation Information device manufacturers in the area of which are needed to bring about and Communications and noise countermeasure components What is the state of progress with smart grids, many kinds of electronic what is the company's outlook and other inductive devices, but not the company's growth strategy? in this category? enough customer development in high- frequency components. In the last fiscal year we actively promoted TDK's extensive We supply products and off er We have refi ned our four growth product lines and modularization sectors into two categories with solutions that enable fi nal capabilities to device manufacturers that the aim of developing products to be made smarter, hold significant market share. We are new markets. smaller, and lighter. We confident that such efforts will bring us a anticipate further growth next wider range of clients for a variety of TDK year and moving forward. products in the fiscal year ending March TDK has been focusing on four growth 2013. sectors—Communications, Home Recent multifunctional smartphones Information Appliances, Automobiles, The demand for data centers is only going employ over 300 types of electronic and Industrial Equipment and Energy. to grow as cloud computing and other components. TDK supplies high-quality, We are now grouping these sectors communications services become more high-performance components and into two categories in order to improve ubiquitous. HDDs are the main type of modularization solutions, enabling the

TDK Corporation Annual Report 2012 9 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Interview with the President

final product to function with more are in high demand for their contribution Additionally, high-voltage direct of expensive rare earth metals will lower advanced capabilities with a lighter, to making cars lighter. current (HVDC) systems are gaining costs, naturally, but it is also an important thinner form factor. The electric drive motor and attention worldwide for low power loss in issue for reducing environmental impact. generator in HEVs, PHEVs, and EVs use the transmission of electricity, and such So, success in developing rare-earth-free Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 neodymium magnets and other high- systems have started being adopted in magnets is also a way to fulfill our social performance magnets. The rare earth many areas. TDK has a particular strength responsibility. elements neodymium and dysprosium in HVDC film capacitors, and we aim to We have already succeeded in How is TDK's performance in are used in the production of neodymium expand sales of related products as the developing ferrite magnets that contain Energy-related sector such as magnets. In recent years the rising price use of HVDC spreads in the future. no lanthanum or and are now automobiles and renewable of these rare earth metals and their supply working to expand sales of these new energy? instability have become major risk factors. magnets. Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 As a pioneer in magnetic materials, Process technology is another core We are currently expanding TDK has been working on developing area that keeps TDK competitive by production technologies for new Could you tell us about enabling us to take advantage of the sales of many types of power neodymium magnets that use a reduced upcoming R&D efforts and your properties of materials to manufacture electronics products and amount of rare earth metals. We have stance on M&A? high-quality products at low cost. Two working to develop rare-earth- already developed a new method such key technologies are: thin-layer free next-generation high- that halves the use of dysprosium, for and high-precision processing that TDK We are devoting resources to performance magnets. which a mass production system will be has developed through the production established within this fiscal year. We R&D on material technologies of HDD heads; and film manufacturing are also currently working to develop and process technologies and are processes, developed through the With rising fuel prices, there have been technologies that completely eliminate also reviewing M&A actions as a production of magnetic tape. strong sales in fuel-efficient eco cars— the use of dysprosium. Finally, we are method for accelerating growth. We are applying thin-layer and HEVs, PHEVs, and EVs. Improvements working to develop methods for creating high-precision processing to electronic are also being made to standard magnets that are entirely free of rare earth components such as capacitors and internal combustion engines to boost metals. Material technologies are like TDK' high-frequency components in order fuel economy through vehicle weight In the fields of renewable energy and corporate DNA. TDK concentrates to develop and mass produce smaller, reductions and increasingly sophisticated smart grids as well, we expect a rise in especially on R&D in magnetic materials. higher performance components. We electronic engine control. demand for power electronics products We have positioned 2012 as the first use film manufacturing processes at the As the electronic systems in from TDK. Our neodymium magnets year of a new era in magnets because Mikumagawa Plant, our mother plant for automobiles become more technologically are used in wind power generation, for the first time we will commercialize manufacturing functional film products of advanced, the demand will grow for TDK's and we supply a industry's broadest magnets that use only half the amount all kinds. And we will continue to develop power electronics products such as DC-DC range of passive components for power of dysprosium, as I stated earlier. We are cutting-edge production technologies converters and high-power film capacitors. conditioners used in power generation also pushing to develop rare-earth-free with an eye toward applying film Also, TDK's smaller, lighter ferrite magnets and distribution facilities. magnets as a final goal. Reducing the use manufacturing processes to electronic

TDK Corporation Annual Report 2012 10 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Interview with the President

components and rechargeable battery the trust of all of our stakeholders. greatest strengths. To pass on our long- separators in the future. Two important aspects of being established manufacturing know-how With regard to mergers and trustworthy are taking measures to to the next generation we have set up acquisitions, to strengthen TDK's core protect the environment in all that we do, the TDK Monozukuri Tradition Seminars. technologies and enhance our capabilities and maintaining good relations with local The aim of these seminars is to help in our two growth areas, we will continue communities and a good standing in the management candidates develop the to study the cooperation with companies global community. Specific actions we are thinking skills needed for management or M&A of companies that hold unique taking start with the goal we have set to positions in order to produce high- technologies and products by watching achieve carbon neutrality. TDK is the first quality products efficiently and with low business deployment and technology company in Japan's electronics industry environmental impact. trend. to set this goal. Carbon neutrality means Also, with the cooperation of the reducing emissions of greenhouse gases mayor and related government personnel Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 in all of our business activities to zero or in Dongguan, China, TDK aims to discuss less. This is accomplished by subtracting what kind of CSR activities are needed the amount of emissions reduced by local communities in that area and to What is TDK's approach to or absorbed in another location, for carry out those activities. corporate social responsibility? example, due to the use of TDK products stable profits in the passive components that reduce greenhouse gases from the business. Also we anticipate healthy Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 development in the communications We strive to maintain the trust of emissions produced in manufacturing operations. As chairman of the Electronic market, which includes smartphones, as our stakeholders at all times and Components Board (ECB) of the Japan What is TDK's outlook for well as in cloud computing which relies are working especially to achieve Electronics and Information Technology fiscal 2013? on data centers, and the automobile carbon neutrality and train Industries Association (JEITA), I will and energy-related markets. We also personnel on a global scale. personally be trying to expand anticipate increased year-on-year sales in We expect increased revenues such efforts throughout industry and recording devices, which includes HDD get Japan's carbon neutrality and a rise in earnings as our heads, as well as in passive components TDK's management philosophy is to certification system accepted as an structural reforms bear fruit and rechargeable batteries. Our contribute to culture and industry international standard. and demand increases in consolidated performance estimates for through creativity. The basis for our TDK is a global company with growth markets. the year ending March 2013 are 900,000 CSR activities is to put this philosophy over 80% of its sales coming from million yen in sales, 57,000 million yen in into practice on a daily basis, from our global markets. So, another important operating income, and in net profit 40,000 top executives down to each and every responsibility is to actively train and We will continue to strongly push million yen. employee in the group worldwide. promote people in locations worldwide. structural reforms in the fiscal year ending When every person employed by TDK is TDK places special emphasis on training March 2013. Our first goal is to establish a trustworthy, the company as a whole wins in the manufacturing sector, one of our revenue base capable of bringing about

TDK Corporation Annual Report 2012 11 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Promoting Global Change for the Better: TDK Feature Smartphones and cloud computing are just two examples of technological advances that make daily life richer and more rewarding. But on the other hand, the world faces serious challenges that concern all of humanity, such as global warming and the depletion of energy sources. The world we live in changes day by day, often at breathtaking speed. TDK is heavily engaged in developing technologies aimed not only at making life more enjoyable but also at helping to overcome obstacles and finding new solutions. Making these widely available on a global basis is our contribution to the society of the future. CLOUD COMPUTING

SMART CITY TDK Corporation Annual Report 2012 12 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

Smartphones and the cloud computing dynamically drive the globalization Making Smartphones More Capable and of society forward More Compact 1 p.14 Using software and systems via an Internet connection is the basis of cloud computing. CLOUD A variety of network services allow users of mobile phones, tablet devices, and similar COMPUTING devices to do email, browse websites, participate in social networking sites, and do a myriad of other things wherever and whenever they wish. Only a concept not too long Enabling Data Centers ago, it has already become a reality. The spread of multi-function mobile terminals to Handle More Data such as smartphones drives the rapid evolution of network services, which have While Consuming become ever more sophisticated and capable of handling enormous amounts of data. Less Energy In order to fully realize a rich and varied network society, TDK provides the technology 2 and products that advance the progress of mobile devices and data centers. p.16

A new “energy aware” society Helping to Reduce the making use of renewable energy Environmental Impact sources and eco cars is emerging of Cars and Promoting 3 Increased Use of IT in various places around the world p.18 SMART CITY In view of global warming and increasingly severe energy related problems such as the depletion of energy sources and the high price of oil, the use of renewable energy, in particular solar and wind power, is gaining traction on a global scale. In the automobile sector, companies are working to make gasoline-powered cars Helping to Realize more fuel e cient, and the development of next-generation automobiles including the Smart City hybrid and electric vehicles is progressing at a rapid pace. TDK contributes not only 4 p.20 to the advancement of energy-saving technology; we are also involved in the ”Smart City” concept that is being developed in various locations around the globe. This is our way of helping to realize a sustainable society.

