Annual Report 2013
For the Year Ended March 31, 2013

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

1

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernancePursuing Technological Innovation and Customer
In November 2013, Tokyo Electron (TEL™) will celebrate theSatisfaction

50

Major BusinessTransformation,
Withdrawal from theExport Business

Expanding In-house
Production,
Becoming a Global
LeaderA Company with a Dream for the FutureThis logo mark was developed as a symbol of our commitment to the future as we celebrate the 50th
anniversary of Tokyo Electron. It symbolizes our company’s concept: “a future with a dream” through afigure in which “people,” “cutting edge technology” and “environment and nature” become one and startmoving in one circle. We hope our employees will also come together to make contributions to a futuresociety as a single team, using the logo mark in a variety of TEL communication tools and applications.

Era of Globalization,
Establishing Business
Locations Globally

Production
ReformStriving for New
Growth63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
TEL imports cutting-edge
technology products, suchas IC testers and electronic components, andexports consumer electronics, such as car radios

1963
TEL is establishedTEL withdraws from theexport of consumer electronics, which accounted
for 60% of its sales
TEL focuses business onimporting high-valueadded semiconductor
production equipment,
computer-related equipment and electronic
components

1968
A 1960s car radio

TEL-Thermco begins
Japanese productionof diffusion furnaces

TEL accumulates its own manufacturing technologies through joint ventureswith foreign manufacturers and establishes the Central Research Laboratory
to reinforce its R&D capabilities

As a fully-fledged semiconductor production
equipment manufacturer,
TEL lays the foundation forsuccessful products of the
future1980

1984

1986-1987

1996

TEL is listed on thesecond section of theTokyo Stock
Exchange

TEL is listed on thefirst section of theTokyo Stock
Exchange

TEL strengthens its functions as amanufacturer, establishing manufacturing subsidiaries and reorganizing joint ventures

Tokyo Electron
America, Inc. establishes new headquarters building andtraining center.

1986
1981

TEL enters the semiconductor production
equipment importbusiness.

TEL forms a numberof joint ventures with
U.S. companies
In addition to its
trading company
functions, TEL istransformed into a
manufacturer possessing cutting-edge
technology

Thermco diffusion
furnace

In-circuit board tester

1964

TEL creates a global network to develop sales
channels and provide
technical support overseas

Central ResearchLaboratory facilities
are completed

TEL improves productivity
through such initiatives as
new production systems

In addition to in-housedevelopment, TEL actively
acquires next-generation
technologies from outside
the Company

2007

2011

Tokyo Electron Kyushu
new productionbuilding

Tokyo Electron Miyagi
new plant

1990

Plasma etch system

Accelerating
technology
development
Technological innovation
creates value
for stakeholders

2012

TEL fully enters FPD
production equipment businessIon implanter

Financial Section

Tokyo Electron will celebrate its 50th anniversary on November 11, 2013.

50th anniversary of its founding. Since its founding in 1963,
the Company has continually stayed one step ahead of thetimes through technological innovation, adapting its businessmodel to meet the latest needs of the market. As we enter
the mobile and big data era, the electronics market is beginning a new period of growth. Looking ahead to Tokyo
Electron’s next half century, we will strengthen technologicaldevelopment to further increase corporate value.

Strengthening Manufacturing
Capabilities,
Establishing Joint Ventures

Intellectual Property

Tokyo Electron 50th Anniversary Logo

th anniversary

Founding Era,
Roots as a Technology
Trading Company

Corporate Citizenship

TEL executes four
corporate acquisitions

2002

2009

2012

2012

TEL participates in
Albany NanoTech program (U.S.)TEL Technology
Center, Taiwan

Technology Center
Tsukuba

TEL Technology
Center, Korea

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

2

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Contents

Financial Highlights

3 Consolidated Financial Highlights
Business Overview

4 Business Overview
Top Message

5 To Our Stakeholders
6 Interview with the CEO
Special Feature

9

Features — Technological Innovationin Pursuit of Growth
Feature 1: Product Development

10

Increasing Business Opportunities
through Production Equipment
Innovation
Feature 2: Research and Development

Financial Section

19 Financial Review
23 Consolidated Eleven-Year Summary
24 Consolidated Balance Sheets
25 Consolidated Statements of Income
25 Consolidated Statements of Comprehensive Income
26 Consolidated Statements of Changes in Net Assets
26 Consolidated Statements of Cash Flows
27 Notes to Consolidated Financial Statements
35 Independent Auditor’s Report
Corporate Data

36 Consolidated Subsidiaries / Investor Information

Boldly Advancing Innovative
Technological Development

11
12

Feature 3: Technology Acquisitions

Timely Acquisitions to Seize
Opportunities for Growth
Feature 4: Manufacturing

Manufacturing that Maximizes
Customer Value

Review of Operations and Business Outlook

13 Review of Operations and Business Outlook
Corporate Governance

14 Corporate Governance
Audit & Supervisory Board Members and
16 Directors,
Executive Officers
Corporate Citizenship

17 Environmental, Safety and Health Activities
Intellectual Property

18 Intellectual Property

Disclaimer
Matters discussed in this annual report, including forecasts of future business performance of Tokyo Electron, management strategies, beliefs andother statements are based on Tokyo Electron’s assumptions in light of
information that is currently available. These forward-looking statements
involve known or unknown risks, uncertainties and other factors that
could cause actual results to differ materially from those referred to in theforward-looking statements.
Factors that have a direct or indirect impact on Tokyo Electron’s future
performance include, but are not limited to:• Economic circumstances in Japan and overseas, consumption
trends, and large fluctuations in foreign exchange rates• Changes in semiconductor/FPD/PV markets• Changes in the demand for products and services manufactured oroffered by Tokyo Electron’s customers, such as semiconductor
manufacturers, FPD manufacturers, photovoltaic cell manufacturers
and electronics makers• Tokyo Electron’s capabilities to continue to develop and provide products and services that respond to rapid technology innovation andchanging customer needs in a timely manner
For details, please refer to Business-related and Other Risks on page 22.

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TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

3

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Review of Operations
and Business Outlook

Special Feature

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Consolidated Financial Highlights

Consolidated Financial Highlights¥508,082¥418,637¥668,722¥633,091¥497,300$5,287,613

Operating income (loss)

14,711(2,181)

97,87060,443

12,549133,429

Income (loss) before income taxes

9,637(7,768)99,57960,602

17,767

188,910Net income (loss)

7,543(9,033)71,92436,726

6,076

64,604

Depreciation and amortization

23,06820,002

17,707

24,19826,631

283,158

Capital expenditures

18,10814,91939,14039,541

21,774

231,515

R&D expenses

60,98854,07470,56881,50673,249778,830(Millions of yen)

750,000

14.6
600,000

450,000

300,000

75,0002.9%(0.5)%

14.6%

9.5%

2.5%

ROE

1.4%

(1.8)%

13.3%

6.3%

1.0%

2.9
0

0

-25,000

09

Total assets¥668,998¥696,352¥809,205¥783,611¥775,528$8,245,912

Total net assets(Total shareholders’ equity)529,265

523,370

584,802598,603605,127

6,434,099

U.S. dollars

Per share:

10

11

12

13

09

¥ 205.04¥ 33.91

24.00

12.00

114.00

80.00

51.00

Notes: 1. U.S. dollar amounts are translated from yen, solely for convenience, at the prevailing exchange rate on March 31, 2013 of ¥94.05=U.S.$1.
2. Depreciation and amortization does not include amortization and loss on impairment of goodwill.

$

(Yen)

(%)

600.00

16.0

0

10

-4.0

11

12

13

450.00

12.0

0.36
0.54

300.00

13.3

8.0
6.3

150.004.0
33.91¥ 401.73

ROE

205.04¥ (50.47)

Net Income (Loss)
per Share

401.7342.15

2.5

Operating Margin

1.4

0

0

-150.00

09

10

1.0
-1.8

-50.47

Cash dividends¥

4.0

Operating Income (Loss)

42.15

Net income (loss)—Basic

8.0

-0.5

At year-end:

Yen

9.5

25,000Thousands of
U.S. dollars

Millions of yen

12.0

50,000150,000

Operating margin

(%)

16.0

100,000-2,181

Net sales(Millions of yen)

12,549For the year:

60,443

2013

97,8702013

14,711

2012

497,300

2011

633,0912010

668,722

2009

Operating Income (Loss) andOperating Margin

418,637

Years ended March 31

Net Sales

508,082

Thousands of
U.S. dollars

Millions of yen

-4.0

11

12

13

09

10

11

12

13

TOKYO ELECTRON ANNUAL REPORT 2013

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4

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Business Overview

Business Overview

SUMMARY OF BUSINESS

Semiconductor devices (IC chips) are used in mobile devices such as smartphones andtablets, and in electronics ranging from flat panel TVs and other digital home appliances to
cutting-edge medical equipment. Tokyo Electron offers semiconductor production equipment for manufacturing such devices, along with superior technical support and service.
Our product lineup includes coater/developers, plasma etch systems, thermal

Semiconductor
Production
Equipment

MAIN PRODUCTS• Coater/Developer• Plasma Etch System• Thermal Processing System• Single Wafer Deposition System• Cleaning System• Wafer Proberprocessing systems, single wafer deposition systems, cleaning systems used in wafer
processes, and wafer probers used in the wafer testing process. Tokyo Electron is also

SALES BY REGIONSoutheast Asia

3.3%
China

Japan

5.1%
Coater/Developer
CLEAN TRACK™
LITHIUS Pro™ Z

Plasma Etch System
Tactras™

10.3%

Taiwan26.9%

expanding its product lineup in a number of new areas. These include technologies
used in advanced packaging processes, which have been attracting attention in recent
years, such as through-silicon via (TSV) etch systems, electrochemical deposition, andNorth
America

Korea

wafer bonders/debonders.

14.7%

29.8%
EuropeThermal Processing System
TELINDY PLUS™

Flat panel displays (FPDs) are used in a wide variety of applications such as flat panelTVs, mobile devices including smartphones and tablets, and recently even digital signage for advertising. Tokyo Electron supplies FPD coaters/developers and plasma etch/

FPD/PV
Equipment

silicon photovoltaic panels, which are highly competitive in hot regions such as• FPD Coater/Developer• FPD Etch/Ash System• Photovoltaic Panel (PV) Production Equipment

Japan

47.1%

Sunbelt countries.
FPD Coater/Developer
Exceliner™

Tokyo Electron has developed a new type of dual model for this business: the tradingbusiness handles sales, in which it acts as a distributor of a wide array of sophisticated

and

9.9%

Wafer Prober
Precio™

Photovoltaic power generation is expected to grow tremendously in the medium
to long term. Tokyo Electron has begun to offer end-to-end production lines for thin-film

Components

Single Wafer Cleaning System
CELLESTA™ -i

ash systems used to manufacture FPDs, along with solid technical support and service.

Production

Electronic

Single Wafer Deposition System
Trias e +™

electronic components and computer network equipment, while the development business designs and develops products in response to customer needs, as well as our• Semiconductor Products• Electronic Components• Computer Networks & Storage• Middleware

52.9%

Overseas

19.3%

own in-house brand products. Business operations for this segment are handled by
Tokyo Electron Device Limited.

Computer
Networks
Xilinx, Inc.
FPGA

Overseas

FPD Etch/Ash System
Impressio™

F5 Networks, Inc.
Load Balancer

Japan

80.7%

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

5

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

To Our Stakeholders

Pursuing technologicalinnovation that drives theevolution of semiconductors
Tokyo Electron will celebrate the 50th anniversary of its

will be for higher performance, higher productivity semi-founding in November 2013. To begin, I would like toconductor manufacturing equipment, and in turn the needexpress my deepest gratitude to Tokyo Electron’s manyfor advanced technological innovation.

stakeholders for their ongoing support over all these years.

To support the new network era from the ground

During fiscal 2013, the year ended March 31,

up as a truly global company, Tokyo Electron will vigor-

2013, we felt the ongoing impact of the global econom-

ously pursue technological innovation that drives theic slowdown. In the electronics industry, capital invest-

evolution of semiconductors and fulfills volume-based

ment by semiconductor manufacturers decreased

expansion needs. We will do this from a foundation of

considerably. Amid these circumstances, Tokyofinancial strength.

