Creating a New TEL: Key Initiatives

Tetsuro Higashi
Representative Director, President & CEO
July 10, 2015

Changing Market Environment:
The IoT Era is Coming
World semiconductor market$B
500

CY2014:$340B

400

Number of “things”
connected to the internet

300

CY2014

CY2020

200

14.5B

50.0B

100
0

1985

1990

1995

2000

2005

2010

Source: Gartner, CISCO

Paradigm shift to IoT will lead to increased applications
and expand the semiconductor market
Corp IR/July 10, 20151

Direction of Technological Innovations
Functional Diversification

Advanced Packaging

CMOS Scaling

TSV/WLP
High-k metalgateMultiplepatterning
EUV

Electron Beam
Lithography

FinFET

Si photonics
MRAM
ReRAM

New Memory

SiGe/Ⅲ-Ⅴ
Carbon/CNT

New Structure/New Materials

Advanced Patterning

Evolution of semiconductors involves new,extensive technologies
Corp IR/July 10, 2015

2

VisionA real global company generatinghigh added-value and profits
to Semiconductor and FPD
industries through innovativetechnologies and groundbreaking
solutions with diverse integrated
technologies
Corp IR/July 10, 20153

Medium-term Business Direction

GOAL

1. Best in Class
2. Best Fit in New Market
Best in Class= “strong business platform”
Best Fit in New Market= “responding to diversity”

Current

FY2018~20

Strengthen platform and response capability to support
further major advances
Corp IR/July 10, 20154

“Best in Class”

Benchmarks (Most Recent Fiscal Year)
Operating margin
JP competitors avg.
TEL

ROE
JP competitors avg.

4%

14.4%

TEL

9%

11.8%

U.S. competitor A

17%

U.S. competitor A

14%

U.S. competitor B

15%

U.S. competitor B

13%

U.S. competitor C

26%

U.S. competitor C

16%

TEL still positioned behind U.S. peers
despite some improvement

Corp IR/July 10, 20155

“Best in Class”

New Financial Model
Wafer Fab Equipment

Market size

$30B

$37B

Sales

¥720B

¥900B

Operating margin

20%

25%

ROE

15%

20%

Aiming for global-level results
Corp IR/July 10, 20156

“Best Fit in New Market”

Global Growth Strategy
Changing market
environment
IoT eraChanging customer
needs
Diversification ofdifferentiated technology

Approaches to diversification• Grasp customers’ true needs for differentiation andcustomization• Provide solutions bringing our technological strengths all
together, extensively and swiftly
Corp IR/July 10, 20157

“Best Fit in New Market”

Global Growth StrategyCustomer

TELSupplier/Materials
manufacturers

Fully utilize TEL’s corporate DNA―our track record of creatingstrong relationships of mutual trust, and work closely withcustomers to overcome tough technological challenges
Corp IR/July 10, 20158

“Best Fit in New Market”

Transition to a New Structure
Key points of structural reform: Created COO post
 CSS that enables swift business execution
 Appointed younger generation directors
with broad knowledge
 Utilize global talent

Become a company that identifies customers’
needs and surpasses their expectations
CSS: Corporate Senior Staff
Corp IR/July 10, 20159

Key Initiatives for Achieving Targets
 Overwhelming differentiation in corebusinesses
 Shift to creating customer needs
 Reinforce foundation for realizing growthand technological innovation
 Improve efficiency of operations
 Utilize global talent

Corp IR/July 10, 2015

10

New Corporate Logo

• The square placed in the center of the logo signifies the high precision of TEL's technology
It also represents core technology, which is essential for the growth of industry and society• The new youthful, vibrant green represents a human element as well as environmental conservation,
which is a key focus in TEL's business• The neat, polished, and universal shape represents TEL's absolute trust and presence, showing ourorganization's fairness• Global design which shows our company achieving global excellence
Corp IR/July 10, 201511

Medium-term Management Plan

Toshiki Kawai
Representative Director, Senior Executive Vice President & COO
July 10, 2015Market Environment
Network society

Still only 60 years since thebirth of semiconductors
Semiconductor MarketCY2014:$340B

Industrial
Medical2000
1950Homes2020Automobile

Environmental

2050

Semiconductors still only in the early stages
Corp IR/July 10, 201513

Market Environment
World IP traffic
Zettabyte/year
2CAGR

21% (CY2013-2018)