TDK Corporation Annual Report 2012 13 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

The arrival of the cloud" society" is increasingly taking over from the communication to take high-resolution empowers mobile terminals mobile phone of the past and has already pictures and watch TV... These are just The spread of cloud computing has surpassed personal computers in terms of some of the things that smartphones are made it possible for users not only to sales figures. At the same time, functions expected to allow these days, while the do mail or browse the web on the road, and specifications are progressing by leaps devices at the same time are becoming but also has opened up a wide variety of and bounds. A sleek modern smartphone even smaller and more lightweight. In order 1 other applications. It is now possible to that can be held in the palm of one's hand is to make this possible, an enormous number watch videos, access a vast music library, in fact nothing less than a mobile computer, of tightly packed electronic components of participate in social networking, play offering capabilities and specifications that many types and shapes are working inside games, look in dictionaries, get the latest rival a high-performance PC. the device. Making Smartphones weather forecasts, use positioning search, And this is where TDK with its world- and do a host of other things wherever and Devising total solutions for leading technology for ultra-compact, More Capable and whenever one wants. Advanced mobile condensing a multitude of functions high-performance electronic components More Compact devices allowing users to enjoy such within a limited space comes in. The range of our products, services and content at high speed and Accessing a wide range of network services centered around passive components, is with high image quality are rapidly gaining at high speed, enjoying high-definition wide and varied. Coils for power circuits, a large market share. The smartphone video, going beyond voice and mail multilayer ceramic chip capacitors, all

Rapidly growing global smartphone market Smartphones becoming more powerful

Notebook computer Advanced Notebook computers Tablet computers Smartphones functions! Camera (Million units) Smartphone 1,000 912 Smaller!

800 Telephone

600 All in one device! 140g 1,050g 400 About 1/8 the weight! PC

Storage capacity 200 250GB 64GB

1,366×768pixel Screen size 960×640pixel TV 0 2010 2011 2012 (Predicted) 2015 (Predicted) Using Internet Source: Data prepared by TDK, based on ” Worldwide Electronics Market 2012 - 8 hours standard equipment Battery operation time 9 hours over Wi-Fi Comprehensive Study” by Fuji Chimera Research Institute, Inc. Data compiled by TDK TDK Corporation Annual Report 2012 14 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

kinds of inductors, noise countermeasure Not only lighter," thinner, shorter" magnet material to provide the same 1 filters, RF components essential for multi- but also less power power conversion efficiency as existing band operation and supporting different Mobile communication terminals such products at less than one half the volume. TDK Module Smartphones Spotlight communication standards and frequency as smartphones not only need to deliver The product has attracted considerable T Technology E Y ranges in a single product, ITO transparent higher performance and incorporate more attention as a way towards realizing more C G H O conductive film for touch panels, the list functions, they are also being increasingly compact dimensions while at the same time N O L goes on. TDK offers total solutions in the used for extensive periods and under reducing power consumption. We also are device sector that allow smartphones to heavy load such as when playing games working on promising solutions in the field Ultra-miniaturized module become more capable, smaller, thinner, and or taking photographs. This means that of rechargeable batteries for mobile devices, with embedded chip in weigh less. battery life is a crucial factor. TDK pursues by developing lithium polymer types with 300 µm substrate TDK harnesses advanced and a comprehensive approach in this regard, higher capacities. The TDK Group will use innovative techniques such as thin film through measures such as reducing the its comprehensive technological prowess In order to realize the miniaturization of electronic devices, TDK has been working technology, micro wiring technology, and power consumption of various components also in future to advance the progress of at the cutting edge of module techniques modular technology for integrating multiple and increasing the efficiency of power smartphones and empower even more for integrating multiple electronic devices (see sidebar), to drive progress and supply devices. A case in point is the enjoyable mobile computing. components in a single entity. A major propel electronic components towards multilayer power inductor MLP1608-V breakthrough in this area is our SESUB (Semiconductor Embedded in SUBstrate) even higher density. series which utilizes low-loss ferrite as technology which allows embedding chips and other components as well as the wiring in the substrate, resulting in an extremely low profile of essentially only TDK product palette for advanced smartphones the substrate thickness. Rather than Advanced functions placing IC chips on top of a circuit board, the innovative TDK approach takes them right into the substrate itself. This is of course not an easy task, requiring Lower power consumption advanced technological know-how in areas such as chip processing and micro wiring. As a result, TDK successfully has developed power supply modules for smartphones with a mounting footprint of less than half that of conventional types. SAW filters / ITO film Thin film common In-house RF modules mode filters SESUB Module comparison: Micro DC-DC 2.9mm 36% smaller Converter footprint Micro DC-DC Lithium polymer Smaller, thinner, lighter converter battery 2.3 mm

Chip embedded in 300 μm thin IC Die substrate! Coils for Multilayer chip Ceramic filters Multilayer ceramic power circuits inductors chip capacitors Cross-section view TDK Corporation Annual Report 2012 15 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

Explosive growth of data volumes require a lot of space as well as a high- Working towards even higher handled on the Internet causes rapid performance communication environment recording densities to reduce power expansion of data center market with high-level security features. The costs consumption by data centers The spread of cloud computing and involved are substantial. However, in the When having to process large volumes smartphones is accompanied by a trend prolonged severe economic climate that of data at high speed, server power towards higher-volume content. Data exists today, businesses are acutely aware of consumption as well as released heat 2 that are being moved on the Internet are their IT costs and increasingly rely on data increases signi cantly. Air conditioning increasingly evolving from documents, centers that have dedicated facilities for facilities are required to cool the servers, and images, and audio towards high-resolution operating and managing servers. Especially their power consumption also becomes a Enabling Data Centers video, games, and similar data-intensive in Japan, the Great East Japan Earthquake major factor. Including UPS (Uninterruptible digital content. This has led to an explosion was a wakeup call that has resulted in a Power Supply) facilities to ensure round-the- to Handle More Data in data volumes handled on the Internet. drastic jump in demand for data centers clock operation every day of the year, the While Consuming In fact, the amount of information has to be used as part of business continuity overall power consumed by data centers is jumped by a factor of 10 over the past ve planning (BCP) in the event of natural enormous. As our modern world becomes Less Energy years. Storing such massive amounts of data disasters, resulting in a larger data center more and more oriented towards power requires a multitude of servers which in turn market. saving, nding ways to cut down on data

Explosive growth in amount of Predicted energy consumption by data Development targets for HDDs information generated worldwide centers worldwide Reduction of power consumption is a major social issue! To reduce power consumption and increase information handling capacity... (Exabytes) (100 million kWh) Thermal assist 2,000 1,800 35,000 exabytes 32,965 TAMR method increases About 3 times the entire PMR Head recording density Head for higher Approximately doubled 30,000 amount of electric power storage capacity! in one year! generated in Japan in FY 2010 ! (2.5” GB/Platter) 1,500 25,000 10,000

988 20,000 1,000 exabytes 1,000 15,000

100 GMR Head 9 10,000 9,192 500 1 Exabyte = 10 GB This corresponds to 2 million PCs Recording density with a HDD of 500 GB each. 5,000 MR Head must be further boosted! 10 1,425 0 0 2000 2010 2011 2005 2025 2050 1 Source: Compiled by TDK, based on Horizon Information Strategies, Source: Compiled by TDK, based on the “GIPC Survey and Estimation Committee 1990 1995 2000 2005 2010 2015 2020 cited from “Storage: New Game New Rules” and Information Data Report FY 2008” Corporation, “The Diverse and Exploding Digital Universe,” 2008.

