Promotion of Improved Productivity

HigherProductivity

Continuous Improvement of Business Operations
Tokyo Electron is currently introducing a new enterprise system (ERP1) to improve productivity and quality further. The
new ERPs, being integrated across operational and national boundaries, is aimed at creating the following five benefits:(1) compliance with the new revenue recognition standards in Japan; (2) business and management decision making
with quick response to change; (3) large improvements in business operation efficiency; (4) utilization of globally
integrated information with an eye toward overall digital transformation2; and (5) realization of ultimate work stylereform. Beginning with business operational improvement, we are contributing to the resolution of issues fromCOVID-19 with global progress in the expansion of telecommuting, the shift to online approval operations, and overall
digitalization.
In fiscal year 2021, we made progress in communication and consensus-building that included our headquarters,
manufacturing sites in Japan, and overseas subsidiaries, as well as partner companies, to form a globally unified teamtoward business innovation. In May 2021, the new ERPs began operation, primarily at our headquarters. While making
the most of the knowledge gained from this process and the results, we plan to realize a true globally integrated
system, with project members and all our employees working as one.
Overview of the New Enterprise System

Post-sale

Sales(Export)Service CRM(Field-Support)

Warranty

Global Trade
Management

Technical
Acceptance(Warehouse)

Start-up(Manufacturing)

DeliveryWarehouse
Management
SystemManufacturing

Manufacturing
Execution
SystemProcurement(Procurement)

Booking

Production
Preparation

Production
Planning(Design)

Supply Chain
Management

Design(Plan)ERP (Sales, Inventory, Accounting)3
Safety First: Company
slogan that prioritizes
the safety of every
person connected withour business activities

Initiatives for Higher Productivity

Main activities
Promotion of improved productivity
Continuous improvement of business operations, Initiatives for higher productivity, Software development
initiatives

Productivity improvement in the value chain
Approach to quality, Management system, Ensuring self-process assurance systems and promoting “ShiftLeft”, Measures to prevent quality problems from occurring and recurring, Initiatives with suppliers

SDGs initiatives

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TOKYO ELECTRON SUSTAINABILITY REPORT 202 1■

Promote productivity, continuously increase management efficiency, contribute to thedevelopment of the industry and society, and contribute to sustainable economic growth■

Promote streamlined business operations and quality management throughout the value
chain, ensuring sustainable forms of production and consumption■

Continuously increasing productivity throughout the entire supply chain throughpartnerships with suppliers

2
DX: Refer to p. 19■ IT System ■ Key Processes

Product
Lifecycle
Management

Schedule

Forecast

Tokyo Electron is striving to promote the standardization and automation of operations and improve productivity along theentire value chain, such as through the development of an enterprise resource planning system and the integration ofbusiness systems in each division and unification of databases. In addition, recognizing the importance of quality
management, we are striving to further improve business efficiency by implementing quality focus operations.
We are enhancing the awareness and capabilities of each employee regarding productivity by rolling out various educational
programs. In addition, we are implementing continuous quality improvement activities throughout the entire supply chain
in collaboration with suppliers. We will strive to enhance corporate value, constantly pursuing improved productivity.

(Opportunities
and Forecast)

Opportunities

Continually Improve Operational Efficiency

Sales CRM

Customer
Investments

Medium-term Goals

1
ERP: Enterprise resource
planning. A system that
integrates the corebusiness operations ofan enterprise, such asaccounting, personnel,
production, logistics andsales, for better
efficiency andcentralized information.

As a manufacturer of semiconductors and flat panel display production equipment, we are committed to continuously
improving productivity while remaining focused on safety and quality in operations along the entire value chain.
Specifically, under the slogan “Safety First3”, we are striving to improve the safety and work environments of every
person connected with our business activities, and we are building quality management systems and pursuing quality
improvement in the value chain in order to understand the true needs of our customers and to achieve the world’s
best quality. We are also conducting company-wide activities for compliance with safety and environmental laws andregulations and to make software development more efficient and smarter. In manufacturing operations, our current
initiatives include BOM4 production, module shipment5 for repeat orders and the building of flow lines6.
Furthermore, to respond swiftly to customer requests and market fluctuations, we are improving our IT
infrastructure and computerizing on-site data by establishing a production system that centralizes all productionrelated information and introduces a manufacturing execution system (MES7). By utilizing the wide range of data
aggregated through these systems in each business operation, we can make production schedules more reasonable
and more efficient, visualize delivery dates for parts, and achieve stronger coordination between sales planning andproduction/procurement/inventory planning. In this way, we will comprehensively promote higher productivity inbusiness operations.
In our manufacturing and logistics operations, where we deal with a wide variety of components, we are also
working on labor savings and efficiency improvements by establishing automated warehouses, introducing awarehousing navigation system and promoting automated inspections.