1.5

1.6

10.5
00.6
2013

2014

2015

2016

2017

2018

Cisco Visual Networking Index（VNI）2013-2018

Data sent on networks will continue
to increase explosively
Zettabyte: Unit indicating the magnitude of computer storage devices and digital data. 10^21 bytes
Corp IR/July 10, 201514

Semiconductor Industry at an Inflection PointBlood
Cell

Size range ofLSI manufacturing

10-3 m = 1mm＜10μm ～ 1nm＞

10-410-5

1970

10-6 m = 1µm

1990
10-7

2010

10-8

DNA

10-9 m = <10nm

Inflection Point

10-11

Interatomic
distance of Si

10-10

CMOS Scaling-12 m = 1pm
10Functional Diversification

Atom≒0.3nm

Corp IR/July 10, 201515

Direction of Technological Innovations
Functional Diversification

Advanced Packaging

CMOS Scaling

TSV/WLP
High-k metal
gate
Multiplepatterning
EUV

Electron Beam
Lithography

FinFET

Si photonics
MRAM
ReRAM

New Memory

SiGe/Ⅲ-Ⅴ
Carbon/CNT

New Structure/New Materials

Advanced Patterning

Evolution of semiconductors involves new,extensive technologies
Corp IR/July 10, 2015

16Technological Trends: High-volume
Manufacturing & Next-generation Devices
Cutting-edge logic
High-volume
manufacturing(present)

16/14nm (2nd Gen. FinFET)

C. Auth, et al.,VLSI tech. 2012

Next generation(2018~）

7nm （nanowire, new materials)

Flash Memory

DRAM
~20nm

2D FG-NAND 15nm

Micron 20 nm
TechInsights

Samsung DRAM
TechInsights

Continuous 1x/1y scaling

3D NAND 64 layer stacking

STT-MRAM

R. Coquand et al.,VLSI tech. 2013

Technologicalinflection points

Challenges: Speed andlow power consumption• Shift to 3D structure device(FinFET)• New structures (nanowire)• New materials

Challenge: Integration• Shift to 3D layer stacking• Etching and deposition
technology for high-aspect
structure

Challenge: Capacitor
capacity•••

High-aspect etching
Shift to ALD for capacitor
materials
Possibility of partial
replacement with MRAM

Identify technological inflection points and provide solutions
Corp IR/July 10, 201517

Our SPE CompetitivenessTEL product market share (CY2014)
Overwhelming
competitiveness

TEL
Coater/developer

Etch

Thermalprocessing

Single wafer
deposition

Cleaning

Wafer
prober
Source: Gartner

Corp IR/July 10, 201518

SPE Products:Broad Product Line Up in Patterning
Clean Track
LITHIUS Pro™ Z

ALD Film Deposition
NT333™, Triase+™ EX-II™,
TELINDY PLUS™ IRad

Dry Etch
Tactras™

CVD Film Deposition
Triase+™ CVD, TELINDY PLUS™

Under
Under
Under
MandrelSpacerBARC
Process
Metal
ULK
SOC
BARC
SOC
Wet
PR
SOC
Planarization
Layer
PR
Layer
Exposure
Layer
Trim
Deposition
Trim
Deposition
Cleaning
Coating
Open
RemovalOpen
Deposition
Coating
Open
Deposition
CoatingFinished3
12Etch2Open
Deposition
Back
1Removal
Etch
Etch
OpenEtch
Etch

Wet Cleaning
CELLESTA™ -i

Corp IR/July 10, 201519SPE Business Strategy: Strengthen Ability toProvide Technological Solutions in Patterning“Patterning Solution Project”
Respond to customer needs for leading-edge
technology by leveraging broad product line

Multiple patterning technology

DSA* technology*Directed Self-AssemblyCorp IR/July 10, 201520

SPE Business Strategy: STT-MRAM Development

Gas cluster ion
beam system

Single wafer
cleaning
systemEtch/CVDsystem

 Strengthen development withcustomers, Tohoku University,and consortia
 Lead development for practicaluse

Magnetic annealing
system

MTJ sputteringsystem

STT-MRAM

MaterialDevice

Equipment
process

STT-MRAM: Spin Transfer Torque-Magnetoresistive Random Access Memory

Corp IR/July 10, 201521

SPE Business Strategy:Topics and Key Strategies by Equipment Category
Cleaning system•••

Highest ever market share in 2014
Customer penetration in leading-edge
HVM lines progressing as planned, with
our proprietary technology
Expand applications of single wafer
cleaning and dry cleaning system andfurther increase market share