TDK Corporation Annual Report 2012 16 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

center power use is a crucial challenge. a pattern that is perpendicular to the platter respective media. 2 The key here is further increased recording surface. We are now working to elevate On the other hand, we also provide the density. For TDK as a worldwide leader recording density to the next level through technology and comprehensive solutions TDK HDD Head Data Centers Spotlight in the sector of magnet heads for HDDs, various means, including the practical for data centers to reduce their energy T Technology E Y tackling this problem therefore is an issue application of another innovation called consumption. For example, TDK offers C G H O that tests our commitment to contribute to "Thermal Assist Method" (see sidebar). highly efficient power supply modules for N O L the betterment of society. In the past, we blade servers, a field where demand is rising. successfully led the way towards smaller Wide range of storage solutions We also produce compressor magnets that Thermal assist technology HDDs with higher capacities, through a support the advance of data centers contribute to more efficient operation of will further boost HDD series of major technological breakthroughs. Going beyond magnetic heads for HDDs, air-conditioning systems, power supply recording capacity This includes the application of thin film TDK is also involved in other means of data modules for UPS systems, and various other process technology to create thin film storage, with products for solid-state drives products and technologies that can help One approach to increasing the recording density of a HDD is to make the recorded magnetic heads for high-density recording, (SSD), LTO tapes, and multilayer optical data centers save power. bits on the magnetic media smaller. and the move from longitudinal magnetic discs. In all of these areas, we offer total However, this also means that the coercive recording to perpendicular magnetic solutions geared towards higher recording force of a recorded bit decreases. We have recording (PMR) where data are arranged in density by maximizing the potential of the countered this tendency by changing the recording media to a material that has higher to start with. But when coercivity is high, the recording head may have trouble writing the digital informa- tion. The breakthrough technology that is TDK Group Solutions expected to transcend this limitation is called thermal assist recording. It consists in irradiating the recording media surface with a laser to heat it up, thereby Support for higher speeds Contribute to temporarily reducing the coercive force and larger capacity energy savings and facilitating the recording process. After cooling down, even small bits can HDD head/suspension HDD Front-end power supply maintain sufficient coercive force, which allows increasing the recording density. Achieved world's highest recording density. Improve power usage efficiency.

Thin film coil Bidirectional Laser beam VCM ( motor) magnet DC-DC converter New magnet for head drive motor Low-loss power conversion Recording significantly reduces dysprosium head (PMR) allows efficient use of power Magnetic flux consumption. from backup battery. Playback head Near-field (TMR) beam Recording layer Optical communication cable LTO tape Compressor magnet Changing data center Highly reliable recording More efficient air conditioning Laser beam irradiation internal wiring to optical fiber. media for archiving systems temporarily improves purposes, with further writing capability! enhanced recording density TDK Corporation Annual Report 2012 17 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

Rising price of oil and increased the vehicle, and improving the combustion in such motors significantly thinner. The environmental awareness make fuel efficiency of the engine. total magnet weight is 60 percent less, and economy a top priority By making its electronic components the overall size of the motor has shrunk by In order to counteract global warming, smaller and lighter, and by enhancing the some 30 percent, bringing clear benefits reducing emissions of CO2 and other electronic control of combustion efficiency, from the point of view of vehicle body greenhouse gases has become a global TDK is making significant contributions in weight reduction. Piezoelectric actuators 3 goal. Environmental regulations for both of these areas. used to control fuel injection valves, automobiles have become more severe, pressure sensors, temperature sensors, and strict standards for fuel economy are A wide range of products for and various other devices supplied by Helping to Reduce the expected to be applied around the world in enhancing fuel economy of gasoline TDK help to boost combustion efficiency. the coming years. In addition, the price of cars, and fuel economy as well as Improving the fuel economy of gasoline- Environmental Impact of oil continues to climb, making the question charging efficiency/range in eco cars fueled engines is an important step, but TDK Cars and Promoting of how to improve the fuel economy of Modern cars incorporate a great number also offers an impressive array of electronic vehicles a matter of survival in the industry. of compact electric motors, for raising and components for electric vehicles (EV) and Increased Use of IT With regard to gasoline-powered cars, lowering the windows, adjusting the rear hybrid electric vehicles (HEV) which are the approach to improving fuel economy view mirrors, and many other tasks. TDK has expected to become much more widely is divided into two major areas, namely a developed a new manufacturing technique accepted in future. thorough reduction of the entire weight of that allows making the ferrite magnets used

Environmental regulations (fuel economy TDK Group Solutions standards) in major areas Target year DC-DC converter for HEV Current sensor 2010 2015 2020 2025 2030 Industry-leading compact size, Allows accurate monitoring of light weight, and high efficiency automotive battery condition, Japan contribute to better fuel Better fuel efficiency for lower power consumption. economy of hybrid electric 16.8km/ℓ 20.3km/ℓ vehicles in Japan and overseas. Film capacitors 2015 ～ 2020～ Used in power supplies and Compact motor ferrite other equipment for EU magnets automotive applications. High coercivity and thin profile 17.8km/ℓ 24.4km/ℓ contribute to size and weight 2012～ NTC thermistor for 2020～ reduction in motors. temperature sensing U.S. Outstanding heat resistance Metal magnets and oil resistance have resulted Used for main drive motors and 15.0km/ℓ 26.0km/ℓ in a large market share. 2016 power generators, these magnets ～ 2025～ enable high-efficiency drive. Common mode filter Canada for automotive LAN Multilayer ceramic Noise control components for 18.3km/ℓ chip capacitors automotive LAN realize high 2016～ Contribute to smaller size and reliability through resistance Source: Data compiled by TDK, based on ”Reality and Future Prospect of lower profile of many electrical against heat, vibrations, and Market 2012” by Fuji-Keizai Group parts. impact. TDK Corporation Annual Report 2012 18 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

The TDK lineup includes powerful metal convenience, cars make increasing use of automobile, including the extremely high 3 magnets (see sidebar) for the drive motors electronics and IT. The share of electronic temperatures in the engine room. Noise TDK's motor of such vehicles, DC-DC converters that components in the total cost of the countermeasure filters and related products Eco Cars Spotlight magnet change the high voltage of the main battery vehicle is about 30 percent for combustion rated for compatibility with automotive LAN T E Y technology into the low voltage required by the electric engine cars, 50 percent for hybrid electric standards serve to improve the reliability of C G H O and electronic equipment of the car, current vehicles, and as much as 70 percent for in-vehicle networks. With a view towards N O L sensors that monitor the battery condition, electric vehicles. On the other hand, the the future, TDK is also engaged in research Working towards and many other devices that help to make progress of cloud computing and wireless and development aimed at making wireless developing completely eco cars more sophisticated, reduce fuel communication technologies has enabled power transfer systems a practical reality. new magnets with consumption, and improve charging the spread of telematics, referring to the These will simplify the charging process for efficiency/range. use of the Internet and various other electric and plug-in hybrid electric vehicles dysprosium content cut communication based services such as and facilitate integration with energy by half or eliminated Communication technology and for broadcast and information reception, networks. We will continue to work towards completely technology for various types of electronic transactions, etc. TDK is offering energy savings and enhanced convenience Rare earth materials are only found in a sensors also contributes to IT an array of devices that serve as the for automobile users. small number of countries and supply implementation in automobiles building blocks for such systems and tends to be unstable. One of TDK’s areas of expertise is metal magnets for the drive To improve not only fuel economy and that are especially designed to withstand motors and electric generation motors in performance but also driving safety and the harsh conditions that exist in an electric and hybrid electric vehicles. But as such motors use dysprosium, a rare earth material, procurement risks and the Making electric motors even smaller and lighter Wireless power transfer system holds high promise possibility of price rises were a concern. TDK therefore embarked on the development of a new method that cuts Motor dysprosium use by half. Mass production Ability to frequently using the new technique began in March Motor Automatic control 2012. Going even further, research is recharge at charging stations of charging currently under way towards eliminating allows reduction of process by wireless dysprosium altogether. Motor size on-board battery communication reduced by Previous method ø40mm ø33.4mm weight. EV/HRV/ % Plug-in HEV 30 Dysprosium