Electron finished fiscal 2013 with net sales of ¥497.3

In April, I was appointed President and CEO ofbillion, operating income of ¥12.5 billion and net income

Tokyo Electron, while continuing to serve as Chairmanof ¥6.1 billion. To recognize the long-standing supportof the Board. Keeping the following management pre-shown by our shareholders, we issued annual dividends

cepts in mind at all times, I intend to place thetotaling ¥51, including a commemorative 50 year anni-

Company on a firm growth footing and continuously

versary dividend of ¥20. Again, I would like to express

improve management to meet the expectations of ourmy deepest thanks.

stakeholders. We will:

Since this spring, capital investment by semiconductor manufacturers and flat panel display manufacturers has begun to pick up after a long period of
restraint, leading in turn to a rise in orders received. We
predict this is the start of a solid upward trajectory.

1. Remain committed to creating new markets andexpanding profit through technological innovation
2. Reinforce technical support and service capabilities on a
global level under a policy of placing the customer first
3. Build a dynamic company that is inspired with creativ-

Short-term reasons include the continuing recovery ofity, eagerness to take on new challenges, passion,

the global economy and reductions in semiconductor

and a sense of responsibility from the frontlines to top

inventories. Over the medium to long term, momentum

management.

will be provided by the full arrival of the global network
era, the spread of cloud computing, and the global
marketing of new IT devices such as smartphones andtablet PCs, even in emerging economies. These trends

4. Meet the expectations of all stakeholders by realizing
world class profitability and sustained growth.
I welcome your continued support and understanding.

will cause nothing less than a tectonic shift in information network infrastructure.
The systems that support global networks will needto ceaselessly transmit, receive and store huge amountsof data, including audio and images, leading to volume
demand for high performance semiconductors. The more

Tetsuro Higashi

these networks expand and evolve, the greater the need

Chairman of the Board, President & CEO

TOKYO ELECTRON ANNUAL REPORT 2013

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6

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Interview with the CEO

As we always say, technological innovation is the source of Tokyo Electron’s reve-

R&D Expenses

nues. In fiscal 2013, R&D expenses were maintained at the high level of ¥73.2 bil-

(Millions of yen)lion as we worked to further boost technological development in a number of areasthat are highly promising for future growth. In addition, research into such new

100,000

semiconductor devices as MRAM (magnetoresistive random access memory) has
been accelerating in recent years. In the manufacture of such new semiconductor
devices, technological development based on not only the extension of existing
technologies, but also cutting-edge scientific theory is more important than ever.

81,50680,00070,56873,24960,000As such, the Company strengthened ties with academia, including Tohoku
University. To create new markets, a new initiative is being launched by universities

40,000and semiconductor production equipment (SPE) manufacturers to develop new
devices and new production equipment. In addition, Tokyo Electron invested ¥55

20,000billion in four corporate acquisitions to capture outstanding products and technologies. Through this multi-faceted approach we are seeking to accelerate the pace0of technological innovation to fuel the future growth of Tokyo Electron.

Pursuing technological innovation
through multifaceted efforts

Accelerating technology
development Technological innovation creates

Ac

ratin
cele

al
gic
o
l
o
chn
g te

io
at
v
o
inn

n
Integrating outside technology
Academic approach
In-house development

value for stakeholders

Q

How would you characterize fiscal 2013 in terms ofTokyo Electron’s business strategy?

A

The business environment surrounding Tokyo Electron in fiscal
2013, the year ended March 31, 2013, was severe due to the influence of the weak macro economy and restrained capital investment by our customers. On the other hand, over the medium andlong term, semiconductors continue to undergo major technological changes. Aiming to seize business opportunities accompanying shifts to new technologies, Tokyo Electron was more active
than ever in laying preparations for the future. We worked tostrengthen internal development, foster joint development withJapanese and overseas research institutions such as universities
and consortia, and obtain new technologies via corporate acquisitions.

Q

Since assuming the title of CEO in addition to your role as
Chairman, what are your thoughts on the development of
the SPE market going forward? What will drive that development?

A

The technology sought for semiconductors is becoming increasingly advanced and diverse. To meet this need, technologicalinnovation in SPE is indispensable, and we on the production
equipment side must create the breakthroughs. As long as semiconductors continue to evolve, I have every confidence that theSPE market will continue to expand, as production equipment
manufacturers continue to provide high-value-added products
and solutions.

11

12

13

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

7

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Interview with the CEO

Demand for semiconductors is forecast to continue expanding due to the fullfledged spread of such mobile devices as smartphones and tablets and the rapid
development of cloud computing, which enables enormous data traffic. In tandemwith volume expansion, technological demand is constantly growing for new semiconductor devices offering higher speed and capacity, coupled with reduced
power consumption. In addition to conventional CMOS scaling in line with Moore’s
Law, new technological innovations are helping meet today’s increasing demands(Figure 1). From such next-generation memory as MRAM to 3DI* and otheradvanced packaging technologies, there is no end in sight to technological innovation surrounding semiconductors.

Q

What were the objectives of the three corporate
acquisitions Tokyo Electron executedin the SPE business last year?

A

These three acquisitions were all aimed at securing
future-oriented technologies. I am confident they will
create synergies with existing products and technologies,
accelerate our technological development, and help tosolidify our combined growth.

*3-dimensional interconnect

We acquired NEXX Systems, FSI International and Magnetic Solutions to strengthAs the development of new production equipment for new devices acceler-en our core SPE business. The benefits are numerous, from the obtainment of newates, the roles of SPE manufacturers on the cutting edge of semiconductor tech-single wafer cleaning technology in the cleaning systems business, which we arenology grows only more important.

seeking to develop, to the expansion of our product lineup in the field of advanced

More than ever, SPE manufacturers must provide breakthroughs and solu-

wafer level packaging, which allows smartphones and tablets to run faster and use

tions to technological problems. By meeting this demand, I am sure that the SPE

less energy, to the acquisition of magnetic annealing technology necessary formarket will continue to grow in the medium and long term.

manufacturing MRAM which is poised to succeed flash memory and DRAM as thenext generation of memory. All of these corporate acquisitions were made with thegoal of capturing future technologies that are indispensable for the manufacture of

Figure 1:
Diverse technological development that supports semiconductor device innovationand leads the SPE market

new semiconductor devices.
We are making full preparations for the coming market expansion by bringing
in outstanding technologies from outside the Company.

Advanced packaging
Silicon photonics

Emerging memory

More than Moore

Three acquisitions to strengthen the SPE business

New material
New structure

450 mm

TSV/WLP
ReRAM
Flip chipMRAM

3D NANDFSI International, Inc.
(now TEL FSI, Inc.)

Carbon material
Ge/III-V channel

Patterning
Tri-gate transistor
DSA

EB direct writing

EUV
Multiple patterning

More Moore

Cleaning technology

Advanced packaging
technology

MRAM manufacturing
technology

NEXX Systems, Inc.
(now TEL NEXX, Inc.)

Magnetic Solutions Ltd.
(now TEL Magnetic
Solutions Ltd.)

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

8

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Interview with the CEO

Q

Please tell us about the background surrounding Tokyo
Electron’s entry into the photovoltaic panel production
equipment business with the purchase of Oerlikon Solar

our gratitude for the support of our shareholders. In fiscal 2014, the year ending
March 31, 2014, considering the Company’s stable financial base as well as therecent state of the world economy, we expect to pay annual dividends of around¥50, on level with fiscal 2013.
Going forward, we aim to continue our efforts to maximize corporate valueAand increase direct returns to shareholder through sustained profit growth, while

We entered the market of photovoltaic panel production equipment with the goal of creating a new business pillar that will
enhance Tokyo Electron’s revenues over the medium
and long term. It will be quite a challenge, but it’s an area in which
we can use the SPE technology Tokyo Electron has built up over
the years.

also flexibly considering share buybacks and other means of further enhancing
shareholder returns.

For photovoltaic power generation to expand, its cost will have to decrease below

Global Development Bases

that of fossil fuel and other existing power sources. We entered the photovoltaic

Accelerating technological innovation throughout our global development framework
to maximize shareholder value through growthpanel production equipment market hoping to rapidly realize cost reductions in

Korea

power generation by working from a development base of Oerlikon Solar’s thin-film
silicon photovoltaic panel technology, among the most advanced in the world, andcombining it with Tokyo Electron’s proprietary semiconductor and flat panel display
production equipment technologies. To begin with, we are concentrating our

TEL Technology Center,
Korea

imec (Belgium)

efforts on quickly establishing this innovative technology.

U.S.

Albany Nano Tech (U.S.)
SEMATECH (U.S.)

CEA-Leti (France)

Korea

JAPAN

TaiwanQ

TaiwanHave the changes in top management brought any shifts
in TEL’s approach to returning profits to shareholders?
TEL Technology
Center, Taiwan

TEL Technology Center,
AmericaA

At present there is no change to our performance-linked dividend
payout ratio target of 35%, but we will need to be flexible, taking
into consideration the Company’s operating environment andfinancial base.

In fiscal 2013, as we entered Tokyo Electron’s 50th year, we issued annual dividends of ¥51, including a commemorative anniversary dividend of ¥20, to express

Japan

Technology Center
Tsukuba

Leading-edge Process
Development Center

Technology Center
Sendai

TEL development base
Joint research institution

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

9

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceFeatures — Technological Innovation in Pursuit of Growth
Feature 3: Technology Acquisitions

Corporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Feature 1: Product Development / Feature 2: Research and Development

Feature 4: Manufacturing

Features: Technological Innovation in Pursuit of Growth

Semiconductor technology moves forwardceaselessly, at a breakneck pace. Semiconductor production equipment
supports this rapid progress. Tokyo Electron is pursuing technologicalinnovation through not only the development of its own proprietary
technologies for next-generation semiconductor devices, but also throughthe integration of superior outside technologies, as well as joint
development with universities and international R&D consortia based on
cutting-edge theory.

TEL Technology Center, Korea
In addition to centers in Japan, the U.S. andTaiwan, Tokyo Electron has established a processdevelopment center in South Korea, further
enhancing its global development framework.
Through development in close contact with customers, Tokyo Electron will speedily introduce new
products that customers need.

Technology Center Tsukuba
Technology Center Tsukuba, established in April
2012, focuses on the research and development ofphotovoltaic power generation and new semiconductor materials. Furthermore, work at the center cultivates new seeds of technology, some of which will
ultimately bear Tokyo Electron into the future.

Corporate Acquisitions
In fiscal 2013, Tokyo Electron conducted four corporate acquisitions: NEXX Systems, FSI International,
Magnetic Solutions and Oerlikon Solar. By acquiring
powerful companies and businesses overseas, Tokyo
Electron seeks to develop new business strengths
that make use of not only its semiconductor production equipment technologies, but all of its technologies, creating new growth drivers.

