Since the critical whirling vibration frequency of high speed built-in type motor spindle systems is dependent on the rotor mass of the built-in motor and the spindle specific bending modulus, the rotor and the shaft were manufactured using magnetic powder contained epoxy and high modulus carbon fiber epoxy composite, respectively. In order to enhance the magnetic flux of the composite squirrel cage rotor of an AC induction motor, a steel core was inserted into the composite rotor. The motor parameters of the developed composite rotor system were obtained from the no-load and blocked rotor tests and the effect of thickness of the steel core on the motor performance was investigated. From the magnetic analysis, the optimal steel core size for the dynamic characteristics of the rotor system mounted on the carbon fiber epoxy composite spindle was determined.