Power panel particle (contains dysprosium) Communication equipment

Magnet wall Motor Inverter Dysprosium use thickness Magnet wall Power circuit, cut by half thickness 5.0mm Rectifier Battery power New method Total magnet 1.9mm transmitter Dysprosium distributed weight reduced by Secondary coil controller FB13B uniformly only FB6B near 60% 26g Primary coil Grain boundary: boundary between particles 65g Alloy particle High-frequency power Commercial power supply (contains no dysprosium)

TDK Corporation Annual Report 2012 19 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

Increasing use of natural energy and network technology to link a number of TDK products shine in all areas smart grid diverse areas. These include HEMS (Home involving electrical power: creation, Global warming and the rising price of Energy Management Systems) geared storage, conversion, transmission, energy are propelling us towards the towards increased use of natural energy in and protection post-oil era, marked by increasing use individual homes and built around smart TDK produces core devices for the field of of natural renewable energy sources meters that make the grid usage status power generation from natural sources. 4 such as wind power and solar power. At transparent, eco cars such as EV, HEV, PHEV, This includes powerful neodymium the same time, intensive research and and facilities for generating and transmitting magnets (NEOREC) used in wind power development is under way into applying power from natural sources. This will generators, electronic components for IT to the distribution of electrical power, optimize the supply and distribution of power conditioners that convert the direct thereby creating the next-generation power electrical power for all members of society. current produced by natural energy power Helping to Realize distribution network called the smart grid, The first step currently being realized in generation into alternating current for the Smart City designed to optimize operation and handle various locations around the world are local distribution to homes, and various other power more efficiently. smart grids based on "locally produced and products. Power conditioners in particular The smart grid will function as a locally consumed energy." are indispensable for configuring systems social infrastructure that uses bidirectional for renewable energy, an area with rapidly

Increasing use of natural energy sources worldwide TDK Group Solutions Create Store Wind power generator magnets Film capacitors Contribute to higher efficiency and Optimal for adjusting and Wind power generation Solar power generation lower noise stabilizing the frequency and Protect voltage on the power grid, and for (GW) Arrestors use in output filters for various 80 types of power converters High market share in devices for protecting the power grid from lightning

60 60.5 43.9 SMART GRID Transmit High-frequency devices 40 Used in smart meters and Convert other high-function meters using wireless communication Power conditioners, 20 smart meter components Convert power with low losses and optimize distribution to Create Convert individual households Power supplies for Bidirectional DC-DC 0 LED equipments converters 2010 2011 2012 2013 2014 2015 Compact, low-profile, lightweight Enable the fusion of power by units, rated for high resistance connecting facilities for domestic Source: Data compiled by TDK, based on ”Global Wind 2010 Report”, Global Wind Energy against dust and waterdrop power storage and eco cars Council, and ”Global Market Outlook for Photovoltaics until 2015”, EPIA.

TDK Corporation Annual Report 2012 20 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Special Feature Promoting Global Change for the Better: TDK

rising demand. About 30 percent of parts the effi cient generation and transmission of few manufacturers worldwide are able ' 4 cost are for passive components. TDK s electrical power. to produce these devices. TDK is an Aluminum broad lineup of aluminum electrolytic important supplier to leading HVDC systems Smart City Spotlight electrolytic capacitors (see sidebar), transformers, Power capacitors are key devices for manufacturers on the global stage. We T E capacitors inductors, reactors, and other passive high-voltage direct current (HVDC) supply power capacitors for large-scale C Y H G components for power conditioners helps transmission systems projects such as the Trans Bay project N O L O to increase power conversion effi ciency. In recent years, high-voltage direct current extending the length of the San Francisco Advanced aluminum We also provide storage batteries, (HVDC) systems for power transmission are Bay, and a power transmission system high-capacitance capacitors, battery gaining traction, thanks to their low losses linking France and Spain. electrolytic capacitors are management systems, and other devices for over long distances. For stable operation vital for renewable energy the power storage sector. Power electronics of HVDC systems, power capacitors that technologies products from TDK include bidirectional smoothen the voltage are indispensable. TDK is developing and manufacturing DC-DC converters for power conversion Such power capacitors must be designed aluminum electrolytic capacitors that are between the generated DC and AC for for high loads and meet extremely strict key components in green energy technologies feeding unit the grid. We are active in every specifi cation requirements such as a such as solar power and wind power generating aspect of the industry, helping to realize service life of 40 years and more. Only a facilities. The aluminum foil that is a major component of these capacitors is manufactured in a plant in Iceland. We have chosen this location because Iceland derives 100 percent of its domestic electric power from renewable energy sources. Aluminum foil Projected worldwide demand for power conditioners Voltage source converter (VSC) HVDC project production is very energy-intensive, making the choice of Iceland with its low-cost, clean energy a significant factor About 30% of power conditioner 2,700 4,300 3,500 in gaining a competitive edge. components cost is for passive components Trans Bay BorWin2 HelWin1 HVDC link extending the length of Project for the North Sea wind farms BorWin 2 Industry-leading lineup of (GW) passive components the San Francisco Bay and HelWin 1 60 Iceland 30% SylWin 5,000 Project for the SylWin cluster of wind farms in the North Sea

40 ·100% of domestic electricc INELFE 4,300 Power capacitors for High-Voltage power in Iceland is INELFE project linking the power Direct Current Transmission Systems renewable energy 20 grids of France and Spain as part This is a key component of HVDC (hydroelectric power 80%, of a trans-European power converters. Because of its high geothermal power 20%) transmission network performance and reliability, the product ·Energy costs are a key factor for was chosen for transmission links from competitiveness in the highly wind farms in the North Sea to the energy intensive mass production 0 German mainland. of aluminum foil 2010 2011 2012 2013 2014 2015

Source: IHS iSuppli Research, February 2012 Note: Figures indicate the number of power capacitors (approximate) per project

TDK Corporation Annual Report 2012 21 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Sales Results New segments Existing segments Passive Components Passive TDK Group’s net sales for the fiscal Components year ended March 31, 2012 were Net Sales •Ceramic capacitors •Ceramic capacitors (billions of yen) ¥814,497 million, down 6.6% from the •Aluminum electrolytic •Aluminum electrolytic 425.5 capacitors capacitors previous fiscal year, and operating 381.6 •Film capacitors •Film capacitors income was ¥18,687 million, down •Inductive devices •Inductive devices •High-frequency components 70.9%. Results in electronics markets •High-frequency •Piezoelectric material components varied greatly depending on the set components, circuit •Piezoelectric material protection devices components, circuit (final product). Production of mobile •Sensors protection devices phones, particularly smartphones, •Sensors and tablet computers was up sharply. 2011 2012 Magnetic and electric Passive Application vehicle production remained strong. Components Products Magnetic Application Products Magnetic In contrast, production of flat-panel Application Net Sales (billions of yen) Products televisions and PCs was at low levels, 46.9 38.8 356.5 316.4 •Recording devices •Recording devices and hard disk drives (HDDs) % % •Power supplies •Power supplies production fell because of damage •Magnets •Magnets from the flooding in Thailand. 2011 2012 •Recording media

In conjunction with the Applied film products transformation of major recording Applied film products Net Sales (billions of yen) 92.7 media products, which previously •Applied film products 58.6 (formerly recording media) were categorized as magnetic •Energy devices Other application products, to functional 11.4% (rechargeable batteries) 2011 2012 film products, their designation was changed to applied films. Starting in •Energy devices (rechargeable the current fiscal year, these products Other Other batteries) Net Sales (billions of yen) are reported on the new applied film 31.3 •Mechatronics products segment along with energy 23.8 •Mechatronics (production equipment) 2.9% (production equipment), devices, which have similar core etc. technologies and markets. 2011 2012