Etching system• Doubled sales in 2014 YoY and increased
market share• Acquire POR in patterning and memory
HARC processes, where growth expected
POR (Process of Record):Certification of equipment application incustomer semiconductor manufacturing process
HARC: High Aspect Ratio Contact

TELshare25%

19%
Single Wafer
Cleaning System
CELLESTA™-i
CY20132014

TEL
share26%･･･

2019

19%
Plasma Etch System
Tactras™

CY2013

2014

･･･

2019

Source：Gartner (market share in 2013 and 2014) andTEL estimate
Corp IR/July 10, 201522

SPE Business Strategy:Topics and Key Strategies by Equipment Category
ALD system• Respond to needs for high coverage and productivity required inminiaturization and 3D structure• Expect to acquire POR and share in logic and memory with semi-batch
ALD system NT333, which is differentiated by its high productivity andhigh-quality film
ALD system SAM*
>10% CAGR (CY2014-2019)¥80B

ALD system
NT333™

2014

2015

2016

*SAM: Served Available Market2017

2018

2019

Source: TEL estimate
Corp IR/July 10, 201523

SPE Business Strategy:
Strengthen Field Solutions Business
Expanding business opportunities

Support customer needs
in existing production lines

The IoT era will bring demandfor diverse semiconductor
technologies¥200.0B¥170.0B

Explosive growth of IP traffic =semiconductor growth¥106.4B

TEL’s installed base54,000 units
FY2012 2013

2014

2015

2020
EstimateField solutions business sales are included in SPE and FPD segment sales.

Expand field solutions business opportunities in IoT era
Corp IR/July 10, 201524

SPE Business New Framework
New framework and executive structure to“Enhance our strengths”• Enhance our core strength—the full
trust of our customers• Implemented account and region
management structures• Create value-added products
leveraging the integration of the coretechnology and expertise of each BU• Launched patterning solution project• Maximize the strengths in valuecreation and efficiency of each plantand development siteGlobal Field General HQBusiness Steering
General HQ

Development/Manufacturing General HQ

Corp IR/July 10, 201525

FPD Business Strategy
Shift to large-size panels, increased demand for high-resolution forsmart phones. Introduced our differentiated ICP* etch systems ingrowing LTPS/metal oxide market
($M)

7,000

FPD production equipment market
Markets where we can differentiate ourtechnology will expand

6,000
5,000

LTPS

4,000

a-Si/Oxide

3,000

a-Si

2,000

a-Si（G10.5）

1,0000CY2011 2012

2013

2014

2015

2016

2017

Source：Display Search Data/TEL Marketing Estimate

Increase market share and profitability,
aim for 20% OPM* ICP ：Inductively Coupled Plasma
Corp IR/July 10, 201526

Summary
Toward profitability and ROE improvement
 Focus on SPE business Leverage product line up and respond todiversifying needs
 New framework and executive structure toenhance our strengths

Corp IR/July 10, 201527

Financial Model,
Shareholder Returns Policy

Tetsuro Hori
Corporate Director, Senior Vice President & General Manager
July 10 , 2015

Financial Performance(Billion Yen)
1,20060%Sales

Operating income

Operating margin

1,000

50%

906.0

800

40%

723.8668.7613.1

60030%
18.6%

16.7%

400

14.4%

14.6%

20020%
10%

2.5%
00%
-0.5%
-4.4%

-200
FY1999 2000

2001

2002-10%
2003

2004

2005

2006

2007

2008

20092010

2011

2012

2013

2014

2015

Corp IR/July 10, 201529

Financial Model (toward FY2020)
 Build an earnings structure capable of attaining
an OPM of 25% at WFE market size $37B
(Billion Yen)FY2016(Estimate)

FY2020(Medium-term plan)

WFE $33.5B

WFE $30B

WFE $37B

Net sales

675

720

900

SPE625

660

840

FPD

476060Gross profit

265

305

395

Gross profit margin

39%

42%

44%SG&A expenses

153160170

SG&A expense ratio

23%

22%

19%

Operating income

112145225

Operating margin

17%

20%

25%

79100

155

Net income

Corp IR/July 10, 201530

SPE Sales (WFE $37B)
 Sales growth in excess of market growth(Billion Yen)FY2016(Estimate)

FY2020(Medium-termplan)

WFE $33.5B

WFE $37B

GrowthWFE +10%

625

840

+34%

New equipment

465

650+40%Field solutions

160

190+19%Sales• Enhance our ability to identify the technological needs ofour customers and to develop products to meet them• Respond to growing demand for field solutions
Corp IR/July 10, 201531