Manufacturing at Tokyo Electron
Building in quality from the design and development
stage is the heart of manufacturing. Tokyo Electron israising the bar of quality and productivity throughnew production methods and a framework that is
integrated from development to manufacturing.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

10

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Review of Operations
and Business Outlook

Special Feature

Corporate GovernanceFeatures — Technological Innovation in Pursuit of Growth
Feature 3: Technology Acquisitions

Corporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Feature 1: Product Development / Feature 2: Research and Development

Feature 4: Manufacturing

Features: Technological Innovation in Pursuit of Growth
Feature 1: Product Development

Feature 2: Research and Development

Increasing Business Opportunities through Production
Equipment Innovation
Until recently, PCs drove the semiconductor market, but in the past year
mobile devices such as smartphones
and tablets have come to the fore. Theirconsiderable growth is also expected totrigger demand for servers and storage
for the cloud services. The year was ahistoric turning point that changed thefuture course of the industry.
The higher speed and lower power consumption demanded of semiconductor

Hikaru Ito
Corporate Director,
Executive V.P., SPE,
Senior General Manager,
SPE Sales Division &General Manager, ESBU

from customers. In memory chips, 3D
structures are expected to be employed in
NAND flash memory. In these structures,Tokyo Electron is attracting attention for its
deep silicon etch technology, used in
DRAM trench processes. Also garneringinterest is our wafer bonding technology
used in bonders/debonders, in the area ofadvanced packaging technologies.
Improving equipment productivity is an

The semiconductor technology is facing
two serious bottlenecks: miniaturizationand power consumption. To realize
continuous growth, we must create
innovative technologies that overcome
these bottlenecks.
In order to continue scaling semicon-

devices have become more important thanever. Development is advancing in an
extremely wide variety of semiconductor

important task as the number of wafer
process steps increases. Tokyo Electron’s
new NT333™ ALD system, CLEAN
TRACK™ LITHIUS Pro™ Z coater/devel-

process technologies, including patterningtechnology centered on conventional lithography, 3D structures, materials and packag-

oper, CELLESTA™ -i single wafer cleaning system and nearly all of theCompany’s products used in wafer pro-with consortia around the world. Also,
Tokyo Electron has superior multiple patterning technology using etching combined with unique film deposition,achieving 11nm line patterns. Single digit

ing. In close collaboration with its
customers, Tokyo Electron is conducting
advanced technological development inthese and other core areas.
Demand is rising for equipment thatrealizes low damage and high selectivity,
especially in 3D structure devices, which
are gaining momentum as they shrink

cesses feature productivity that is 1.5 to 2
times higher than previous generations.
Furthermore, we are advancing development of new products for the 450mm
wafer generation.
Moving forward, the product cycle ofadvanced electronics will continue toshorten, and speed will be increasingly
important in the development of production equipment. Tokyo Electron will meetthe needs of the era through allianceswith customers, consortia and universities, and by offering production equipment for next-generation technology
before anyone else.

below 20nm. Tokyo Electron is meetingthese needs with proprietary RLSA™ etching technology, dry cleaning technology,
and wet cleaning technology acquired withFSI International last year that eliminates
the need for ashing. These are garneringhigh levels of interest and tool evaluations

Aiming for sales expansion through product development in response to new technologies
The latest coater/developermodel, with increased
through-put and enhanced
defect reduction for further
miniaturization

Semi-batch ALD system
employing a concept different from existing ALD
processes, realizing highquality nano-scale deposition while maintaining
high productivity.
ALD System
NT333™

Boldly Advancing Innovative Technological
Development

Coater/Developer
CLEAN TRACK™ LITHIUS Pro™ Z

Silicon plasma etch systemcharacterized by low damage and high selectivity,with excellent 3D structuretransistor formation process performance
Plasma Etch System
Tactras™ RLSA™ Etch

ductors, Tokyo Electron is developing
technologies for EUV* lithography, apromising next-generation technology,

nm lines are now in sight. In addition,
Tokyo Electron is developing DSA** technology which makes circuit patterns byusing chemical reactions, without exposure and development. Through these
efforts, Tokyo Electron is pursuing a fullrange of technological development
aimed at further miniaturization.
Technologies that solve the problemof power consumption will make use of
new semiconductor materials to reduce
operating voltage and to reduce standby power by introducing nonvolatilememory to replace DRAM and SRAM.
Research into germanium (Ge) andindium gallium arsenide (InGaAs) as new
semiconductor materials with high carrier
mobility is advancing. Integrating these different types of semiconductors on silicon
substrates will mean a great upheaval,
equivalent to restarting the development ofsilicon semiconductor device production
processes. To face this change, Tokyo
Electron is developing manufacturing technology based on bold ideas that transcend
conventional wisdom.
MRAM is currently the only candidate

for nonvolatile memory to replace today’s
standard forms of working memory. The
key to realizing highly integrated magnetic
memory lies in magnetic materials andproduction technology to integrate them.
In order to pursue development of manufacturing technology optimized for thesematerials, we are accelerating development via joint research with world leader
Tohoku University.
Tokyo Electron is also tackling environmental and energy-related problems inorder to realize a more sustainable society. The Company is actively engaging indevelopment of thin-film silicon photovol-

Shigetoshi Hosaka
Senior Vice President,
General Manager,
Corporate Development Division

taic panels to provide green energy and
OLED panel production technology,
which is expected to achieve commercial
viability and promises high luminosity andlow power consumption.
In these and other areas, Tokyo
Electron continues to boldly advance innovative technological development of rapidlychanging, cutting edge technology.
* EUV: extreme ultraviolet** DSA: directed self-assembly

11nm line pattern realized withmultiple patterning technology

Tohoku University Center for Innovative Integrated Electronic Systems, Research andDevelopment Building, completed April 2013

Tokyo Electron is taking part in the research and development program conducted by Tohoku University Center
for Innovative Integrated Electronic Systems, with the aim of quickly establishing production equipment technology for MRAM (magnetoresistive random access memory), which is attracting attention as a next-generation
memory device.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

11

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceFeatures — Technological Innovation in Pursuit of Growth
Feature 3: Technology Acquisitions

Corporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Feature 1: Product Development / Feature 2: Research and Development

Feature 4: Manufacturing

Features: Technological Innovation in Pursuit of Growth
Feature 3: Technology Acquisitions

Timely Acquisitions to Seize Opportunities for GrowthTokyo Electron conducted four acquisi-

products, helping us provide a wide

it into a core business over the medium

global network and sales support capa-

entiated technologies. Going forward,

tions in 2012, each with distinct growth

range of solutions to meet the increas-

and long term.

bilities. Technological innovation moves

we will flexibly consider a wide range ofobjectives.

ingly complex needs of our customers.

As planned, Tokyo Electron is

at a rapid pace in the markets thatcollaboration, extending to M&A, with

Tokyo Electron secured next-genera-

We acquired U.S.-based FSI

advancing the integration of new

Tokyo Electron operates in, and it isother companies in order to achieve a

International to strengthen existing busi-

tion core technologies through theresources acquired via M&A with Tokyo

imperative to be the leader in develop-

profitable growth.

nesses. This addition will quickly

acquisition of Irish venture company

Electron’s own proprietary technology,

ing and commercializing superior, differ-improve the competitiveness of Tokyo

Magnetic Solutions, obtaining magnetic

Electron’s cleaning systems, one of the

field annealing technologies necessary

most important areas of our core semi-

for the production of a promising new

conductor production equipment busi-

memory.

Kenji Washinoness, which we are targeting for

Corporate Director,
Executive V.P.,
Corporate Development Division,
ATS/FPD/PVE

expansion. The synergy of this acquisi-

Oerlikon Solar to expand our field oftion has already begun to show.

operations. With this acquisition, Tokyo

We acquired the Swiss company

The acquisition of U.S.-based NEXX

Acquisition of FSI International

Acquisition of NEXX Systems

Expanding Tokyo Electron’s cleaning system business with

Strengthening the lineup of advanced packaging products,

new complementary single wafer cleaning technology

a future growth driver

Existing TEL Systems

Electron made a full-fledged entry into

Systems expands Tokyo Electron’s

the photovoltaic panel production

lineup of wafer level packaging

equipment business, with plans to growBatch cleaning

EXPEDIUS™

FY2013: Corporate acquisitions for further growth

Objectives

Technologies acquired

Completion of
acquisition

Cleaning technology• Single wafer cleaning systems

FSI International, Inc.
(now TEL FSI, Inc.)

October 2012

Advanced packaging technology• Electrochemical deposition systems• Sputtering systems

NEXX Systems Inc.
(now TEL NEXX, Inc.)

May 2012

Obtaining next-generationcore technology in
SPE business

MRAM manufacturing technology• Magnetic annealing systems

Magnetic Solutions Ltd.
(now TEL Magnetic
Solutions Ltd.)Entering new
business areas

Photovoltaic panel manufacturing
technology• Thin-film silicon photovoltaic panel
production equipment

Strengthening
SPE business

Single water cleaning
Stratus, Electrochemical Deposition System
CELLESTA™
Critical cleaning
Film stripping

ORION™
High-dosed resist
stripping

Dry cleaning
Cu pillar

TSV Cu filling

By acquiring NEXX Systems, Tokyo Electron expanded its line-

Certas™

up of TSV 3DI packaging technology with NEXX’s electro-

December 2012

chemical deposition and sputtering systems for advanced

Physical cleaning

packaging.
TSV: through-silicon via

Oerlikon Solar AG(now TEL Solar AG)

Micro bump

NS300+
ScrubbersystemNovember 2012ANTARES™
AerosolTokyo Electron will increase its competitiveness in single wafer
cleaning systems through the acquisition of FSI International.
FSI International boasts high-dosed resist stripping technology
with high temperature SPM process, an increasingly important
technology.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

12

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceFeatures — Technological Innovation in Pursuit of Growth
Feature 3: Technology Acquisitions

Corporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Feature 1: Product Development / Feature 2: Research and Development

Feature 4: Manufacturing

Features: Technological Innovation in Pursuit of Growth
Feature 4: Manufacturing

Manufacturing that Maximizes Customer Value
Tokyo Electron continuously aspires toand design stage to realize manufactur-

ate production equipment that has the

Our customers also have highThroughout all stages of operations,realize manufacturing that maximizes

ing that is continuously responsive tofunctions that make these possible.

expectations for Tokyo Electron’s pro-beginning with marketing, the thoroughcustomer value. Two years ago wemarket demands. The broader defini-To realize those functions it is firstduction equipment. They most often

implementation of waste elimination via

began operations at the new Tokyo

tion of quality includes functionality,and foremost essential to quickly create

seek clearly specified conditions for

TPM** and prevention of defective

Electron Miyagi plant, which deals insafety, environmental soundness, reli-differentiated technologies throughproducing non-defective products, easeproducts is indispensable.

etch systems from development to pro-ability, maintainability and cost effective-

combinations of cutting-edge and con-of set-up, reliably stable performance,

Tokyo Electron will mark its 50th

duction. Then, last year, in China, theness. Manufacturing begins withventional technologies (value creation).

predictability of variations in perfor-

anniversary this year. Looking toward

principal market for the flat panel dis-marketing: precisely understanding

We then need the manufacturing tech-mance, and ease of repair. Again, these

the next 50 years, we will spare noplay (FPD) production equipment busi-

each customer’s desires and problems.

nology to consistently produce theattributes must be built in from theeffort to advance manufacturing andcontinue to grow as a manufacturer.

ness, we began operations at a new

products we have designed at the low-

design stage to achieve the desired

plant manufacturing FPD etch systems

innovations in semiconductors are low

est cost (maximizing value).

level of quality.

and carrying out a repair business for

power consumption, high-speed pro-Furthermore, in realizing these func-

their key components.

cessing and low cost. These qualities

tions, it is important that they bewith marketing. Quality must be built in

The most sought-after technologicalTokyo Electron’s basic stance with

To reiterate, manufacturing begins

can be realized through miniaturization,backed by core, foundational technolo-

from the development and design

regard to manufacturing is to build

the use of new materials and newgies in order to build a competitive

stage. Furthermore, in order to quickly

quality, cost performance and produc-device structures, larger wafers, andadvantage that can be sustained intobring new products to market, concur-tion processes from the development

total cost reduction. It is our job to cre-

the future (the source of value).

rent engineering* is also necessary.

* Concurrent engineering: a product development methodology in which all steps of design and production planning, including concept design, detailed design,
production design and pre-production, are performed inparallel.
** TPM: Total productive management coordinates all activities
throughout an organization to prevent loss and improve
efficiency.

Manufacturing operations of FPD etch systems begun
at new Kunshan plant in China

The Source of Value
Core, foundational technologies
to build a competitive advantagethat can be sustained
into the future

Maximizing Value

Value Creation

Consistently producing
products developed
at the lowest cost

Realizing rapid development
of differentiated technologies
combining cutting-edge
and conventional
technologies

Tokyo Electron (Kunshan) Limited

Tokyo Electron (Kunshan) Limited has begun manufacturing operations of FPD etch systems in China, the main market for FPD production equipment, to improve responsiveness to customers and reduce costs.