TDK Corporation Annual Report 2012 22 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Sales Sales Results Results New segments Existing segments Demand in automotive markets increased Passive Components Passive TDK Group’s net sales for the fiscal Components while the home information appliance year ended March 31, 2012 were Net Sales •Ceramic capacitors •Ceramic capacitors market and communications equipment (billions of yen) Passive ¥814,497 million, down 6.6% from the •Aluminum electrolytic •Aluminum electrolytic market slumped, and as a result, sales were 425.5 capacitors capacitors Components down 10.3% year-on-year. previous fiscal year, and operating 381.6 •Film capacitors •Film capacitors income was ¥18,687 million, down •Inductive devices •Inductive devices •High-frequency components Total net sales in the segment during the fiscal year ended March 31, Ceramic capacitors Aluminum electrolytic capacitors 70.9%. Results in electronics markets •High-frequency •Piezoelectric material components 2012 were ¥381,576 million, down 10.3% from the previous year, and varied greatly depending on the set components, circuit •Piezoelectric material operating losses were ¥6,610 million, down ¥31,093 million. Results by protection devices components, circuit This business segment (final product). Production of mobile product segment are set forth below. •Sensors protection devices encompasses phones, particularly smartphones, •Sensors “Capacitors”, “Inductive Capacitors Devices”, and “Other Passive and tablet computers was up sharply. 2011 2012 Sales of aluminum electrolytic capacitors and film capacitors to Components”. “Capacitors” includes Magnetic the industrial equipment market and the automobile market were Hybrid electric vehicle and electric Application ceramic capacitors, aluminum electrolytic capacitors, and lm Passive up. Sales of ceramic capacitors to the home information appliance vehicle production remained strong. Components Products capacitors. “Other Passive Components” includes Magnetic market, however, were down. As a result, net sales were ¥132,364 Magnetic Application Products Application high-frequency components and piezoelectric material Film capacitors Inductive devices In contrast, production of flat-panel components, as well as circuit protection devices and sensors. million, down 9.0% from the previous fiscal year. Net Sales (billions of yen) Products televisions and PCs was at low levels, 46.9 38.8 356.5 316.4 •Recording devices •Recording devices Inductive Devices and hard disk drives (HDDs) •Power supplies % % •Power supplies Sales to the automotive market increased, but sales to the home •Magnets production fell because of damage •Magnets Sales (billions of yen/quarter) informationセグメント利 appliance 益（億円／四半期） market decreased. As a result, net sales were 2011 2012 73 from the flooding in Thailand. 120 ¥121,201100 million, down 6.9% from the previous fiscal year. •Recording media 62 63 50 Other Passive Components In conjunction with the 104.7 108.7 107.1 105.0 101.7 Applied film products 99.9 Sales of high-frequency components were down, particularly to 90 89.5 90.5 50 High-frequency components and modules Piezoelectric material components transformation of major recording Applied film products Net Sales (billions of yen) the communications device market. Also, sales of piezoelectric 92.7 media products, which previously •Applied film products material components and circuit protection devices to the industrial 58.6 (formerly recording media) equipment market declined. As a result, net sales were ¥128,011 were categorized as magnetic 60 0 •Energy devices Other million, a 14.6% year-on-year decrease. application products, to functional 11.4% (rechargeable batteries) 2011 2012 -2 -3 film products, their designation was -15 30 -50 changed to applied films. Starting in •Energy devices (rechargeable the current fiscal year, these products Other Other batteries) Net Sales (billions of yen) Circuit protection devices Sensors are reported on the new applied film 0 -100 31.3 •Mechatronics -92 products segment along with energy 23.8 •Mechatronics (production equipment) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4Q3Q2Q1Q 1Q 2Q 3Q 4Q (production equipment), 2.9% 2011/3 devices, which have similar core etc. FY March 2011 FY March 2012 2012/3 technologies and markets. 2011 2012

TDK Corporation Annual Report 2012 23 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Sales Results

Sales of other magnetic application products to the automotive market were strong, but Magnetic sales of HDD recording devices declined, and net sales were down 11.2% from the Application previous fiscal year. Products Total net sales in the segment during the fiscal year ended March 31, 2012 were ¥316,402 million, a decrease of 11.2% from the previous Recording devices year, and operating income was ¥39,028 million, down ¥12,397 This business segment million. Results by product segment are set forth below. encompasses “Recording Devices” including HDD Recording Devices heads and related products, as HDD production fell because of damage from the flooding in well as “Other Magnetic Application Thailand, and as a result sales of HDD heads, the main product in this Products” including power supplies and magnets. segment, were down. Also, production and sales of HDD suspensions declined because of flooding damage to a plant in Thailand. In addition, declining prices and the appreciation of the yen against the U.S. dollar also had an impact, and net sales were ¥208,728 million, a Sales (billions of yen/quarter) decreaseセグメント利 of 18.9% 益（億円／四半期） year-on-year. 73 120 100 Power supplies 62 63 Other Magnetic Application Products 50 Sales of power supplies to the industrial equipment market were 96.8 90 89.6 88.2 87.8 down,50 but sales to the automotive market increased. Sales of 81.9 79.6 81.0 magnets, mainly to the automotive market, were stable. As a result, 68.0 net sales were ¥107,674 million, up 8.8% from the previous year. 60 0

-2 -3 -15 30 -50

Magnets -100 0 -92 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4Q3Q2Q1Q 1Q 2Q 3Q 4Q FY March 2011 FY March 2012 2011/3 2012/3

TDK Corporation Annual Report 2012 24 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Sales Results

Sales to the communications device market and home information appliance market were up sharply, resulting in a 58.2% year- Applied Film on-year increase. Products Other Net sales in this segment during the fiscal year ended March 31, 2012 were ¥92,727 million, an increase of 58.2% from the previous year, and operating income was ¥6,255 million, up ¥5,044 million. Sales of energy devices (rechargeable batteries) for communications This business segment devices, particularly smartphones and tablet computers, and home Other includes encompasses “Energy information appliances, increased substantially. Some recording mechatronics Devices (Rechargeable media products that had been classified as magnetic application (production equipment) Batteries)” and “Applied Film products were terminated, and separators, materials used in lithium and other businesses. Products” (formerly recording media). batteries were added, causing the main recording media products to shift to functional films. As a result, sales in the new applied film products category to the communications devices market increased. Net sales in this segment during the fiscal year ended March 31, 2012 sales declined 24.1% year on year to ¥23,792 million , and operating losses were ¥4,839 million, down ¥5,344 million.

(billions of yen/quarter) Sales セグメント利 益（億円／四半期） セグメント利 益（億円／四半期） 73 73 40 100 (billions of yen/quarter) 100 62 63 Sales 62 63 50 12 50

30 50 50 28.2 9 8.9 24.2 Energy devices 22.4 (rechargeable batteries) 7.8 7.2 7.4 20 0 0 6.9 6.6 17.2 18.0 6 5.7 16.1 -2 13.7 -3 -2 -3 11.6 -15 4.6 -15 10 -50 -50 3

0 -100 -100 -92 0 -92 4Q3Q2Q1Q 1Q 2Q 3Q 4Q 4Q3Q2Q1Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4Q3Q2Q1Q 1Q 2Q 3Q 4Q Applied films FY March 2011 FY March 2012 2011/3 2012/3 FY March 2011 FY March 2012 2011/3 2012/3

TDK Corporation Annual Report 2012 25 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Research & Development

R & D Activities Concentrating technological resources on growth markets and promoting development on a worldwide basis

