Apart from products made to order for the government and broadcast stations, Ibuka had wanted to make a product sold directly to consumers for some time. Morita too, looking at things from a business perspective, was considering whether Totsuko could develop new products to expand its market outside of orders from the NHK. The two first set their sights on creating a wire recorder, but taking technical limitations and the product's future potential into account, they ultimately abandoned the project.

It was around then that the two heard rumors of "a machine that could play sound from paper tape." When they got an opportunity to listen to a tape recorder for the first time at the NHK broadcast center they frequented, they were amazed by how much better the audio quality was compared to a wire recorder. "This is it! This is what we must do. This is the product of the future. Let's do it on tape."

No matter what, we have to make a tape recorder - so decided Ibuka and Morita, who begged an officer from the occupation's General Headquarters to let them take a tape recorder to Gotenyama with them. They then went to Tachikawa, now in charge of accounting, and played the tape recorder for him as they said, "so we want to make this thing called a tape recorder, but we're going to need about three hundred thousand yen..." Tachikawa eventually granted them the funds.

Tape recorders were few and far between in Japan, and upon consulting the sparse literature on the subject, no information could be gleaned aside from the fact that they used plastic tape with some form of magnetic coating applied to them. What they would use for their tape, or what kind of magnetic material would be most suitable for recording voices, were all left for Totsuko to find out on their own. Assuming that any magnetic material would work for the coating, they first experimented with ferrite powder, but with the technology of the time these tapes could only produce a harsh buzzing noise. Realizing that the coating did not require ferrite powder's magnetic strength, they then settled on testing iron (II) oxalate, which was reported to decompose into iron (III) oxide upon heating; these kinds of chemical reagents were hard to find, however, amidst the widespread shortages of post-war Japan. Morita and Nobutoshi Kihara searched up and down the row of chemical suppliers in Kanda, finally finding a single supplier who stocked the reagent, and immediately began experimentation. Kihara borrowed a frying pan from the company kitchen and began cooking the iron oxalate using a wooden rice spoon, stopping the reaction with a douse of water once the compound had turned brown to black in color: the brown material was iron (II) oxide; the black was iron (II, III) oxide. Relying on Kihara's eagle eyes to spot these subtle color changes, the powder for the magnetic coating was finally obtained.

The next step was figuring out how to apply the powder as a coating. Days of further trial-and-error continued, as they experimented with applying the powder using spray guns, adjusting the tape's width, and even going as far as to ask makeup manufacturers how they produced fine powders for their makeup. Cellophane was tested as tape material, but in the end, paper was found to be the best fit - another discovery that had to be made independently. As part of this work, Totsuko also began the process of acquiring the patent rights to use high-frequency tape biasing for improving tape audio quality.
In this way, the process of researching magnetic powder and tape-making allowed Totsuko to solve several problems in one fell swoop. Kihara then created a simple prototype and began running tests with the tape, repeating the phrase "today is a sunny day," rewinding the tape by hand, and listening for his own recorded voice. Finally hearing something played back from the tape was a massive step towards success.

After confirming the prototype's functionality, Kihara traveled back to the NHK's broadcast center to inspect the real tape recorder and, taking the machine's design into account, worked tirelessly alongside the other researchers to create Totsuko's first prototype tape recorder in just one week in September 1949. Development continued on finalizing the nation's first tape recorder thereafter, and in January 1950, the G-Type industrial tape recorder, capable of one full hour of recording, was completed.

In preparation for the recorder's release, Totsuko trademarked the product as the "Tapecorder," while naming its in-house manufactured tape "SONI-TAPE," a portmanteau of "sonic" and "tape." At last, in May 1950, sales of the G-Type began. Costing one hundred sixty thousand yen, the machine weighed a total of thirty-five kilograms (over seventy-seven pounds). It had been just over a year since Ibuka had laid his eyes on that first tape recorder, and the payoff to all those days of hard work since had finally come.

Yet several months after the G-Type was put on the market, only a single recorder had been sold. On a brighter note, Totsuko was able to let the Empress of Japan record and listen to her own voice using the machine at an exhibition within the National Diet Library.

Seeing the G-Type struggle to sell, Morita decided to rethink Totsuko's sales strategy together with Masao Kurahashi, an employee at Yakumo Sangyo, which had operated as a middleman showing the G-Type to prospective buyers. The first issue with the G-Type was its ease of use - or rather, the lack thereof. Even transferring the tape from one reel to another required a special technique, and issues with the tape getting tangled during recording were far from uncommon. Although Ibuka and Morita had developed the product based on their own personal technological interests, as long as the product was difficult to use and the true value of the machine wasn't truly understood by potential customers, no matter how amazing the machine was, it still would never sell. In order to find ways to raise demand, they set about learning different ways to use the tape recorder, coincidentally managing to get their hands on a pamphlet from an American tape recorder titled "999 Ways to Use a Tape Recorder" at around that time. Listing a variety of ways to use tape recorders, such as within airplanes or at beauty salons, Morita and Kurahashi studied the book's contents for several days, realizing the versatility of the tape recorder.