Hirofumi Kitayama
Representative Director,
Senior Executive V.P., Business Ethics,
Production and Technology,
System Development Division, IT,
General Manager, Production Division(Quality)TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

13

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Review of Operations and Business Outlook

Review of Operations and Business Outlook

SALES BY SEGMENT

SHARE OF NET SALES

Semiconductor Production Equipment

511.3

392.0

Net Sales¥ 392.0 billion

262.4

325.4

150

477.9

600

300

78.8%

0

09

10

11

12

13

FPD/PV Production Equipment(Billions of yen)

50

4.1%

69.9

66.7

71.4

88.1

100

75

Net Sales¥ 20.2 billion

20.2

25

0

09

10

11

12

13

During fiscal 2013, global capital
investment in semiconductor equipment remained subdued, influenced
by the sluggish economy. Due to aworsening DRAM supply-demandbalance caused by slowing shipments of PCs as well as weaker than
expected demand for NAND flash
memory, investment to increase production capabilities in memory manufacturing by Tokyo Electron’scustomers was restrained. However,demand for logic chips used in
mobile devices, servers and otherapplications was strong, leading tofirm logic-related investment.

• Segment net sales were down 18.0% year on
year to ¥392.0 billion.

In flat panel displays (FPD), capital
investment in large panels was put off
in fiscal 2013, due to weakened
demand for flat panel TVs in developed countries. Investment was limited mainly to small- and medium-sizedhigh-definition panels for use inmobile devices, falling approximately
70% as a result.
Demand for photovoltaic panels is
rapidly expanding worldwide. As
uncompetitive production lines released
since 2008 face elimination, 2012 isthought to be the bottom point, with rising investment going forward.

• Segment net sales were down 71.2% year on
year to ¥20.2 billion (of which sales of FPD production equipment accounted for nearly 100%).

Electronic Components and Computer Networks(Billions of yen)

17.0%
84.7

90.2

75

84.9

84.5

94.2

100

Net Sales¥ 84.7 billion

50

25

0

09

10

11

12

13

BUSINESS OVERVIEW

BUSINESS OUTLOOKThe technological innovation sought for semiconductors is becoming increasingly advanced(Billions of yen)

450

BUSINESS ENVIRONMENT

Demand for both consumer andindustrial electronic components was
weak in fiscal 2013. Private capital IT
investment continued to face harshconditions though the cloud computing market, including data centers,
showed underlying notes of expansion.

• Sales fell 51% in Japan and 47% in South Korea
due to weak memory-related investment.
• Sales rose 40% in Taiwan and 2% in the U.S. on
the back of solid logic-related investment.
• Tokyo Electron achieved a record high 89%
market share of coater/developers.
• Tokyo Electron secured multiple approvals from
customers in the key area of etching and cleaning systems for new manufacturing lines.
• Tokyo Electron introduced new ALD systems
and metallization systems.

and diverse as semiconductor demand continues to expand, propelled by the full-fledged
spread of such mobile devices as smartphones and tablets and the rapid development ofcloud computing, which enables enormous data traffic.
SPE plays an increasingly important role in realizing the advanced technological innovationand needed volume expansion that will drive capital investment in the semiconductor industry.
By aggressively introducing new products, Tokyo Electron will take advantage of the shift
to new technologies to expand its business. In coater/developers, an area in which theCompany already commands a large market share, the Company will increase productivity
and introduce products for extreme ultraviolet lithography. In deposition systems, Tokyo
Electron aims to increase revenues with semi-batch ALD systems and metallization systems.
In the key business areas of etching and cleaning systems, the Company will work to expand
its market share with etching systems featuring low damage and high selectivity, as well as
single wafer cleaning systems for advanced logic chips and dry cleaning systems. With regard
to wafer probers, the Company plans to expand its served available market by introducing
new products that will help to reduce customers’ production costs. Additionally, in the waferlevel packaging field, which is expected to grow significantly, the Company aims to expand
sales by taking advantage of its strong product lineup, enhanced by the electrochemical
deposition systems acquired in fiscal 2013 with TEL NEXX.

• Sales by region were 47% domestic and 53%
overseas.
• Around 85% of FPD production equipment sales
came from sales of equipment for generation six(Gen6) or below small- and medium-sized panels.
• Tokyo Electron released an ICP etch system for
Gen8 panels, responding to demand for higher
definition panels.

The market of small- and medium-sized panels for mobile devices such as smartphones andtablets will remain firm. Capital investment related to large-sized panels will resume in China. In
thin film transistor (TFT) processes, the use of low-temperature polysilicon (LTPS) and indium
gallium zinc oxide (IGZO) is advancing, replacing the use of conventional amorphous silicon.
As the successor to liquid crystal displays, OLED displays with higher definition and lower
power consumption are already being used in mobile devices, and development aimed at
manufacturing large-sized OLED displays for TVs has been accelerating. As such technological innovation advances, Tokyo Electron will pursue growth in this business by introducing
competitive products for TFT process and entering the new market of OLED production
equipment. In addition, the Company will ramp up manufacturing at the Kunshan Plant in
China, increasing responsiveness to customers and reducing costs.
In photovoltaic panel production equipment, which is expected to become a business pillar in the medium- to long-term, Tokyo Electron will use the sophisticated thin-film silicon photovoltaic panel production equipment of Oerlikon Solar, acquired in fiscal 2013, as a base

• The Kunshan Plant in China began repair andmanufacturing operations of FPD etch systems.

while strengthening development in order to realize high conversion efficiency, the key to low-

• Segment net sales were down 0.2% year on
year, to ¥84.7 billion.

In the electronic components business, market growth in the Asia region is forecast to contin-• In the electronic components business, domestic demand for consumer and industrial electronics fell, causing domestic sales to decrease
approximately 10%. However, sales in the Asia
region, including China, rose, causing overallsales to decrease only 0.7% year on year.
• Sales in the computer networks businessincreased 2.2% year on year due to firm sales of
product and maintenance services.

cost power generation.

ue. In the computer networks business, investment in data centers is also expected to continue, reflecting the spread of cloud computing.
With these market trends in mind, Tokyo Electron will work to expand segment sales not
only through existing businesses and securing trade rights, but also by promoting sales tooverseas customers, and through overseas sales of the Company’s in-house inrevium™
brand. In addition to reinforcing its direct sales system for cloud computing and data centers,
Tokyo Electron will strive to introduce new high-value-added products and provide optimal
solutions.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

14

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate Governance
Against a backdrop of ongoing business globalization, Tokyo

duties by directors. During fiscal 2013, the audit & supervisory board

Electron maintains a management philosophy that puts emphasis on

met seven times.

improving corporate value for its shareholders and all other stake-effectiveness of internal control systems. As necessary, the Global

nInternal Control and Risk Management System

Audit Center also provides guidance to operating divisions.
In order to enhance corporate value and ensure that all businessholders. To this end, the Company considers it important to strength-

Outside Directors and Outside Audit & Supervisory Board

activities are carried out responsibly and in the interests of all stake-

Coordination Between Audit & Supervisory Board Members

en corporate governance. In line with the following three basic

Members

holders, Tokyo Electron is taking steps to strengthen its internal con-and Internal Audit Department

principles, the Company is building a highly effective, optimized cor-

From the viewpoint of objectively ensuring the effectiveness of thetrol systems and make them more effective. The Company is

The audit & supervisory board members coordinate with the Global

porate governance structure, and upgrading and strengthening its

decision-making of the Board of Directors, Tokyo Electron has

implementing practical measures in line with the Fundamental

Audit Center, a department responsible for internal auditing activities,

internal control systems and risk management system.

appointed two outside directors to the Board: Mr. Hiroshi Inoue, who is

Policies Concerning Internal Controls within the Tokyo Electron

primarily by attending its report meetings.

Chairman of the Board, Tokyo Broadcasting System Holdings, Inc.,

Group decided by the Board of Directors. The Company is alsoTokyo Electron’s Basic Principles of Corporate Governanceand Mr. Masahiro Sakane, who is Councilor & Senior Advisor,

implementing measures for the Internal Controls Over Financial

Coordination Between Audit & Supervisory Board Members

1. Ensure the transparency and soundness of business operations

Komatsu Ltd. Additionally, to objectively ensure the reasonableness ofReporting, based on the Financial Instruments and Exchange Act.

and Independent Auditors

2. Facilitate quick decision-making and the efficient execution of

the audits, Tokyo Electron has appointed three outside audit & supervi-business operations
3. Disclose information in a timely and suitable mannernThe Corporate Governance Framework

The audit & supervisory board members receive audit plans for thesory board members: Mr. Mikio Akaishi, Mr. Takatoshi Yamamoto andInternal Control Systems

fiscal year from the independent auditors, as well as explanations

Mr. Ryuji Sakai, who is an attorney at law of Nagashima Ohno &To more effectively strengthen the internal control and risk manage-

regarding auditing methods and particular areas of focus, among

Tsunematsu. Mr. Mikio Akaishi conducts audits of the Tokyo Electron

ment systems of the entire Tokyo Electron Group, Tokyo Electronother matters. The independent auditors audit the year-end financial

Group as a full-time audit & supervisory board member.

appointed a Chief Internal Control Director and a Compliance &statements and review the quarterly financial statements, and report

Internal Control Executive Officer. Under them, the Company estab-the results of their audits to the audit & supervisory board members.
The Company provides KPMG AZSA LLC, its independent audi-

Tokyo Electron uses the audit & supervisory board system based onCompensation for Corporate Directors and Audit &the Companies Act, and furthermore has established its own

Supervisory Board Members

within the General Affairs Department, which evaluates and analyzes

tors, with all necessary information and data to ensure that it canCompensation Committee* and Nomination Committee** to increase

Tokyo Electron has adopted the following executive compensation

the risks which could affect the Group, and works to reduce these

conduct its audits during the fiscal year promptly and correctly.

the transparency and objectivity of management. The members ofprogram with the intention of tying compensation more closely torisks by promoting the necessary measures. Tokyo Electron has also

these committees are directors and audit & supervisory board mem-financial results and shareholder value, raising corporate competitive-

established the Information Security Committee and the Export Tradebers, excluding the representative directors. Also, to more clearly

ness, and enhancing management transparency.

Control Committee to further strengthen the management of confi-

define the roles of the Board of Directors and the executive body and1. The compensation for corporate directors consists of a monthly

dential information and the export compliance system.

to facilitate quick decision-making, Tokyo Electron has adopted thefixed remuneration and a performance-linked compensation.

executive officer system since 2003. Moreover, Tokyo Electron has

2. The performance-linked compensation system for corporate direc-

been disclosing the individual remuneration of representative direc-

lished a dedicated risk management and internal control function

nCompliance
Stakeholder trust is the cornerstone of business activities. In orderto maintain trust, it is necessary to continuously act in rigorous

Internal Audit Department (Global Audit Center)

conformity to business ethics and compliance. In line with thetors is designed to align compensation more clearly with financial

The Global Audit Center oversees the internal auditing activities ofFundamental Policies Concerning Internal Controls within thetors since 1999 in recognition of the importance of managerial trans-

results and increases in shareholder value. It takes into accountthe entire Tokyo Electron Group. The Center is responsible for audit-

Tokyo Electron Group, all Group executives and employees areparency for shareholders.

consolidated net income and consolidated return on equity (ROE),

ing the business activities of the Group’s domestic and overseas

required to maintain high standards of ethics and to act with a*two performance indicators of consolidated business results.

bases, as well as their compliance and systems, and evaluating theclear awareness of compliance.

Compensation Committee: This committee makes recommendations to the Board of
Directors on the director remuneration system, as well as representative director remuneration itself.
** Nomination Committee: This committee nominates director- and CEO-candidates, andsubmits them to the Board of Directors for approval.

Necessary adjustments are then made when there are special factors that should be taken into account, such as principal performance indicators for the term under review, including profits andlosses, and so on. In principle, performance-linked compensation

The Board of Directors

comprises cash bonuses and stock-based compensation.

The Board of Directors consists of 11 directors, two of whom are

Performance-linked compensation is limited to five times the fixedoutside directors. In principle, the Board of Directors meets once

yearly remuneration. The ratio of cash bonuses to stock-baseda month. During fiscal 2013, the Board of Directors met on 12

compensation has generally been one to one. Stock-based com-occasions. In order to ensure that the Company can respondpensation consists of granting share subscription rights with a set

quickly to changing business conditions, and to more clearly

strike price of one yen per share and a three-year vesting period

define management accountability, the term of office for directors
is set at one year.

before the granted stock options may be exercised.
3. The performance-linked compensation of outside directors does
not include stock-based compensation.

