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Nidec eyes big investment in vibration motors for smartphones

Shigenobu Nagamori

KYOTO -- Nidec plans to spend more than 100 billion yen ($827 million) over the next few years to increase production of vibration motors, a smartphone component being positioned as a key part of the company's efforts to raise sales to 2 trillion yen by fiscal 2020.

     Business is booming for the Japanese motor maker. Net profit for the April-September period jumped 30% year over year to 47.6 billion yen -- a first-half record -- while sales climbed 20% to 587.3 billion yen. Quarterly sales topped 300 billion yen for the first time in the July-September period, reaching 302.3 billion yen. Brisk sales of efficient micromotors for home appliances and automotive motors played a major role, while mainstay precision micromotors also fared well.

Sensational growth seen

President and Chairman Shigenobu Nagamori considers vibration motors one of the three prongs of Nidec's future growth. He discussed the planned investment Wednesday, comparing it with previous spending of hundreds of billions of yen to start making hard drive motors. The parts became a bread-and-butter business for Nidec that drove rapid growth.

     Apple's newest handset, the iPhone 6S, uses haptic feedback -- physical sensations, such as vibrations, that provide information to users. The technology likely will be adopted widely in high-end smartphones, with the market seen reaching 600 billion yen in 2017. It also can replicate the sense of touch, opening opportunities for use in cars, medicine and remote-controlled robots.

     "We expect the market to keep growing for the next decade or more," Nagamori said.

     Nidec, which has begun supplying vibration motors for the 6S, aims to hold half of the market in fiscal 2017. It will spend 12 billion yen this fiscal year to switch production at a Chinese factory from hard drive motors to vibration motors. Capacity also will be increased at plants run by subsidiaries in Vietnam and elsewhere. The company will invest 20 billion yen to 30 billion yen annually from fiscal 2016 onward and consider building new plants. It hopes to encourage adoption of the technology by Samsung Electronics and other smartphone makers.

     Automotive components are another pillar of Nidec's growth strategy, Nagamori said, and the company is looking at markets that require technological innovation. Nidec will lift capital spending on automotive components this fiscal year to 18 billion yen from the originally planned 12 billion yen. It intends to boost output of motors for anti-lock braking systems at a Polish plant.

     Nagamori said Nidec will specialize in parts, including sensors and electric pumps, for markets set to grow, such as electric and self-driving cars. It is targeting automotive component sales of 1 trillion yen in fiscal 2020, five times the fiscal 2014 figure.

Wise investment

Nidec is known for acquisitions, and these moves as well as mid-career hiring have given it access to technology. In the automotive component business, it has bought Nidec Tosok, once part of Nissan Motor, and Nidec Elesys, formerly Honda Elesys. The company also has brought in employees from companies such as Nissan.

     And its vibration motor technology was developed by former Fujitsu affiliate Nidec Copal, which boasts a large share of the market, and Nidec Seimitsu, previously Sanyo Seimitsu. Engineers drawn from Sanyo Electric's audio department did much of the work to turn the technology into finished products.

     For Nidec's foray into Internet of Things technology, which connects motors and other parts to the Internet to help predict malfunctions and improve efficiency, the company is looking to talent from Sharp. It already has hired about 30 section chiefs from the manufacturer, mainly in telecommunications, and intends to lift that figure to over 100, including staffers planning early retirement.

     Nagamori expects the presence of former Sharp President Mikio Katayama, now chief technology officer and a vice chairman at Nidec, to help with the screening process. "He's quite familiar with what kind of talent Sharp has in which areas," the chairman said.

     In the April-June quarter, Nidec opted to pass up seven potential midsize or large acquisitions, deciding they were not worth the price. Since then, "share prices have settled down, and we've started moving on quite a few deals over the past month or two," Nagamori said. A steady flow of money from existing businesses will be crucial to keep up investment in growth areas.

     As China's slowing growth casts a shadow over the economy, Nidec likely will need to figure out how to turn more of a profit from its overseas home appliance and industrial equipment operations, which have far narrower margins than its domestic business.

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