TDK is strongly focusing its research and development activities power supplies is one way in which we are responding to such R & D expenditure (Billions of yen) on new products and technologies geared to swiftly respond to needs. As the price for rare earth source materials is rising due to the 60 the continuing advancement and diversification of the electronics difficult international situation in producing areas, we are aiming to 57.4 57.6 53.9 53.0 52.6 sector. Key areas are products related to next-generation maintain our price structure by significantly reducing the use of rare 50.1 recording technology, micro electronics modules for mobile earth elements or even eliminating them altogether in new types of communications, and the application of materials technology and magnets. 40 design technology for developing environmentally oriented and In the film application sector, the development of next- energy-saving devices for the automotive sector and for next- generation lithium batteries and film materials with new properties generation infrastructure applications. Technological resources and functions is progressing. 20 are being allocated to vital markets including next-generation The development flow at TDK encompasses the Material information communications and the energy sector, to realize & Process Development Center, Devices Development Center, efficient, solution-oriented research and development. Application & Analysis Center, as well as the technology development 0 In the passive components sector, we have harnessed core resources of the respective business units. Each of these is engaged 2007 2008 2009 2010 2011 2012 technologies for the development of next-generation multilayer in dedicated work on new products and new technologies in their ceramic chip capacitors and inductors, EMC filters, and compound respective fields, while cooperation among departments is also being Percentage of net sales (%) sheet type flexible magnetic shields and radio wave absorbers strengthened. for anechoic chambers. As a result, we introduced various EMC On the global stage, TDK promotes research and development 10 countermeasure products to the market and advanced the in conjunction with major universities in the U.S. and Europe, and we performance of anechoic chamber facilities. Activities related to are aiming at making increased use of local expertise and technology 8 7.9 implementation of RF modules and other module products were resources through R & D subsidiaries in various countries. In China, 6.6 6.7 6.5 6.0 also strengthened. where we intend to strengthen our base and pursue an expansion of 6 5.8 In the magnetic application product sector, the development activities in future, we are carrying out research related to electronic of rare-earth-free magnets and next-generation ferrite magnets component materials. As for R & D at other consolidated subsidiaries, 4 is progressing, along with the development of next-generation we continue to strongly promote the development of next- high-density recording heads. The development of devices for generation HDD heads at Headway Technology, Inc. in U.S. 2 hybrid vehicles and electric vehicles is also being strengthened. In particular, the Great East Japan Earthquake has accentuated the The expenditure for R & D activities in the fiscal year ended March 31, 0 need for energy-saving measures which have become a major 2012 was 52,551 million yen (6.5% of net sales), which represents a 2007 2008 2009 2010 2011 2012 concern for Japanese society. The development of highly efficient 0.1% drop over the previous year. Note: Fiscal years ended March 31

TDK Corporation Annual Report 2012 26 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Research & Development

Materials Technology Process Technology Pursuing the characteristics of materials on the atom level Making things ever smaller and thinner

Materials design technology Microstructure control technology Thick-fi lm process technology

This technology utilizes control of main Electroceramics such as ferrite are A technique that involves printing paste type electrodes onto dielectric or ferrite raw material composition as well as polycrystalline substances consisting of a sheets to create a multilayer structure. It is used in the production of multilayer microadditives to achieve certain targeted large number of crystal grains. By controlling ceramic chip capacitors and multilayer chip inductors. properties during the development of the internal composition of the crystal grain magnetic materials, dielectric materials, and as well the boundary between particles and similar electronic materials. other properties, various characteristics can be realized.

* Dielectric layer

* Electrode

* Cross-section view of chip Structure of multilayer chip Multilayer ceramic chip capacitors and their structure inductor Multilayering technology creates a Core (center) and shell (surrounding part) structure spiral-shaped coil within the chip. of dielectric ceramics particles

Powder control technology technology Thin-fi lm process technology

Most raw materials for electronic Electroceramics materials and magnetic This technique involves creating a thin fi lm on a wafer and using applications are used in powder form. materials are shaped and then sent to the etching processing or a similar process to form an electrode, coil, In order to achieve higher performance, sintering process to become the sintered head element etc. It is used in the production of magnetic heads for various advanced techniques are applied compact. This requires extremely accurate hard disk drives, thin fi lm electronic components, etc. to control properties such as base powder environmental control, because the resulting microstructure, uniformity, and dispersion microstructure is aff ected by factors such on the nanometer level. as temperature and gas components in the sintering oven.

HDD magnetic heads Left: Thin-fi lm common mode fi lter formed on Head component at the tip is wafer Right: Scanning electron microscope manufactured using thin-fi lm Neodymium magnet crystal grain structure (SEM) photograph process technology. Finer and more uniform crystal grain results in Structure of thin-fi lm improved magnetic characteristics. common mode fi lter Sintering process of ferrite and temperature control with ESD function

TDK Corporation Annual Report 2012 27 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Research & Development

Process Technology Device & Module Technology Substrate embedding technology gives us an edge

Shaping technology Winding technology Circuit technology MEMS technology

Ferrite cores, magnets, etc. are formed by Automatization and optimization of winding This comprises selecting optimum components Micro Electro Mechanical Systems adding a binder to the base powder. A process based on accumulated know-how and designing the circuitry including the wiring technology involves confi guring sensor, high degree of technical sophistication is result in a highly reliable products. and thermal dissipation arrangement using actuator, and similar functions on a chip to required to achieve compact, low-profi le, advanced simulation techniques. create a very compact functional device, complex shapes. SMD (Surface Mount using micro machining. Device) type power coils

Pulse transformers AC-DC switching Power module for LAN applications power supply (PC board type) MEMS microphone MEMS pressure sensor Transformer Ferrite cores of various shapes Packaging technology IC embedding (SESUB) technology

Coating technology Electrode materials technology Parts assembly, matching, sealing, structural This technology involves embedding ICs and design, and shape design are optimized other components as well as the wiring into the ITO fi lm used for touch panels Core technology know-how is also applied to achieve compact dimensions and high substrate itself, to achieve a modular product. and similar is produced for internal electrodes of capacitors and performance. by uniformly coating electrodes for lithium polymer batteries. High-frequency the conductive material devices and modules (powdered indium-tin-oxide) ITO powder with a very thin plastic fi lm. TDK can harness advanced coating techniques developed Power supply module in the manufacture of magnetic tape and Aluminum electrolytic Lithium related products. capacitors ITO fi lm polymer battery LTCC technology

High-speed winding technology Low temperature co-fi red ceramic (LTCC) technology allows the integration of a high number of components This technology is applied in the manufacturing process for fi lm such as capacitors and inductors on a dielectric sheet to capacitors and other products, ensuring fast and highly precise winding of create a printed multilayer module. components such as the plastic dielectric fi lm. High-frequency devices Film capacitor TDK Corporation Annual Report 2012 28 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Research & Development

Evaluation and Simulation Technology Equipment Development Technology Ranging from material analysis and examination to simulation of Promoting a unifi ed production system starting from source material product structure, thermal conditions, and electromagnetic fi eld for further improvements of QCD (Quality, Cost, Delivery).

Evaluation and analysis technology Simulation technology Equipment technology

Tasks such as observation of microstructure Harnessing the power of computers to Outstanding products come from outstanding manufacturing facilities. TDK not only develops and visualization of elemental distribution visualize the distribution of thermal energy innovative manufacturing techniques but realizes these by building much of the required are carried out using the latest analysis emitted by circuits, or the electromagnetic equipment in-house. This comprehensive approach is the key to superior craftsmanship. equipment and simulation techniques. fi eld distribution of noise sources is helpful in designing products more effi ciently and ensuring EMC compliance.

Element imaging technology for components mounted PCBs Noise measurement Simulation with thermal analysis Design Die machining Micro machining Elemental distribution evaluation of capacitor material

Assembly Inspection Antenna evaluation Unit type EMC countermeasure technology compound radio wave absorber TDK factory EMC measures are aimed at ensuring that a device is not automation equipment susceptible to interference from other devices and also does (fl ip-chip mounter/ not become the cause of interference in other devices. Such FOUP load port) measures are implemented using common mode fi lters and a range of other EMC countermeasure products. TDK is also a leading provider of anechoic chambers, which use radio wave absorbers and are essential for noise measurements and the evaluation of electronic equipment and antennas. High-speed/high-precision automatic winder used for fi lm capacitor manufacturing Ultra-high-performance 10 meter method anechoic chamber

TDK Corporation Annual Report 2012 29 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Group Management