4
BOM: Bill Of Materials.
A list of parts that
controls a product. It
shows the hierarchicalstructure of the
product and includes
basic information ofeach part, includingwhich parts are used toassemble the product.
5
Module Shipment:
Equipment is shipped
to customers inmodules. The modules
are assembled into
equipment at thecustomer’s site before
inspection andadjustment. This helps
reduce the lead time
between manufactureand shipping.
6
Building of Flow Lines:
Building of a system forsecuring materials andpersonnel and ensuringthat work is carried out
accurately andefficiently according to
an expected schedule
7
MES: Manufacturing
Execution System. A
system forunderstanding andmanaging production
processes and forproviding instructions
and support to workers.

TOKYO ELECTRON SUSTAINABILITY REPORT 202 1

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Higher Productivity

Software Development Initiatives
Streamlining Product Development and Improving Added Value
Since 1995, we have incorporated platform software developed in-house in our semiconductor production
equipment and have worked on streamlining operations and improving product quality. By standardizing
platform software, we have been able to reduce the hours spent on developing various types of duplicate
functions for each type of equipment, leading to guaranteed real-time1 control and enhancement of our responseto new demands and technologies. Having adopted such concepts as object-oriented2, we are also working on
more efficient development of new platform software for next-generation equipment.
In fiscal year 2021, as a new base for the digital transformation activities we are promoting, we established TEL
Digital Design Square, and aim to further improve the added value that our products provide through softwaredevelopment.

Quality Policy
1
Real-time: The propertyof time limitation until
the completion of work
2
Object-oriented: A
software engineering
theory3
Smart fab: A fab thatutilizes digital data torealize continuous andprogressive reform ofoperational processes andimprovements in quality
and productivity

Equipment Data Management Plan

4
OES: Optical Emission
Spectroscopy

Remote access:■

Event history
Parts replacement history

CustomersystemField engineer■■

APC/AEC

Customer

Process log
OES4 log

4. Continual Improvement
Ensuring customer satisfaction and trust by establishing quality goals and performance indicators and byimplementing continual improvement using the PDCA cycle.
5. Stakeholder Communication
Listening to stakeholder expectations, providing timely product quality information and making
adjustments as needed.

Customer data:

Customer site■

2. Quality Design and Assurance
Building quality into products and assuring in-process quality control, from the design and development
phase throughout every process.
3. Quality and Trust
When a quality-related problem occurs, working as a team to perform thorough root cause analyses andresolve problems as quickly as possible.

Developing Smart Equipment
Amid advances in manufacturing that make the most of innovative technologies such as IoT and AI, our customers are
forging ahead in improving productivity by taking advantage of visual representations of data and building smart fabs3
to improve consistency in quality. Under these circumstances, we will provide advanced equipment operation services
and promote “equipment data management” to further enhance the added value of equipment, based on the various
types of data generated by customers’ equipment.

TEL data:

1. Quality Focus
Focusing on quality to satisfy customers, meet production schedules and reduce required maintenanceeven with temporary cost increases.

■■

Alarm log
System log

Shareddata

Access to customer's data upon request for
support from customer

Control model

We strive to implement own-process assurance systems by carrying out strict risk management and development/
design inspections beginning at the development stage and also by ensuring verification of customers’ operations
using simulations. We have also built an important component traceability system as part of our effort to strengthen
our information environment. By making it possible to use the One Platform1 to view such information as past
problems and adjustment values used during manufacturing and assembly, as well as important component
inspection information from suppliers, we have successfully strengthened our risk management (FMEA2) to prevent
various types of non-conformance. We believe that thorough implementation of these own-process assurance
systems and prevention makes it possible for employees to focus on high value-added business operations andpromote initiatives that lead to Shift Left3 (front-loading). We will continue to strive to provide high-quality andhigh-value-added products and services to our customers.

Gate Server

TEL site

Gate Server

1
One Platform: A
platform that makes it
possible to easily view
multiple different
systems as seamlessinformation sources inorder to effectively andefficiently achieve
traceability.
Refer to p. 28
2
FMEA: Failure modeand effects analysis.
Method to identify,
prevent and mitigate
risks in advance.
3
Shift Left: Refer to p. 17

Management System
To provide consistent, high-quality products, we have built quality assurance systems under the leadership of ourRepresentative Director, President & CEO. We have been promoting ISO 9001 quality management system certification,
and all of our manufacturing companies within our group have completed the transition to ISO 9001:2015.