Improvements to the machinery itself were also made at this time, as the G-Type's high price tag was matched by its huge weight. Ibuka and Morita debated on ways to make the machine usable in schools and regular households. "Something as big as the G-Type is no good. It'll definitely sell as long as we can make it more portable," said Ibuka to Kihara, who immediately began refining the recorder's design. A genuine consumer-grade tape recorder, the H-Type, was finally completed after Kihara and his team were locked up at a vacation rental home in Atami where they wouldn't be interrupted by calls or guests, with Ibuka telling them not to come back until it was finished. The H-Type was released commercially in March of 1951, starting at a price of eighty-four thousand yen and weighing thirteen kilograms, less than half the G-Type's weight. The H-Type's design was entrusted to Sori Yanagi, the first industrial designer Totsuko worked with.

At the same time as the H-Type was completed, demand for tape recorders for use in schools was rising, in part due to Kurahashi's efforts spreading information on the tape recorder's uses. Audiovisual education was being promoted as part of the Allied occupation's policies, and Totsuko's tape recorders were proposed as a way to record radio announcements, which could be incorporated into school curricula. Kurahashi's team began talks with schoolteachers and the Ministry of Education, Science, Sports and Culture about how to implement the technology effectively. Kurahashi was soon called upon by Morita: "You're doing amazing work, but it would be a waste if you couldn't share what you've learned. What if you were to tour around the country and talk with people about what you've learned so far," he suggested. Kurahashi, now assigned as managing director of Totsuko's Sound Recording Educational Research Center, thus set off on a nationwide school tour, giving talks on "the benefits of an audiovisual education."
Kurahashi was not there to market the product, however, instead only explaining the importance of audiovisual learning and ways to implement recording devices as part of it. Requests for him to speak began flooding in, and the H-Type was suddenly needed by schools across the country.

Given the tape recorder's infancy as a technology, it was no surprise that users were initially unfamiliar with its operation, and malfunctions remained a problem. Although the factory still had not even three hundred employees and production was struggling to catch up to demand, Factory Manager Higuchi decided to choose twelve of the company's most talented individuals and station them in Tokyo, Osaka, Nagoya, Sapporo, Hiroshima, and Fukuoka, traveling throughout their respective regions and providing routine repairs. Stemming from a belief that good service continues even after a product breaks, Totsuko ensured a thorough repair service for H-Type users. Special consideration was also taken to prevent shipping damage, as H-Types were carefully packaged in boxes made from wood instead of cardboard. All these factors gave the H-Type a good reputation among schools, producing both a boost to the tape recorder market, as well as trust in Totsuko as a company.

With the H-Type's production, Totsuko quickly realized that it would need to study assembly line-style manufacturing, as Totsuko lacked experience with mass production. Receiving an opportunity to tour the Hayakawa Electric (current day Sharp Corporation) assembly line, Factory Manager Higuchi, Head of Manufacturing Iwama, and Head of Operations Koichi Kasahara traveled to visit the Hayakawa factory. There they learned how to prevent wiring faults, how many points each individual on the line could manage, and various other information corresponding to each of their own roles in production. Hayakawa Electric's own factory manager also paid a visit to Totsuko, giving pointers on factory safety and other important topics.

A new factory was constructed in Sendai, located in Japan's Tohoku region, in May 1954. Although it initially began producing oil bearings and magnets, production eventually focused on the profitable ferrite and other magnetic materials.

Totsuko's presence in Tohoku started in 1951, when Ibuka began researching ferrite with Tohoku University professor Toshihiko Okamura, eyeing ferrite's special properties under high frequency as ideal for producing tape recorder heads. After the H-Type - the first tape recorder to use ferrite heads - started sales that same year, this research went on to help boost manufacturing output for the P-Type and R-Type successor models.

By 1953, tape recorder sales were growing steadily. Looking to expand the industrial sector between its coastal cities of Sendai and Shiogama, Miyagi Prefecture began promoting factory construction projects in the surrounding area. Low on space at its Gotenyama factories, the growing Totsuko decided to expand to Sendai, where electricity was readily available and Tohoku University was right next door. With this decision, the Sendai Factory was opened with 27 initial employees.