The Audit & Supervisory Board

4. The compensation for audit & supervisory board members con-

The Company has five audit & supervisory board members, three ofsists only of a monthly fixed remuneration, to maintain indepen-

whom are outside audit & supervisory board members. The audit &dence from management.

supervisory board members not only attend meetings of the Board of

5. Retirement allowance systems for corporate directors and audit &Directors, the Top Management Conference and other important

supervisory board members have been abolished in and after thebusiness meetings, but also conduct operations audits and account-end of fiscal 2005, as part of the revisions to Tokyo Electron’s

ing audits, evaluate risk management, and audit the performance ofexecutive compensation program.

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Annual Shareholders' Meeting
Board of Directors

Audit & Supervisory
Board

Compensation Committee Chief Business Ethics Director
Nomination Committee
Chief Internal Control Director

Request for improvement/Report

Representative Directors

Confirm the progress of improvements and give instructions
Audit and improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer

Internal Audit Dept.
(Global Audit Center)

Executive Officers

Committees Ethics Committee
Information Security Committee
Export Trade Control Committee

Independent Auditors

Request for improvement/Report

Risk Management & Internal Control Function(General Affairs Dept.)
Request for improvement/Report

Monitoring

Administrative Depts.

Check and balance

Business Depts.

Audit

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

15

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate Governance
Code of Ethics, Chief Business Ethics Director and Ethics

Internal Reporting System

Committee

In the event that an employee becomes aware of any activity which

In 1998, Tokyo Electron formulated the “Code of Ethics of the Tokyo

may violate laws, regulations or principles of business ethics, theElectron Group” to establish uniform standards to govern all of its

Group operates an internal reporting system that employees can use

global business activities. In the same year, the Company appointed

to report their concerns. The entire Group has established an ethics

a Chief Business Ethics Director and established the Ethics

hotline and a compliance hotline, and this reporting system is also in

Committee, which is responsible for promoting business ethics

place at each overseas base. In all cases, this system ensures thatawareness throughout the Group. The Code and its Q&A section arestrict confidentiality is maintained to protect the whistleblower andpublished in Japanese, English, Korean and Chinese editions, andDoes Tokyo Electron have these major components of corporate governance?
Compensation Committee

Yes

Composed of directors, excluding representative directors,
or audit & supervisory board members

Nomination Committee

Yes

Composed of directors, excluding representative directors,
or audit & supervisory board members

Outside directors

Yes

Two of the 11 directors are outside directors

Outside audit & supervisory board members

Yes

Three of the five audit & supervisory board members areoutside audit & supervisory board members

ensure that they are not subject to any disadvantage or repercussions.

Executive officer system

Yes

Disclosure of individual remunerations of representative directors

Yes

including those overseas. Moreover, the Code is appropriately

Shareholder’s Meeting

Performance-linked compensation systemYesreviewed and revised in response to changes in the environment andTokyo Electron mails a Notice of Annual General Meeting ofsocietal demands. The most recent revision of the Code and Q&A

Shareholders to shareholders more than three weeks in advance ofStock options systemYes

was in April 2011.

the meeting, as one of its measures to vitalize these meetings and to

Retirement allowance system for executives

Nopromote smooth and efficient voting.

Anti-takeover measures

No

the Company distributes it to all Group executives and employees,

Compliance & Internal Control Executive Officer

It also sets the date of the Company’s meeting to avoid days on

Tokyo Electron has appointed a Compliance & Internal Control

which many such meetings are concentrated. In addition, sharehold-Executive Officer from among the executive officers to raise aware-ers are free to cast their votes via the Internet. Moreover, Tokyo

ness of compliance across the Group, and further improve its imple-

Electron participates in the web-based voting platform for institutional

mentation.

investors operated by Investor Communications Japan Inc. (ICJ). To
supplement the above shareholder meeting-related initiatives, Tokyo

Framework for Thorough Implementation of ComplianceElectron’s website carries notices, resolutions and voting results ofTokyo Electron has drawn up the Compliance Regulations setting out

shareholders’ meetings.

basic compliance-related requirements in line with the Code. The
Compliance Regulations are intended to ensure that all individuals
who take part in business activities for the Group clearly understandthe pertinent laws, regulations, international standards and internal
company rules, and continuously apply them in all of their activities.

Constituent of the
FTSE4Good Global Index

The Company also conducts web-based training programs for
employees, makes information on compliance issues available toemployees via the Company intranet, and takes other steps to promote broad awareness of compliance throughout the Company.

Tokyo Electron has been a constituent of the FTSE4Good Global Index
since September 2003. The FTSE4Good Global Index is a social
responsibility investment (SRI) index provided by the FTSE Group,a world-leading index firm wholly owned by the London Stock Exchange.

Disclosed since 1999
Does not apply to outside directors andaudit & supervisory board members

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

16

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Review of Operations
and Business Outlook

Special Feature

Corporate GovernanceCorporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Directors, Audit & Supervisory Board Members and Executive Officers

Directors, Audit & Supervisory Board Members and Executive Officers (As of July 1, 2013)

Directors

Executive Officers
Tetsuro Higashi

Tatsuya Nagakubo

Chairman of the Board, President & CEO

Vice President & General Manager, HR/
Human Resources Development Center/
Corporate Branding Promotion/CSR
Promotion

Tetsuo Tsuneishi
Vice Chairman of the Board,
Assistant to the CEO,Corporate Strategy, IR

Tetsuro Higashi

Tetsuo Tsuneishi

Hirofumi Kitayama

Kiyoshi Sato

Representative Director
Chairman of the Board,
President & CEO

Vice Chairman of the Board

Representative Director
Senior Executive Vice President
Business Ethics

Corporate Director

Hirofumi Kitayama
Senior Executive Vice President,
Production and Technology,
System Development Division, IT, General
Manager, Production Division (Quality)

Kenji Washino
Executive Vice President, Corporate
Development Division, ATS/FPD/PVE

Hikaru Ito

Kenji Washino

Hikaru Ito

Takaaki Matsuoka

Yoshiteru Harada

Corporate Director

Corporate Director

Corporate Director
Technology and Development

Corporate Director
Internal Control

Executive Vice President, SPE, Senior
General Manager, SPE Sales Division &General Manager, ESBU

Takashi Ito
Senior Vice President, General Manager,
PVE

Hiroshi Inoue*

Masahiro Sakane*

Corporate Director

Corporate Director/
Chairman & Representative
Director, Tokyo Broadcasting
System Holdings, Inc.

Corporate Director/
Councilor & Senior Adviser,
Komatsu Ltd.

Seisu Ikeda (Yoh)Vice President & General Manager, CTBU

Toshiki Kawai
Vice President & General Manager, SPSBU

Yoshinobu Mitano
Vice President & Deputy General Manager,
ESBU

Shingo Tada
Vice President & General Manager, TPSBU

Takeshi Okubo
Vice President & General Manager, SDBU

Kiyoshi Sunohara
Vice President & General Manager, FSBU

Senior Vice President, General Manager,
SPE Sales Division

Yuichi Abe

Senior Vice President, General Manager,
SPE Marketing & Process Development
Division

Vice President & General Manager, ATSBU

Tsuguhiko Matsuura
Vice President & General Manager, FPDBU

Shinichi Sasahara

Shigetoshi Hosaka

Vice President & General Manager, FPD Sales

Senior Vice President, General Manager,
Corporate Development Division

Kazushi Tahara

Yoshiteru Harada

Audit & Supervisory Board Members

Vice President & General Manager, IT

Chiaki Yamaguchi

Gishi Chung

Tetsuro Hori

Keisuke Koizumi

Vice President & General Manager,
Corporate Administration Division,
Compliance/Internal Control
HR/General Affairs/Accounting/Export andLogistics Control

Vice President & General Manager, System
Development Division

Satoru Kawakami
Vice President & Deputy General Manager,
SPE Marketing & Process Development
Division,
TEL Technology Center Sendai

Tetsuro Hori

Mitsutaka Yoshida

Shojiro Mori

Mikio Akaishi*

Takatoshi Yamamoto*Ryuji Sakai*

Audit & Supervisory Board
MemberAudit & Supervisory Board
MemberAudit & Supervisory Board
MemberAudit & Supervisory Board
MemberAudit & Supervisory Board
Member/Attorney at law, Nagashima
Ohno & Tsunematsu* Outside Director, Outside Audit & Supervisory Board Member

Vice President & Deputy General Manager,
Corporate Administration Division,
Corporate Strategic Planning/Finance/
Legal/Intellectual Property*BU stands for “business unit”

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

17

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Environmental, Safety and Health Activities

Environmental, Safety and Health Activities
Tokyo Electron positions environmental, safety and health activi-

In procurement and logistics, we are promoting green procurementties as one of its most important management issues to achieve

and modal shifts. In environmental management, we will continue toboth sustained corporate growth and a sustainable society. The

obtain ISO 14001 certification for the Group’s plants, implement envi-

Group is committed to reducing the environmental impact of all its

ronmental education, and begin activities to protect biodiversity,

activities, and to ensuring absolute safety in the Company’s facili-among other environmental activities.

ties and in those of its customers.

Example of efforts to reduce products’ environmental impact

gories were achieved. The overall amount of water used was
reduced by 6.4% from the previous year.

Single Wafer Cleaning System• Recycling of waste
Domestic plants and offices achieved the goal of recycling 97%

Recycling of Pure Wateror more of waste.

Waste fluid flow paths are divided into
those for recycling and those fordischarge to enable collection andrecycling of pure water.

nEnvironmental Activities

Cleaning
SystemTokyo Electron’s New Environment Vision
The Tokyo Electron Group has pursued activities at customers’ fac-

set by the six domestic plants and offices, the goals of five cate-III. Other• Tokyo Electron revised green procurement guidelines, conduct-

Cleaning
Systemed web-based environmental training, and established guidelines concerning biodiversity.

tories, as well as within the Group itself, with the aim of reducing
environmental impacts by 50% over the baseline year of fiscal 2008

Collection

by the end of fiscal 2015. Because this goal was forecast to be

Discharge

achieved ahead of schedule, in September 2012, we established a

Recycling

In fiscal 2014, these activities will be expanded to Group companies overseas to continuously promote improvement activities.

Discharge

nSafety and Health Activities

new Environment Vision and set new environmental goals to expand
our scope of activities by making our efforts more multifaceted.

Results of the Fiscal 2013 Environmental Goals
The results of the first year under the new Environment Vision andTokyo Electron gives top priority to the safety and health not only

New Goals based on the New Environment Visionenvironmental goals are as follows.

to our employees but also our customers and partner companies

With the adoption of the new Environment Vision, we have set new

and conducts various safety activities. The Company promotes  

environmental goals in the four areas of products, plants and offices,

I. Products

safety and health in all of its operations, including designing prod-

procurement and logistics, and environmental management. In prod-• Reducing environmental impact

ucts with an emphasis on safety and factories with considerationucts, we are aiming to reduce the power consumption of major mod-Against the goal of reducing power consumption of the major

for the environment.

els of each business unit by 50% and promote the environmental

models in each SPE business unit by 50% from the fiscal 2008

In fiscal 2013, Tokyo Electron reduced the number of work-

compliance of products. In plants and offices, we aim to reducelevels by the end of fiscal 2015, a 30% reduction in power con-place accidents by 20% compared with the previous year. Tokyo

energy and water consumption, and promote the recycling of waste.