TEL expert

ISO 9001 Certified Plants and Offices
Company Name

Plant/Office Name

Certification Date

Fujii Office / Hosaka Office

September 1994

Tohoku Office

December 1994

Tokyo Electron Technology Solutions

Productivity Improvement in the Value Chain
Approach to Quality
Tokyo Electron has defined its approach to quality as follows:“The Tokyo Electron Group seeks to provide the highest-quality products and services. This pursuit of quality begins
at development and continues through all manufacturing, installation, maintenance, sales and support processes. Our
employees must work to deliver quality products, quality services and innovative solutions that enable customer
success”.

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TOKYO ELECTRON SUSTAINABILITY REPORT 202 1

Tokyo Electron Kyushu

Koshi Office

March 1997

TEL Magnetic Solutions—

November 2009

Tokyo Electron Korea

Balan Plant

September 2011

Tokyo Electron Miyagi

Taiwa Office

September 2012

TEL Manufacturing and Engineering of America

Chaska Office

March 2013

Tokyo Electron (Kunshan)—

May 2018

TOKYO ELECTRON SUSTAINABILITY REPORT 202 1

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Higher Productivity

Accident Information:■ Example Initiatives

We are focused on process improvement activities (PCS1) using a statistical method. Invariably, our customers’
production sites require limited variations in quality between equipment, accurate process repeatability and highproductivity. To meet these requirements, we ask our suppliers who handle specific important components tounderstand the importance of PCS and cooperate with us. Putting the information acquired from various types ofimportant components into control diagrams and carrying out trend analyses together with our suppliers allows us toquickly detect changes in manufacturing processes and take any necessary steps. These supplier activities and thecontinuous implementation of PCS activities in our manufacturing processes are leading to the suppression ofcomponent quality variability and maintenance/improvement of manufacturing processes that produce quality
products, ultimately helping us provide products surpassing customer expectations. Since new technologies are being
created daily and customer needs are constantly increasing, manufacturing processes that handle new importantcomponents need to be constantly reexamined and improved. Our products consist of tens of thousands ofcomponents, and the task of selecting important components that are especially relevant to customers’ production
and tallying and analyzing them regularly requires many hours. To optimize and streamline this task, we reexamine ouroperational flow, including the adoption of automation, and improve our systems by collecting information from
customers, holding discussions among our manufacturing sites in Japan, and interviewing our suppliers. By
continuously carrying out these activities that incorporate the concept of Shift Left, we are striving to improve our
productivity further.

TOKYO ELECTRON SUSTAINABILITY REPORT 202 1

Management
Accident
Reporting
System (TIRS)PoliceDepartment
CustomerContact Point

Customer
Report and Workplace Recovery

Permanent Measures

Service
Division

Defective Quality
Reporting System(Q-VICS1)
Operations
Divisions
Safety Division
Quality Assurance
Division

Relevant Divisions
Investigation of causes and development ofrecurrence prevention measures
Investigate and
Identify Causes
Confirm Spread

Determine Measures
Establish
Implementation Plan

2
FCN: Field change
notice. Refers to thegeneral recall notice.

Issue FCN2
Share with Group
Companies(QA-BOX)
Reflect in DesignStandards
Revise Standards
Notify Revision

Initiatives with SuppliersContinuously improving quality based on strong partnerships with suppliers is essential for providing high-quality
products quickly to the market. Since fiscal year 2001, we have conducted our unique Supplier Total Quality Assessments(STQA) in an effort to ensure our suppliers properly understand the level of quality expected from them. Before starting a
new business with suppliers, an STQA is conducted via self-assessment to evaluate their product quality, costs andinformation security. The assessment also includes their CSR initiatives, including human rights, ethics, safety and theenvironment. If a risk is identified, we visit the supplier and confirm the area of non-conformance on-site. Once ourapproach to quality has been shared with the supplier, we request that they plan and implement improvement measures,and we provide continuous support until all of them have been completed. In addition, we also conduct audits once every
three years for suppliers who handle important components and for suppliers where quality issues have been found. Also,in the course of holding regular meetings with the leaders of various manufacturing sites in Japan who use STQA, asystem shared by our whole Group, we share supplier-related information and discuss measures to resolve issues.
Additionally, Tokyo Electron Kyushu is working with its suppliers on its own improvement activities. For suppliers
judged to require focused evaluation, we add technically focused check items to STQA, based on past case examples of
non-conformance, and carry out assessment to prevent recurrence. By continuing these activities, we technicallystrengthen preventive measures and increase their effectiveness, linking them to further quality improvement.
■ Example Initiatives

