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This paper presents a microelectromechanical systems (MEMS) capacitive position sensor for nanopositioning applications in Probe storage systems. The objective of the sensor system design is to develop a high-precision X-Y linear and rotational position sensor with a minimum sensor area and a large range of movements at high speed. To achieve this, first, a simple sensor noise model scalable with a sensor area was developed, in which all the parasitic capacitances are taken into account. Furthermore, a signal-processing solution was developed to compensate for the nonlinearities caused by rotational disturbances and, at the same time, to generate a rotational position signal for active rotation-control purposes. A MEMS capacitive sensor prototype was constructed with the design of a 13-mum pitch, a 300-mum peak-to-peak linear stroke, and a 3.46-mm2 sensor area at a 3-mum gap. The measured sensor noise was 0.2 nm 1sigma, which corresponds to 12 mudeg 1sigma for the fabricated prototype sensor, at 25-kHz bandwidth. Furthermore, the signal linearity was significantly enhanced by the proposed sensor signal processing, with a measured sensor signal nonlinearity of 0.78% for an 80-mum peak-to-peak stroke at 200 Hz. Finally, the capacitive sensor-based dynamic closed-loop X -Y linear and rotational position control of an electromagnetic scanner was successfully demonstrated.