Strengthening the Function of the Board Adoption of Corporate Officer System for required for investment decisions by Corporate Governance of Directors and Holding Directors More Expeditious Business Execution shareholders and investors, to ensure Accountable TDK has adopted a Corporate Officer system that TDK conducts comprehensive, Adoption of Company Auditor System TDK has a small number of Directors (seven) that separates the management decision- appropriate, timely and impartial disclosure and Strengthening the Supervisory to expedite management decision-making. making and Director supervisory functions in accordance with various laws and Function At the same time, TDK has appointed three of the Board of Directors from the execution regulations regarding securities transactions TDK has adopted the Company Auditor independent outside Directors who have of business. Corporate Officers are in charge and the rules and regulations of the stock System pursuant to the Companies no conflict of interest in order to enhance of business execution and carrying out exchanges where TDK’s shares are listed. Act of Japan and has appointed three the supervision of management. In addition, decisions by the Board of Directors, thereby The Compensation Advisory independent outside Company Auditors the Directors’ term of office is set at one year expediting business execution in line with Committee, which is made up of the who have no conflicts of interest in order to to give shareholders an opportunity to cast management decisions. outside Directors (1 of whom chairs enhance the supervision of management. votes of confidence regarding Directors’ the committee) and outside specialists, performance every business year. Establishment of Advisory Bodies to examines the composition of remuneration the Board of Directors (Business Ethics and the remuneration system pertaining to Structure of Corporate Gavernance & CSR Committee, Disclosure Advisory Directors and Corporate Officers, as well as Committee, Compensation Advisory presidents and qualifying executive officers Ordinary General Meeting of Shareholders Committee, Nomination Advisory of principal TDK subsidiaries. It also verifies Information Disclosure (Report, Submit Proposals) Elect and Dismiss, Supervise Elect and Dismiss, Supervise Committee) the transparency of the remuneration The aim of the Business Ethics & CSR decision-making process, as well as the Advise, Business Ethics & CSR Committee Report Board of Directors Audit Board of Company Auditors Report Accounting Auditors Committee is to ensure implementation of reasonableness of individual remuneration Ensure Compliance With Management Decision Making Management Supervision Accounting Audits the TDK Corporate Motto and the thorough levels in light of corporate business results, Corporate Ethics, Promote CSR Activity application of business ethics, and to individual performance, and the general 7 Directors Including 3 5 Company Including 3 Outside Outside Directors Auditors Company Auditors improve awareness of corporate social standards of other companies. Disclosure Advisory Committee responsibility (CSR). To achieve this aim, the The Nomination Advisory Committee, Elect and Dismiss, Supervise Cooperate Discuss and Examine Company Auditors Office Directors, Company Auditors, Corporate which is chaired by an outside Director of Important Corporate President Information Disclosure Assist Company Auditors Officers and all other members of the TDK TDK, discusses the conditions expected Decide Policies and Measures Instruct Group are made fully conversant with with regard to nominations for the post of Compensation Advisory Related to Business Execution Management Review & Committee Support Department the TDK Corporate Motto and Corporate Director, Company Auditor or Corporate Chaired by Outside Director Discuss and Report Guide and Report Important Projects Supervise Principle (“Vision” “Courage” “Trust”) as TDK’s Officer and makes nominations. In this Review the Remuneration for Report Audit Consistency of Business Directors and Corporate Officers Execution and Management Policies, management philosophy, and the TDK way it helps ensure the appropriateness Executive Committee and Management Efficiency Risk Management Committee Code of Ethics, which stipulates concrete of the selection of Directors, Company Review Policies and Measures Introduce and Promote Enterprise Nomination Advisory Related to Business Execution Instruct standards and guidelines for compliance Auditors and Corporate Officers, and the Committee Risk Management (ERM) Chaired by Outside Director Discuss and Report Guide and Regulations Committee with the letter and spirit of all laws, transparency of the decision-making Deliberate Matters Concerning Important Projects Supervise international regulations and social norms. process. Nomination of Directors, Crisis Management Committee Establish Corporate Regulations Company Auditors and Corporate Officers The Disclosure Advisory Committee Corporate Officers Countermeasures Against Business Execution Unexpected Contingencies reviews and examines important corporate

Guide and Supervise Information Security Committee information and disclosure materials Divisions and Group Undertake Information Companies Security Measures

TDK Corporation Annual Report 2012 30 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Group Management

The Corporate Officers in charge of business Compliance Risk Management execution take responsibility for handling risks relating to daily business under their Comprehensive Distribution of Companywide Risk Management System jurisdiction. Information on the TDK Code of Introduced to Reduce Risks and Improve Furthermore, Company Auditors Ethics Raises Awareness Concerning Operations and the Management Review & Support Compliance At TDK, the Risk Management Committee Department, which is TDK’s internal auditing Businesses must act as good corporate works directly under the Executive body, monitor the implementation of citizens in compliance with laws, Committee to promote companywide countermeasures and offer advice on regulations, and other social norms and enterprise risk management (ERM). It how to effectively reduce risks to business maintain impartiality and fairness in their specifies 50 risk items involved in the operations. Advice on new adverse factors dealings with society. This must all be based Group’s corporate activities, including that may affect the Group is also received on an awareness of their social existence risks relating to natural disasters, such as constantly from specialists such as TDK’s supported by customers, shareholders, earthquakes and flooding; risks relating to advisory lawyers. suppliers, local communities, employees, contagious diseases, such as new strains of In the fiscal year ended March 2012, and other stakeholders. influenza; risks relating to product quality; TDK compiled guidelines concerning the TDK has organized these concepts and risks relating to the procurement of raw sale of products to customers in specialized in the TDK Code of Ethics and calls on all materials, etc. fields where risks relating to human life are Group personnel to act in strict compliance The Risk Management Committee especially high. with the standards in the Code. The conducts activities to ensure a proper Business Ethics & CSR Committee works to response to these items. In particular, it is make all personnel thoroughly cognizant revising the Group's business continuity of the TDK Corporate Motto, Corporate plan (BCP) and promotes cross-sectional Principles, and Code of Ethics, representing and companywide activities aimed at TDK’s management philosophy, as well as reducing risks that hinder the achievement to put the motto “Contribute to culture and of business objectives. If a crisis does industry through creativity” into full practice. unexpectedly occur, TDK will take the As part of this program, during the necessary countermeasures centered on the fiscal year ended March 2012, TDK fully Risk Management Committee. revised the Code of Ethics Handbook and In addition, regarding individual risks distributed them to all Group employees. that should be dealt with by the function or Business Group concerned (legal, financial, information technology, environmental risks, etc.), TDK stipulates operational rules in companywide standards, detailed rules, and procedures and Business Group procedures.

TDK Corporation Annual Report 2012 31 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Group Management (As of June 28, 2012)

Back row, Makoto Sumita Osamu Yotsui Noboru Hara Osamu Nakamoto Koichi Masuda from the left: Outside Company Auditor Company Auditor Company Auditor Outside Company Auditor Outside Company Auditor

Front row, Yukio Yanase Kenichi Mori Atsuo Kobayashi Takehiro Kamigama Hiroyuki Uemura Junji Yoneyama Ryoichi Ohno from the left: Outside Director Outside Director Director Representative Director Director Director Outside Director

TDK Corporation Annual Report 2012 32 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

Group Management (As of June 28, 2012)

Corporate Officers

Hiroyuki Uemura Atsuo Kobayashi Executive Vice President Takehiro Kamigama Executive Vice President TDK-EPC President & CEO, President and CEO, Raymond Leung General Manager of General Manager of and General Manager of Executive Vice President Corporate Planning Group Ceramic Capacitors Business Electronic Components General Manager of China and General Manager of Group, and General Manager Sales & Marketing Group Operation Group Corporate Planning Dept. of Magnetics Business Group

Takaya Ishigaki Corporate O cer In charge of Materials & Shinichi Araya Process Development, Senior Vice President Yoshiaki Hirota and General Manager of Shinya Yoshihara General Manager of Senior Vice President Material & Process Corporate O cer Technology HQ and Seiji Osaka General Manager of Development Center of General Manager of General Manager of Senior Vice President Power Systems Corporate R&D Group, Production Engineering Management System Group TDK-EPC SEVP* & COO Business Group Technology HQ Center

Kaoru Matsuoka Junji Yoneyama Corporate O cer Corporate O cer General Manager of Corporate In charge of Export and R&D Group, and General Import Control, and Masataka Kajiya Manager of Devices Noboru Saito General Manager of Robin Zeng Corporate O cer Development Center, and Corporate O cer Administration Group, and Corporate O cer Deputy General Manager General Manager of Corporate Deputy General Manager General Manager of Human General Manager of Energy of Electronic Components Technology Planning Dept., of Electronic Components Resources Department Devices Business Group Sales & Marketing Group Technology HQ Sales & Marketing Group