Environmental
management

Procurement
and logistics

Plants and offices

Products

ActionMedium- to long-term goals

Reduction of environmental
impactReduce power consumption of major models of each SPE business unit by 50% from the fiscal 2008 levelsby the end of fiscal 2015

Compatibility with Chinese RoHS

Continue to ensure product compatibility with the Chinese labeling standard

Compliance with environmental
regulations of each country

Continue to ensure product compliance with the EU’s Registration, Evaluation, Authorization and Restriction ofChemicals (REACH) framework as well as with labeling requirements based on the Globally Harmonized Systemof Classification and Labeling of Chemicals (GHS) and battery regulations of each country

Voluntary standard based on
the EU’s RoHS

Continue to ensure that major models of each SPE business unit contain 98.5% or more parts that meet the
EU’s Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS)

Promotion of energy conservation

Reduce energy use by 1% on a per-unit basis from the fiscal 2012 level(Evaluate in a comprehensive manner based on a per-unit standard appropriate to the situation of each plantand office)Reduction of water consumption
Recycling of waste

Maintain the fiscal 2012 level(Evaluate in a comprehensive manner based on a per-unit standard appropriate to the situation of each plant)• Maintain a recycling rate of 97% or more
• Continue to achieve zero emissions

Green procurement• Continue to implement strict control over the use of chemical substances in equipment• Strengthen the link with suppliers’ environmental management systems

Reduction of environmental impact oflogistics• Promote a modal shift• Continue monitoring

Environmental management system

Continue to obtain ISO 14001 certification for the Group’s plants

Environmental education

Implement throughout the Group

Environmental communication

Continue to publish and enhance Environmental and Social Reports

Biodiversity

Start activities from fiscal 2014 upon investigation and examination

sumption was achieved for all such models.

Electron also carried out activities in line with its important goal of• Product environmental compliancepreventing accidents that could lead to serious injuries. As a

In addition to activities to reduce the use of hazardous sub-result, the number of such accidents was maintained at the samestances*, Tokyo Electron continued to assure compliance withlow level as fiscal 2012, half that of fiscal 2011. The Company

environmental regulations.

tenaciously continued to implement accident prevention mea-

*In Japan, substances regulated in the Act on the Evaluation of Chemical Substances andRegulation of Their Manufacture, etc., the Industrial Safety and Health Act, and the
Poisonous and Deleterious Substances Control Act.
Outside Japan, substances regulated by RoHS, REACH, etc.

sures such as prior checks of clean rooms before installing equipment, on-site risk prediction activities, safety patrols, and safety
education for workers based on accident case studies.
In 2013, Tokyo Electron will mark the 50th year of its founding.

II. Plants and Offices

The Company will take this chance to once again return to the• Reducing energy use by 1% on a per-unit basis in each area

starting point of Group’s “Safety First” policy, working to foster

Of the six domestic plants and offices that set goals for crude oilsafety culture, with the entire Company united in preventing work-

equivalent energy use reduction, five achieved their goals. The

place accidents and disasters.

overall amount of energy used was reduced by 6% from theprevious year.

For further details, see the “Tokyo Electron Environmental and

The Company’s CO 2 emissions as defined by scope 1 andSocial Report 2013” (to be published in September 2013).

scope 2 of the GHG Protocol were 141,007 tons.
• Reducing water use (maintain a per-unit basis in each area)
Of the six categories of goals (city water, industrial water, etc.)

Tokyo Electron’s Environmental Activities
http://www.tel.com/environment/enviro/
product/index.htm

Tokyo Electron’s Safety and Health Activities
http://www.tel.com/environment/
stakeholder/health_safety/index.htm
Environmental and Social Report 2012
Technology Symposium

Practical safety training
in a clean room

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

18

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate Citizenship

Financial Section

Intellectual Property

Corporate DataIntellectual Property

Intellectual Property
nPolicy for Intellectual Property Activities

our R&D achievements, it is necessary to protect these by steadi-

A fundamental tenet of the Tokyo Electron policy for intellectual prop-

ly obtaining IP rights. To facilitate this process, we cooperate

erty (IP) is to protect the Company’s intellectual assets and help

closely with our R&D operations, and we locate IP personnel

increase corporate revenue by supporting Tokyo Electron’s businessnearby and often within our product development centers andactivities in both existing and new market sectors. To do this, our IP

manufacturing facilities. Furthermore, we have IP personnel based

strategy must be closely integrated with our technological and prod-

overseas in the U.S. and other countries to address our increas-

uct strategies. Our IP strategy must also prioritize the differentiation ofing global R&D activities.

Tokyo Electron’s products and bolster the Company’s competitive

Flexibly responding to dramatically changing markets and tech-advantage with strong IP rights. In addition, the evolution of a strong,nological trends is essential for effective IP activities. To ensure thediverse IP portfolio generates income from licensing.

rapid exchange of information on market and technological trends,

The advancing technological complexity of our business sectors

our IP personnel in charge of monitoring and external affairs are

significantly increases the risk of becoming involved in IP disputes

assigned to corporate headquarters, where they are near the sales

during the development of new products. Given the increasingly

and marketing divisions. In addition, we periodically convene IP

competitive environment, we strive to minimize the risk of potentialcommittees for each business/R&D area in order to make informed

disputes by actively monitoring IP developments, fully respecting thedecisions based upon market and technological trends. These

IP of other companies, and taking appropriate measures, such ascommittees are comprised of IP personnel, sales/marketing man-licensing, when necessary.

agement, and R&D management who are tasked with assessing IP,

nGrowth of Intellectual Property Portfolio

grow IP. As noted previously, Tokyo Electron acquired several com-

With the aim of growing our businesses and increasing revenue,

panies in fiscal 2013. IP personnel are advancing the integration ofTokyo Electron aggressively pursued new technologies in fiscal

these new members of the Tokyo Electron community and estab-

2013, including the acquisition through M&A of:lishing consistent policies/procedures for IP activities, including IP

discussing IP strategy, and deciding upon cost-effective avenues to• TEL NEXX, Inc., which provides opportunities in theadvanced packaging market, in May 2012.

committees, in all of the acquired companies.

• TEL FSI, Inc., which expands opportunities in single wafer

nStatus of Intellectual Property Rights

cleaning systems, in October 2012.

To establish an elevated entry barrier around our business, Tokyo• TEL Solar AG, which provides entry into the thin film silicon

Electron vigorously constructs an IP portfolio encompassing our core

photovoltaic (PV) market, in November 2012.

technologies, and protects our future technological growth. The• TEL Magnetic Solutions Ltd., which offers entry into magnetic

graphs in this section show the number of patent applications*1 andannealing technology including MRAM device fabrication, in

patents*2 of Tokyo Electron in each region. During fiscal 2013, theDecember 2012.

patents we acquired through M&A strengthened our IP portfolio.

		 Note: Post-acquisition names of the rebranded companies are used above.

With these acquisitions, we are working to fulfill our responsi-

The IP committees periodically revise policies for filing and holding
patents in light of evolving perspectives including technological trends,

bility of absorbing each respective IP portfolio and integrating

market conditions, competition and cost-effectiveness. We have main-these new members of the Tokyo Electron community in accor-

tained a global application ratio of approximately 70%*3 in recent years

dance with our aforementioned principles.

while strategically adjusting the regional distribution of these.

nOperation of Intellectual Property Activities
Tokyo Electron continues aggressive R&D activities to satisfy andexceed the requests of our customers, and further enable newmarket opportunities. In order to maintain the competitiveness of*1 Applications of acquired companies are included only after acquisition.
*2 Includes all patents of acquired companies. By region, these acquired patents consisted of Japan (38), the U.S. (132), Europe (102), South Korea (30), Taiwan (18)and China (38).
*3 The percentage of our patents filed with the Japan Patent Office that were also filed
overseas. The average among Japanese companies is about 25%.

Number of Patent Applications

Number of Patent Held

1,000

5,000

800

4,000

600

3,000

400

2,000

200

1,000

0

0

09
Japan

U.S.

10
Europe111213South Korea

TaiwanChina

09(Fiscal year)

Japan

U.S.

10
Europe1112South Korea

Taiwan13
China (Fiscal year end)

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

19

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate CitizenshipIntellectual Property

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review
Sales and Income

Sales

Research & Development

Net sales in fiscal 2013 decreased 21.4% year on year to ¥497.3

R&D expenses were down 10.1% year on year to ¥73.2 billion. As

During fiscal 2013, Tokyo Electron posted interest and dividend

Operating Environment

billion. This was mainly due to significantly reduced sales in mainstay

Tokyo Electron continues to view R&D as a source of growth, theincome of ¥1.7 billion and revenue from grants of ¥2.7 billion, but

During fiscal 2013, there was widespread unease about the state

semiconductor production equipment and FPD production equip-Company aggressively invested not only in strengthening existingalso incurred a net foreign exchange loss of ¥1.5 billion. Afterof the world economy due to extended financial problems in

ment, reflecting the influence of the stagnant business environment.

business areas, but also in new areas that are expected to support

including lesser items, other income (expenses), net amounted toEurope and financial issues in the United States as well as slowing

Domestic sales fell 30.8% year on year to ¥118.5 billion, while

future growth. As a percentage of net sales, R&D expenses rose

an income of ¥5.2 billion.

growth in emerging countries including China. Near the end of theoverseas sales fell 18.0% to ¥378.8 billion. Overseas sales as aperiod, economic conditions staged a gradual recovery. The

share of total consolidated sales came to 76.2%, up 3.3 percent-Japanese economy received a boost from the rapid depreciation

age points from 72.9% in fiscal 2012.

Other Income (Expenses) and Net Income

from 12.9% to 14.7%.

This contributed to ¥17.8 billion in net income before taxes andR&D investment in semiconductor production equipment

minority interests, down 70.7% from the previous fiscal year. Net

strengthened new product development in each product category

income totaled ¥6.1 billion, down 83.5%. Net income per share

Orders received during the fiscal year under review decreased

to respond to diversifying technologies. The Company focused on

was ¥33.91, compared with ¥205.04 in fiscal 2012.

of the long-term effects of the high yen and concern over the slow-

by 16.7% compared to the previous year, to ¥450.6 billion. The

the development of process technology and equipment needed foring of the worldwide economy, however, the broader domesticorder backlog at the end of March 2013 was ¥180.8 billion, downsuch next-generation devices as 3D structure devices, advanced

Comprehensive Income

economy was restrained during the fiscal year, with recovery

16.5% year on year.

packaging technology and low-power-consumption technology

In fiscal 2013, Tokyo Electron posted comprehensive income of

responding to demand for lower energy use and environmental¥15.8 billion, a 57.2% year-on-year decrease. The decrease was

Gross Profit, SG&A Expenses and Operating Income

friendliness. Other areas of R&D investment included next-genera-

due to a significant year-on-year drop in net income, despite an

spread of smartphones gathered momentum, helping to drive theCost of sales for the period under review decreased 19.7% year

tion memory manufacturing technology and development of equip-¥8.8 billion gain on foreign currency translation adjustments due toindustry. However, sales of PCs and TVs were slow. This worsenedon year to ¥338.5 billion, only partially compensating for thement for next-generation 450mm wafers.

the yen’s rapid depreciation late in the period.

the supply-demand balance of memory chips and LCD panels,

decrease in net sales, leading to a cost of sales ratio of 68.1%, aleading to restrained capital investment by Tokyo Electron’s semi-

full 1.5 percentage points worse than in fiscal 2012.

of the yen in the latter half of the fiscal year. Against the backdrop

remaining slow.
In the electronics industry, in which Tokyo Electron operates, theAs a result, gross profit was down 24.9% year on year to ¥158.8

conductor and flat panel display (FPD) manufacturing customers.

billion, with the gross profit margin falling to 31.9% from 33.4% in
fiscal 2012.

Corporate Acquisitions

R&D investments in FPD/PV production equipment were concentrated on development of OLED production equipment and fur-Dividend Policy and Dividends

ther improving the conversion efficiency of thin-film silicon

It is the policy of Tokyo Electron to pay dividends on the basis ofphotovoltaic panel production equipment.

business performance and earnings results. The dividend payout

In fundamental R&D, development focused on various core

Tokyo Electron made four corporate acquisitions in fiscal 2013:

SG&A expenses fell 3.2% year on year to ¥146.2 billion.

TEL NEXX, Inc. (formerly NEXX Systems, Inc.), TEL FSI, Inc.