Measures to Prevent Quality Problems from Occurring and Recurring

31

1
Q-VICS: Quality
Valuable
Information
Chain System

Tokyo Electron GroupFire
Department

In order to improve the quality of products, it is important to prevent non-conformance from occurring in upstream
processes and to ensure thorough quality control in each process so that nonconforming products are not allowed toflow into later processes. From this perspective, we promote activities focused on self-process assurance systems. In
particular, we aim to improve the level of completion of product quality by implementing thorough risk detection andmitigation measures (FMEA) from the initial stages of product design, as well as carrying out thorough inspections ineach process and conducting verification using simulation.
Improving the precision of each process and reducing reworking costs in these activities for self-process assurance
systems have enabled us to create high-value-added technologies and products in the upstream processes, leading to
the promotion of the Shift Left concept. We are also promoting Product Lifecycle Management (PLM) by using selfprocess assurance systems to comprehensively manage and analyze all processes from product planning,development, design and production through to service, in an effort to facilitate the earlier release of products,
enhance operational efficiency, improve quality and reduce costs.

To comply with ISO and EN safety standards and achieve higher safety levels, we have established our own design
rules for each of our products. As an equipment manufacturer, we have developed systems for manufacturing
products, which include safety considerations. We have other systems in place for responding to equipment design
and production non-conformance and any occupational accidents.
In the event of an accident, we use our TIRS3 accident reporting system to distribute information to safety andquality personnel in each division, officers and management, including senior management. An accident investigationis also conducted immediately to identify the cause and plan preventive measures.
We use a proprietary system called QA-BOX4 to share information on equipment quality and any major nonconformance across all quality departments in accordance with our operating rules. Measures obtained from theresults of an accident investigation are promptly applied, not only to the problem equipment but also to relevant
equipment operated by other customers, and revisions are also made to the current design standards. Additionally, we
work to prevent a recurrence of the accident by analyzing the factors that led to the human error and creatingprocedures that are easier to understand.
In operating “QA-BOX”, we validate the commonalities among accidents and share the issues and countermeasuresin regularly scheduled meetings attended by the Quality General Manager (GMs) responsible for various types ofequipment. This allows us to examine various approaches to prevent similar non-conformances from occurring in anyof our equipment. Furthermore, by managing the progress of the cases shared in QA-BOX and validating the effects ofthe measures, we ensure the implementation of effective measures and reduce the number of equipment-caused
accidents.

Operations and Information Flow:1
PCS: Process Control
SystemEnsuring Self-Process Assurance Systems and Promoting “Shift Left”

2

Information Sharing:2
EN: European Norm.
Uniform standard for theEuropean Union
complimenting parts oftechnical standards notstated in European
Commission directives(“New Approach”
directives).
3
TIRS: TEL Incident Report
System
4
QA-BOX: Tool for the
sharing and horizontal
expansion of importantquality-related
information within ourcompany

Percentage of Defects by Cause
Having identified reduction of costs for dealing with defective components and unit partsat customer sites as a material issue, since March 2020, the quality assurance division at
Tokyo Electron Technology Solutions have been promoting quality improvement activities
Inadequate
focused on a single point. As part of these activities, we categorized defects at all businessevaluation
units (BUs) by cause, and found that 31% were due to inadequate internal evaluation and
31%
Other
54%
15% were related to our suppliers. There was also a tendency for defects attributable toinadequate internal evaluation to be higher for equipment using new technology and for
Attributableto suppliers
large equipment such as flat panel display (FPDs), and defects related to our suppliers to15%
be higher for other equipment.
Based on analysis of the present situation, each BU raises quality improvements thatwarrant a concerted effort, and proceeds with measures while considering what quality should be like. For example, at
DSP3 Dept. (ES BU) and FPD BU, technical and quality assurance divisions cooperate with suppliers from the planningstage for new equipment, and by using FMEA to extract specific evaluation details, conduct evaluations that take into
account the environment in which the customer will use the equipment. TFF BU and TS BU, meanwhile, have been
conducting activities aimed at achieving zero defects for components and unit parts with a high frequency of defects, andwe are gradually seeing the results of these activities. ES BU and CT BU are also conducting their own quality
improvement activities using the “single point of focus” approach in an effort to resolve important matters.
Together with our suppliers, we will continue striving to further improve the quality of our components and unit partsby continuously rolling out initiatives, including the “single point of focus” approach.

3
DSP: Dry Surface
Preparation

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