Back row, Makoto Sumita Osamu Yotsui Noboru Hara Osamu Nakamoto Koichi Masuda from the left: Outside Company Auditor Company Auditor Company Auditor Outside Company Auditor Outside Company Auditor

Mitsuru Nagata Joachim Thiele Front row, Takakazu Momozuka Corporate O cer Joachim Zichlarz Corporate O cer Yukio Yanase Kenichi Mori Atsuo Kobayashi Takehiro Kamigama Hiroyuki Uemura Junji Yoneyama Ryoichi Ohno Corporate O cer Deputy General Manager Corporate O cer Deputy General Manager from the left: Outside Director Outside Director Director Representative Director Director Director Outside Director General Manager of Finance of Electronic Components TDK-EPC of Electronic Components & Accounting Department Sales & Marketing Group SEVP*&CFO Sales & Marketing Group ※SEVP：Senior Executive Vice President

TDK Corporation Annual Report 2012 33 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

CSR Activities

By putting these principles into through subsequent stages including Cooperating with Socially Responsible CSR Philosophy practice, we increase the value of our shipping, distribution, assembly and Investment (SRI) business, contributing to both the processing at end product manufacturers, TDK stock is included in the Dow Jones Promoting CSR activities through business continued evolution of this business and use by customers, and finally disposal. Sustainability Asia Pacific Index, launched activities based on TDK Code of Ethics the creation of a sustainable society. We believe that simple inspection jointly by SAM Group Holding (Switzerland) For the TDK Group, CSR efforts take "after the fact" is not enough to ensure and Dow Jones & Company (U.S.A.), as well shape through the implementation of quality. Rather, forward-oriented thinking as in the Morningstar Socially Responsible our corporate motto and the thorough begins at the development and design Investment Index (MS-SRI), which is Japan’s pursuit of corporate ethics. This means Quality Assurance stage and informs the entire process. The SRI indicator. (Current as of April 2012) always maintaining proper channels of pursuit of zero defects and ambition to communication between customers, Becoming a quality leader through the become the industry’s quality leader inspire suppliers, employees, shareholders/ pursuit of zero defects our day-to-day activities. investors, local communities, and other Quality assurance at TDK is based on the Improvement and stakeholders. The TDK Code of Ethics serves pursuit of a zero defects policy throughout Protection of Environment as the overall framework guiding our actions the entire lifecycle process. This does not as we fulfill our responsibilities. end with the finished product but continues CSR and Procurement Implementing global business activities focused on a conservation-based environmental vision CSR and Ethcs Framework Assessing supplier CSR through a Web- based framework TDK believes a long-term vision is essential to achieve sustainable development and a Continued evolution of business Creation of a sustainable society TDK operates a Supplier Partnership Continued evolution of business Creation of a sustainable society System designed to allow a comprehensive closed-loop economy. The entire Group is assessment of CSR activities by our guided by the TDK Environment Protection Implement Corporate Motto suppliers. The system uses 60 carefully Charter and implements this philosophy Implement Corporate Motto Contribute to culture and industry Enhance business value Enhance business value designed evaluation questions based on through concerted hands-on action. Contribute to culture and industry through creativity selected items from the Supply Chain In April 2011, the Group began through creativity CSR Promotion Guidebook, published by implementing the new TDK Environmental the Japan Electronics and Information Action 2020 plan. Targets were set to Technology Industries Association (JEITA). achieve carbon neutrality for the first time in Environmental Economic Social Environmental Economic Social Social Economic Social The assessment questions, which are the electronic components industry. TDK is aspect aspect aspect aspect aspect aspect aspect aspect aspect reevaluated every year, focus on the areas focusing on reducing carbon dioxide (CO2) that matter most to TDK, such as human emissions through its products to reduce the company's environmental footprint. rights and labor relations, the environment, CSR Activities CSR Activities fair trade and ethics, and information That means both minimizing CO2 output at Customers Employees Customers Employees security. In the fiscal year ended March manufacturing facilities and contributing 2012, about 1,693 companies in Japan and to society products and know-how that TDK Business Activities 1,025 companies overseas cooperated in will reduce emissions. We will continue to TDK Business Activities TDK Code of Ethics promote environmental activities with the TDK Code of Ethics Suppliers Local Communities the management assessment process. Suppliers Local Communities goal of reaching carbon neutrality by the end of fiscal 2020.

Shareholders/Investors Shareholders/Investors TDK Corporation Annual Report 2012 34

企業の継続的発展 Continued evolution of business 持続可能な社会実現 Creation of a sustainable society

社是の実践 Implement Corporate Motto 創造によって文化、産業に貢献する Contribute to culture and industry through creativity 企業価値の向上 Enhance business value

企業の継続的発展 持続可能な社会実現 ＣＳＲ活動 CSR Activities 環境的側面 Environmental aspect 経済的側面 Economic aspect 社是の実践 創造によって文化、産業に貢献する 企業価値の向上 社会的側面 Social aspect ＴＤＫの事業活動 TDK Business Activities ＴＤＫ企業倫理綱領 TDK Code of Ethics お客様 Customers 環境的 経済的 社会的 側面 側面 側面 取引先 Suppliers 株主・投資家 Shareholders/Investors 地域社会 Local Communities 従業員 Employees CSR活動 お客様 従業員

TDKの事業活動 TDK企業倫理綱領 取引先 地域社会

企業の継続的発展 株主・投資家 持続可能な社会実現

社是の実践 創造によって文化、産業に貢献する 企業価値の向上

環境的 経済的 社会的 側面 側面 側面

CSR活動 お客様 従業員

TDKの事業活動 TDK企業倫理綱領 取引先 地域社会

株主・投資家 Financial Highlights Profile Interview with the President Special Feature Sales Results Research & Development Group Management CSR Activities

CSR Activities

Reducing CO2 emissions in manufacturing Quantification standards to measure Sports, Arts, and Culture; Environmental Fifty percent of TDK's CO2 emissions come reductions in environmental impact are Social Contributions Conservation; and Social Welfare and Local from the Chugoku region of Japan, where important in electronic components not Community Service. intensive energy-saving measures have only for TDK but for the entire components Promoting Social Contributions by Staff In fiscal 2005, the company started been implemented. industry. For this reason, TDK is working through Awards Framework the TDK Group Social Contribution Award with industry organizations to develop As a corporate citizen, TDK endeavors program. In fiscal 2012, there were 35 common standards and promote their to contribute to society in various ways, applications, 11 of which were selected for Expanding products that help to reduce widespread use. focusing particularly on the following four an award (including two natural disaster CO2 emissions In fiscal 2011 the quantification of areas: Academic Research and Education; preparedness awards). TDK contributes products and know- emissions reductions was completed for how to society that focus on reducing certain TDK product groups, and efforts CO2 emissions, and is working to will continue in fiscal 2012 to establish establish standards by which to quantify standards for all quantifiable product groups their impact on lightening the world's and carry out calculations. environmental load.

Formula for TDK to Achieve Carbon Neutrality zero

CO2 emissions (environmental Amount of CO2 emissions reduced by load) from production ー products (environmental load reduction) ≦ 0

Actions that reduce CO2 emissions Actions that reduce CO2 emissions The promotion of hiring of people with hearing Donations for giving Christmas presents to in production through products impairments and support for them in the workplace disadvantaged children (TDK Corporation of America) Promotion of (TDK-Lambda Corporation, Nagaoka Technical Center) energy Expand products measures with positive environmental effect Emissions arising from manufacturing CO2 CO2 Level of contribution emissions contributions to society through products and know-how

Donations of drinking water to areas affected The planting of 100 seedlings on World by flooding in Thailand (Magnecomp Precision Environment Day (June 5) (EPCOS India Private Ltd.) Technology Public Co., Ltd.)

Note: Besides the above examples, 7 more social contribution activities were selected for an award.

TDK Corporation Annual Report 2012 35 1-13-1, Nihonbashi, Chuo-ku, Tokyo, 103-8272, Japan Phone: +81-3-5201-7102 http://www.tdk.co.jp/

TDK Corporation Annual Report 2012: Published in June 2012