However, the ratio of SG&A expenses to consolidated net sales­(formerly FSI International, Inc.), TEL Solar Holding AG (formerly

increased to 29.4% from 23.9% in fiscal 2012. Meanwhile, in the

Oerlikon Solar Holding AG), and TEL Magnetic Solutions Ltd.

year under review, group-wide measures were taken to reduce­(formerly Magnetic Solutions Ltd.). TEL Solar Holding AG is reflect-

fixed costs by approximately ¥16.0 billion to improve profitability.

ratio has been set at approximately 35% of consolidated nettechnologies aimed at achieving differentiation, including processincome. In fiscal 2013, as Tokyo Electron entered its 50th year, thetechnologies for further miniaturization and new materials.

Company paid annual dividends of ¥51, including a commemorative dividend of ¥20, for a combined ratio of 150.4%.

Consequently, operating income decreased by 79.2% year on

ed only in the consolidated balance sheet for fiscal 2013, and will
be fully included in all other consolidated financial statements

year to ¥12.5 billion, and the operating margin declined from 9.5%

beginning in fiscal 2014. The influence of the other three corporate

to 2.5%.

acquisitions conducted in fiscal 2013 on the financial results of theyear under review was minimal.
For additional information concerning these acquisitions, seeNote 20 to Consolidated Financial Statements, Business
Combinations, on pages 31 to 33.

110,497

136,888

151,002146,206

Operating income (loss)

14,711(2,181)

97,87060,443

12,549Operating margin

2.9%(0.5)%

14.6%

9.5%

2.5%

Income (loss) before income taxes and minority interests

9,637(7,768)99,57960,602

17,767

Net income (loss)

7,543(9,033)71,92436,726

6,076

2.9

200

09
 Domestic
 Overseas

0

10

11

12

40

5

20

0

0

-5

-20

71.9

97.9
25

0

10

13

2.5

-25

09

6.1

122,69760

36.7

Selling, general and administrative expenses

15

-0.5

10

 Operating Income (Loss) Operating Margin

11

12

13

-9.0

31.9%

80

7.5

158,755

33.4%

12.5

211,44535.1%(Billions of yen)

9.5
60.4

234,758

25.9%

50

-2.2

108,316

27.0%

75

14.7

137,408

(%)
20

378.8

Gross profit
Gross profit margin400

Net Income (Loss)

14.6

118.5

¥497,300

171.4

2013

¥633,091

182.2

2012

¥668,722

256.0

2011

¥418,637

162.6

2010

¥508,082

208.9

2009

Net sales

Sales and Income

299.2

600

461.7

Millions of yen

497.3

100
633.1

(Billions of yen)

800
486.6 668.7(Billions of yen)

418.6

Operating Income (Loss) andOperating Margin

508.1

Domestic and Overseas Sales

09

10

11

12

13

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

20

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate CitizenshipIntellectual Property

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review
Performance by Segment

M FPD/PV (Flat Panel Display and Photovoltaic Panel)

M Electronic Components and Computer Networks

M Other

In fiscal 2013, demand was weak in the domestic electronic com-

Other sales mainly include group-wide logistics services, facility

M Semiconductor Production Equipment

Capital investment in small- and medium-sized FPD panels for mobile

ponents market for both consumer and industrial electronics.

maintenance and insurance. Net sales to external customers

Driven by advanced mobile devices such as smartphones and tab-devices was firm. However, as demand for flat panel TVs in developed

However, the cloud computing market, including data centers,

amounted to ¥0.4 billion, almost unchanged from the previous fis-lets, logic-related semiconductor capital investment was relatively

countries settled down, capital investment was pushed out, and theshowed underlying notes of expansion.

cal year.

firm. However, against a backdrop of slow PC shipments, memo-

FPD production equipment market contracted considerably.

Production Equipment

Segment net sales to external customers decreased 0.2% year

Segment net sales to external customers decreased 71.2% year

on year to ¥84.7 billion. Segment net sales including intersegment

on year to ¥20.2 billion. Segment net sales including intersegment

sales or transfers were down 1.0% to ¥85.5 billion. Segment profit

sales or transfers also decreased 71.2% to ¥20.2 billion. Segment

fell 44.5% compared to fiscal 2012, to ¥1.3 billion, and the seg-on year to ¥392.0 billion. Segment net sales including interseg-

loss totaled ¥6.4 billion, compared with segment profit of ¥2.3 bil-ment profit margin fell from 2.7% in fiscal 2012 to 1.5%.

ment sales or transfers were down 18.0% to ¥392.1 billion.

lion in fiscal 2012. FPD production equipment sales made up near-

Segment profit fell 45.4% compared to fiscal 2012, to ¥48.6 bil-ly 100% of segment sales.

ry-related semiconductor capital investment continued to shrink in
the fiscal year under review.
Segment net sales to external customers decreased 18.0% year

For a business overview of this segment, please see page 13.

Orders in this segment increased 18.1% year on year to ¥22.0

lion, and the segment profit margin fell from 18.6% in fiscal 2012billion. The order backlog as of March 31, 2013 was up 72.0% toto 12.4%.

¥24.4 billion.

Orders in this segment dropped 21.7% to ¥342.5 billion. The

For a business overview of this segment, please see page 13.

order backlog as of March 31, 2013 was down 24.9% year on
year, to ¥141.6 billion.
For a business overview of this segment, please see page 13.

Millions of yen
Reportable Segment

Segment Information2013:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

¥392,027¥20,160¥84,665¥   448¥497,300

43

—

813

10,613

11,469(11,469)—

392,070

20,16085,478

11,061

508,769(11,469)

497,300

Eliminations
andCorporate

Consolidated¥¥497,300

Net sales
Sales to external customers
Intersegment sales or transfers
Total

Selling, General and Administrative
Expenses and Ratio to Net Sales（%）(Billions of yen)

200

40

—

Segment profit (loss)

48,600(6,355)

1,283

1,321

44,849(27,082)

17,767

Segment assets

223,956

49,48947,5571,550

322,552

452,976775,528

Depreciation and amortization

12,330

462

448

78

13,31813,313

26,631

Amortization of goodwill

1,038

—

103

—

1,141

—

1,141

Capital expenditures, including intangible andother assets

13,464

1,661

482

54

15,661

9,834

25,495

R&D Expenses

Cash Dividends per ShareTotal Assets

Working Capital andCurrent Ratio(Billions of yen)

(Yen)

(Billions of yen)(Billions of yen)

100

125

1,000

600

Receivable Turnover andInventory Turnover(Times)(Days)

6

150

5

125

4

100

20

25

200

482.3

433.8

3.8

4.9
414.8

300

400

50
51

10

400

416.4

4.6
775.5

783.6

809.2
696.4

669.0

600

80

70.6

40

75

4.9

500

800

476.2

151.0

20

54.1

60

73.2

100
81.5

80

121
100

96
92 87

109
3

86

86

75

74

74

200

2

50

100

1

25

0

0

0

0

09

10

11

12

13

 Selling, General and Administrative Expenses
 Ratio to Net Sales

0

12

24

50

23.9
20.5
136.9

110.5

122.7

100

24.1

146.2

26.4

30

61.0

29.4

150

114

5.7

0

09

10

11

12

13

09

10

0

11

12

13

0

09

10

11

12

13

09
 Working Capital Current Ratio

10

11

12

13

09

10

 Receivable Turnover
 Inventory Turnover

11

12

13

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

21

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate CitizenshipIntellectual Property

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review
Financial Position and Cash Flows

M Liabilities and Net Assets

Capital Expenditures1 and Depreciation and Amortization2

Cash Flows

Current liabilities decreased by ¥18.1 billion from the end of fiscal

Capital expenditures were ¥21.8 billion in fiscal 2013, a 44.9%

Cash flows from operating activities totaled ¥84.3 billion, up ¥54.6

Assets, Liabilities and Net Assets

2012, to ¥106.7 billion. This reflected decreases of ¥10.7 billion in

year-on-year decrease, as a number of investments for futurebillion from fiscal 2012. Major contributors were ¥17.8 billion in

M Assets

trade notes and accounts payable and ¥7.4 billion in customer

development and manufacturing site expansions were completed

income before income taxes and minority interests, a ¥57.5 billion

Current assets decreased by ¥85.5 billion from the end of the pre-advances. The balance of interest-bearing debt as of March 31,

in fiscal 2012.

decrease in trade notes and accounts receivable, ¥26.6 billion invious fiscal year, to ¥521.5 billion, reflecting decreases of ¥49.8 bil-2013 was ¥3.8 billion, compared with ¥4.4 billion at the end of theTokyo Electron purchased evaluation equipment, mainly forlion in trade notes and accounts receivable, ¥13.8 billion inprevious fiscal year. The debt/equity ratio declined to 0.6%, 0.2

areas of high growth potential in the semiconductor production

inventories. Major negative factors included a ¥15.5 billion

inventories, and ¥7.5 billion in liquidity on hand (cash, cash equiva-

percentage points lower than at the end of March 2012.

equipment and FPD/PV production equipment businesses. The

decrease in notes and accounts payable and a ¥12.5 billion

Company also invested in development and evaluation equipment

decrease in customer advances.

Non-current liabilities increased ¥3.5 billion year-on-year tolents and short-term investments). The turnover period for tradedepreciation and amortization, and a ¥20.3 billion decrease innotes and accounts receivable decreased from 87 days in fiscal¥63.7 billion, mainly as a result of a ¥2.0 billion increase in accrued

for its new research and development sites that began operations

Net cash used in investing activities was ¥141.8 billion, a con-2012 to 74 days in fiscal 2013, and the inventory turnover period

pension and severance costs. Total liabilities stood at ¥170.4 bil-in fiscal 2013, Technology Center Tsukuba, and the process devel-siderable increase from ¥8.4 billion in the previous fiscal year. This

increased from 86 days in fiscal 2012, to 100 days in fiscal 2013.

lion, down ¥14.6 billion compared with the end of fiscal 2012.

opment center in Hwaseong, South Korea.

included ¥66.1 billion outflow from a net increase in short-term

Net property, plant and equipment increased by ¥8.8 billion year

Net assets came to ¥605.1 billion, up ¥6.5 billion from the endon year, to ¥135.7 billion, due in part to ¥21.8 billion in fixed assetof fiscal 2012. This was mainly because of the ¥9.3 billion in divi-

acquisitions and ¥26.6 billion in depreciation and amortization.

dends paid, exceeding net income of ¥6.1 billion and resulting in a

Depreciation and amortization increased 10.1% to ¥26.6 billion.

investments; ¥19.0 billion used in the payment for purchase ofproperty, plant and equipment; and ¥55.1 billion used in four cor-

1. Capital expenditures represent only the gross increase in property, plantand equipment.
2. Depreciation and amortization does not include amortization of goodwill
or losses on impairment.

porate acquisitions by cash.
Cash used in financing activities came to ¥10.6 billion, com-

Investments and other assets increased ¥68.7 billion to ¥118.3¥3.3 billion decrease in retained earnings, as well as an ¥8.7 billion

billion, mainly due to an increase of ¥38.4 billion in goodwill and an

decrease in loss on foreign currency translation adjustments due

increase of ¥16.8 billion in intangible assets resulting from theto the devaluation of the yen. As a result, the equity ratio rose 1.6

acquisition of four overseas companies. As a result, total assets aspercentage points from 74.9% at the end of March 2012 to 76.5%

The balance of cash and cash equivalents at the end of Marchof March 31, 2013 stood at ¥775.5 billion, down ¥8.1 billion year

at the end of March 2013. ROE dropped to 1.0% from 6.3% in fis-

2013 stood at ¥85.3 billion, a decrease of ¥73.5 billion from theon year.

cal 2012.

end of fiscal 2012. Total liquidity on hand, which consists of cash,

pared with ¥27.3 billion in fiscal 2012, due mainly to ¥9.3 billion in
dividends paid.

cash equivalents and short-term investments, decreased by ¥7.5
billion year on year, to ¥240.1 billion at the end of March 2013.