FPD Sales Target sales growth in leading-edge areas,
where we can differentiate our technology(Billion Yen)FY2020(Medium-termplan)

FY2016(Estimate)

Growth4760+28%

New equipment

3848+26%

Field solutions

912+33%

Sales• Focus on etching systems and OLED deposition systems,
areas in which we have technological superiority

Corp IR/July 10, 201532

Gross Profit (WFE $37B)
 Gross profit margin: up 5%pts(Billion Yen)FY2016(Estimate)

FY2020(Medium-termplan)

GrowthGross profit

265395+49%

Gross profit margin39%

44%+5%pts• Raise marginal profit ratio through efforts to enhance
product competitiveness• Expand field solutions business• Reduce costs by sharing technology across our products• Reduce costs, shorten production lead-times and pursue
quality from the design stage onward
Corp IR/July 10, 201533

SG&A Expenses (WFE $37B)
 SG&A expense ratio: improve by 4%pts(Billion Yen)FY2016(Estimate)

FY2020(Medium-termplan)

GrowthSG&A expenses

153

170+11%

SG&A expense ratio

23%

19%-4%pts• Pursue operational efficiencies by reinforcing regionalsales & marketing and field engineering capabilities
under account management structure• Select development projects carefully, focusing on SPE

Corp IR/July 10, 201534

R&D Expense, Capex Plans
 Advance developmental efforts that are necessary for
growth while working to improve their efficiency
 Maintain capex at around its current level(Billion Yen)
100

R&D expenses
81.5

73.2

78.6

2013

2013

71.3

74.5

80.0~90.0

500FY2012

Capex(Billion Yen)
50250

2013 2016 (Estimate)2020 (Medium-term plan)

Depreciation

39.5
24.1

21.726.6

24.8
12.7

FY2012

2013

2014

21.0

20.8
13.1

2015

12.0

2016
(Estimate)

≒20.0
≒15.0

2020
(Mediumterm plan)

Corp IR/July 10, 201535

Managerial Targets
 We target a global level of profitability

WFE Market

$30B

$37B

Operating margin

20%

25%

ROE

15%

20%

Corp IR/July 10, 201536

Capital Policy, Shareholder Returns
 Approach to capital policy• While closely monitoring the business environment andour necessary cash balance, we will strive to raise ROE
through earnings maximization and asset turnover
improvement to efficiently utilize shareholders equity

 Approach to shareholder returns• Business trends in our industry can be volatile and ourpolicy is to link dividend payments to businessperformance• However, to assure stable returns to our shareholders,we will utilize our sound financial foundation toestablish a minimum DPS payment
Corp IR/July 10, 201537

New Policy for Shareholder Returns

Dividend payout ratio:

50%

Annual DPS of not less than ¥150
We will review our dividend policy if the company does
not generate net income for two consecutive fiscal years

We will flexibly consider share buybacks
Our previous dividend policy since FY2011 year-end dividend was performance-linked
payout ratio of around 35%.
Corp IR/July 10, 2015

38

FY2016 Dividend Forecast (Announced on July 10, 2015)
 Revised dividend forecast based on newshareholder returns policy
Dividend per share (Estimate)InterimYear-end

93 yenYear Total

129 yen

222 yen(Yen)300

222 yen200

143 yen

155 yen

129 yen

90 yen100

65 yen93 yen0
FY2015FY2016(Previous estimate)

FY2016(Revised estimate)
Corp IR/July 10, 201539

SummaryWe strive to outperform market growth andenhance our corporate value

Corp IR/July 10, 201540

Disclaimer regarding forward-looking statement
Forecast of TEL’s performance and future prospects and other sort of information publishedare made based on information available at the time of publication. Actual performance andresults may differ significantly from the forecast described here due to changes in various
external and internal factors, including the economic situation, semiconductor/FPD/PV market
conditions, intensification of sales competition, safety and product quality management, andintellectual property-related risks.

Processing of numbersFor the amount listed, because fractions are rounded down, there may be the cases where thetotal for certain account titles does not correspond to the sum of the respective figures foraccount titles. Percentages are calculated using full amounts, before rounding.

Exchange Risk
In principle, export sales of Tokyo Electron’s mainstay semiconductor and FPD/PV panel
production equipment are denominated in yen. While some settlements are denominated indollars, exchange risk is hedged as forward exchange contracts are made individually at thetime of booking. Accordingly, the effect of exchange rates on profits is negligible.
FPD/PV: Flat panel display/Photovoltaic

Corp IR/July 10, 2015