Millions of yen

Total current assets

Millions of yen

2009

2010

2011

2012

2013

¥505,687¥552,939¥644,231¥607,051¥521,501

Financial Position

2009

2010

2011

2012

2013

Cash flows from operating activities¥ 81,030¥ 48,285¥ 83,239¥ 29,712¥ 84,267

Cash Flows

Net property, plant and equipment

99,906

92,128112,552

126,885

135,698

Cash flows from investing activities(160,622)

9,613(35,882)(8,352)(141,769)

Total investments and other assets

63,40551,28552,422

49,675

118,329

Cash flows from financing activities(46,016)(288)(5,237)(27,335)(10,625)

Total assets

668,998

696,352

809,205

783,611775,528

Cash and cash equivalents at end of year

65,883

123,940

165,051

158,776

85,314

Total current liabilities

89,272

119,162

168,038

124,794

106,670

Total liabilities

139,733

172,982

224,403

185,008

170,401

Total net assets (Total shareholders' equity)529,265

523,370

584,802598,603605,127

Capital Expenditures andDepreciation and Amortization

Total Liquidity on Hand

(Billions of yen)(Billions of yen)

40

300

20

3

600

15

15

39.1
25

1.4

0

12

0

13

0

09

10

11

12

1.0

0

10

11

12

13

10

26.6

24.2
20.0

23.1

12

13

100

0

09

11

12

13

ROA = (Operating income + Interest and dividend income) /Average total assets x 100
ROE=

10

150

50

-5

09

 Equity Equity Ratio

1.8

17.7

2.3
-0.2

-5

13

20

5

-1.8
0

11

200
7.7

6.3

0.6

0

13.1
10

50

200

250

30

14.9

572.7

13.3
10

0.8

1.0
0.7

 Interest-Bearing Debt
 Debt-to-Equity Ratio

75

5
1

10

76.5

3.8

3.8

1.4

2

09

400

511.8

2

4.4

4

518.4

5.1

73.5

74.9

18.1

70.8

593.0

77.5

586.8

6

240.1

（%）

20

247.6

（%）

100

243.9

（%）

800

210.2

(Billions of yen)

4

285.1

ROA

8.0

8

ROE

21.8

（%）

(Billions of yen)

Equity and Equity Ratio

39.5

Interest-Bearing Debt, D/E Ratio

0

09

10

11

 Capital Expenditures Depreciation and Amortization

12

13

09

10

11

Total liquidity on hand = Cash and cash equivalents +Short-term investments

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

22

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review
BUSINESS-RELATED AND OTHER RISKS(3) Impact From Research and Development(6) Impact of Intellectual Property Rights(9) Other Risks

Through ongoing and proactive R&D investment and activities in

In order to distinguish its products and make them more competi-Tokyo Electron is actively engaged in reforming its corporate struc-

The following risks may have a material impact on Tokyo Electron’s

cutting-edge technologies—miniaturization, vacuum, plasma, ther-tive, Tokyo Electron has promoted its R&D strategy for the earlyture so that it can generate profits even when markets contract.

business performance, stock price, or financial position.

mal processing, coating/developing, cleaning, wafer-transfer anddevelopment of cutting-edge technologies together with its busi-

These reforms have entailed creating new high-growth and high-clean technologies—Tokyo Electron has created advanced tech-ness and intellectual property strategies. This approach has

return businesses and pursuing higher earnings from existing busi-(1) Impact From Changes in the Semiconductor Market

nologies. At the same time, by quickly bringing to market new

enabled Tokyo Electron to obtain sole possession of many proprie-nesses. At the same time, Tokyo Electron has promoted activities

Tokyo Electron has achieved a high profit margin by concentratingproducts incorporating these technologies, Tokyo Electron hastary technologies that have been instrumental to the Company’s

to preserve the environment and worked to restructure its compli-

resources in high-tech fields, including semiconductor production

successfully captured a high market share in each of the productability to capture a high market share and generate high profit mar-ance, risk management and information security management sys-

equipment, where technological innovation is rapid but Tokyo

fields it has entered and generated a high profit margin. However,gins in each of its product fields. Tokyo Electron’s products incor-

tems. However, as long as it conducts business activities, as with

Electron can effectively use its strengths. Although technologicaldelays in the launch of new products and other factors could

porate and optimize many of these proprietary cutting-edge

peer companies or companies in different industries, Tokyo Electronchange is responsible for the semiconductor market’s rapid

adversely affect Tokyo Electron’s business performance.

technologies. There may be cases in which, by avoiding the use ofis subject to the effect of many other factors. These include thethird-party technologies and intellectual property rights, Tokyo

world and regional economic environments, natural disasters, war,

Electron’s business performance could be adversely affected.

terrorism, infectious diseases and other unavoidable occurrences,

growth, Tokyo Electron has actively undertaken structural reforms
to be able to generate profits under any circumstances, including(4) Safety-related Impact

when the market contracts temporarily due to imbalance of supply

Tokyo Electron’s basic philosophy is to always bear in mind safetyand demand. However, order cancellations, excess capacity andand health in the execution of business activities, including devel-(7) Impact of Fluctuating Foreign Exchange Rates

chains, market conditions for products and real estate, the ability

personnel and increased inventories resulting from an unexpected-

opment, manufacturing, sales, services and management. In

Success in the development of overseas operations has increased

to recruit personnel in Japan and overseas, competition over stan-

ly large market contraction, losses from bad debts resulting fromaccordance with this philosophy, Tokyo Electron works actively

the share of sales generated overseas. As a rule, Tokyo Electron

dardization, and loss of key personnel. Any of these factors could

the worsening of a customer’s financial position, and supply short-and continuously to improve the safety of its products and to elimi-

conducts export transactions on a yen basis to avert exposure toadversely affect Tokyo Electron’s business performance.

ages resulting from the worsening of a supplier’s management sit-nate any harmful impact on health. However, harm to customers,

foreign currency risks. However, some exports are denominated inuation, could adversely affect Tokyo Electron’s businessorder cancellations or other circumstances resulting from safety or

foreign currencies. In these cases, Tokyo Electron hedges foreign

performance considerably.

other problems related to Tokyo Electron’s products could

currency risk by using a forward foreign exchange contract whenadversely affect Tokyo Electron’s business performance.

an order is received or by other means. However, foreign

financial or stock markets, government or other regulations, supply

exchange rate risks can arise from fluctuations in prices due to(2) Impact From Concentration of Transactions on(5) Impact From Quality Issues

sudden foreign exchange movements, which could have an indi-

Tokyo Electron has been successful at increasing transactions with

Tokyo Electron actively develops outstanding, cutting-edge tech-rect adverse effect on Tokyo Electron’s business performance.

the leading semiconductor manufacturers worldwide, including

nologies for incorporation in new products that are brought quickly

those in Japan, through the provision of products featuring out-

to market. At the same time, Tokyo Electron works to establish(8) Influence of Corporate Acquisitions

standing, cutting-edge technology and of services offering a higha˛quality assurance system, efforts that include obtaining ISO 9001

As part of its business strategy, Tokyo Electron conducts corpo-

level of customer satisfaction. However, Tokyo Electron’s sales may

certification, as well as to establish a world-class service system.

rate acquisitions in order to expand into new business areas,from time to time be temporarily concentrated on particular custom-

These actions have resulted in a large number of customers

secure new technologies and business platforms, and strengthen

ers due to the timing of large capital investments of major semicon-

adopting Tokyo Electron’s products. However, because Tokyo

the competitiveness of existing businesses. The Company con-ductor manufacturers. The resulting escalation in sales competition

Electron’s products are based on cutting-edge technologies, andducts due diligence and carefully deliberates each specific acquisi-

could adversely affect Tokyo Electron’s business performance.

due to other factors, many of the technologies developed are intion. However, in the event that the results following an acquisition

unfamiliar fields. The occurrence of unforeseen defects or other

do not meet expectations, Tokyo Electron’s business performanceissues could adversely affect Tokyo Electron’s business performance.

could be adversely affected.

Particular Customers

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

23

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Eleven-Year SummaryTokyo Electron Limited and Subsidiaries
As of and for the years ended March 31
Thousands of
U.S. dollars

Millions of yen

2013

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

Net sales 1
Semiconductor production equipment
FPD/PV production equipment 2
Computer networks
Electronic components and computer networks
Other
Operating income (loss)
Income (loss) before income taxes
Net income (loss)
Comprehensive income (loss) 3$5,287,613
4,168,283
214,354—900,213
4,763
133,429
188,91064,604
168,272¥ 497,300
392,027
20,160—84,665448
12,54917,767
6,076
15,826¥ 633,091
477,873
69,889—84,868461
60,44360,602
36,72636,954¥ 668,722
511,332
66,721—
90,216453
97,87099,57971,92469,598¥ 418,637
262,392
71,361—
84,473411(2,181)(7,768)(9,033)(4,751)¥ 508,082
325,383
88,107—
94,207385
14,711
9,637
7,543
—

¥ 906,092
726,440
68,016—111,181455
168,498
169,220
106,271—¥ 851,975
642,625
100,766
19,16988,294
1,121
143,979
144,414
91,263—¥ 673,686
486,883
81,176
17,49786,881
1,249
75,70375,32848,006—¥ 635,710
457,191
75,03815,96686,2491,266
63,98355,77561,601—¥ 529,654
425,747—
18,44884,2291,230
22,28014,9368,297—¥ 460,580
364,689—
17,19377,3801,318
1,119(23,010)(41,554)—

Domestic sales
Overseas sales

1,260,011
4,027,602

118,504
378,796

171,364
461,727

182,165
486,557

162,609
256,028

208,871299,211

323,946
582,146

313,816
538,159

262,532
411,154

232,678
403,032

242,318
287,336

190,513
270,067

283,158
231,515
778,830

26,631
21,77473,24924,19839,541
81,506

17,707
39,14070,56820,002
14,91954,07423,068
18,10860,98821,41322,70366,073

18,82027,12956,962

19,17013,33549,182

21,4639,876
43,88924,963
11,00744,15027,374
12,35950,123

8,245,912
6,434,099

775,528
605,127

783,611598,603809,205
584,802696,352
523,370668,998529,265

792,818
545,245

770,514469,811663,243
376,900

644,320
332,165

561,632
275,800

524,901
252,904

12,201

10,684

10,343

10,068

10,391

10,429

9,528

8,901

8,864

8,870

10,053¥   511.27
509.84
2,573.72
103.00180,61141,289¥   267.61
267.32
2,112.30
55.00
180,611
46,272¥   343.63
343.54
1,863.28
45.00
180,61160,857¥   46.37
45.78
1,543.73
10.00
180,61160,873¥ (238.57)—
1,456.23
8.00
175,698
49,259

21.8
16.9
59.7
1.19

13.5
11.2
56.8
1.03

20.3
10.1
51.6
1.05

3.1
4.2
49.1
0.97

(14.8)
0.2
48.2
0.85

¥   89,418¥   75,687¥   71,718¥   59,713¥   45,815

Depreciation and amortization 4
Capital expenditures 5
R&D expenses
Total assets
Total net assets (Total shareholders’ equity) 6
Number of employees

U.S. dollars

Net income (loss) per share of common stock: 7
Basic
Diluted 8
Net assets per share of common stock
Cash dividends per share of common stock
Number of shares outstanding (thousands)
Number of shareholders$     0.36
0.36
35.19
0.54

Yen

¥   33.91
33.85
3,309.58
51.00
180,61141,287¥   205.04
204.723,275.14
80.00
180,61142,414¥   401.73
401.103,198.66
114.00180,61144,896¥  (50.47)—
2,859.37
12.00
180,61139,285¥   42.15
42.07
2,896.55
24.00
180,61142,509¥   594.01
592.71
2,989.70
125.00180,611
43,324
Percent

ROE
Operating margin
Equity ratio
Asset turnover (times)

1.0
2.5
76.5
0.64

6.3
9.5
74.9
0.79

13.3
14.6
70.8
0.89

(1.8)
(0.5)
73.5
0.61

1.4
2.9
77.5
0.70

¥  40,759¥   59,256¥   64,655¥   41,581¥   48,896

U.S. dollars

Net sales per employee$  433,376

21.4
18.6
67.5
1.16
Thousands of yen

1  Until fiscal 2004, the FPD (Flat Panel Display) division was included in Semiconductor production equipment. From fiscal 2008, Computer networks is included in Electronic components and computer networks.
2  From fiscal 2009, the FPD division was changed to the FPD/PV production equipment division. Photovoltaic panel (PV) production equipment is included in
FPD/PV production equipment.
3  From fiscal 2011, the Company applied “Accounting Standards for Presentation of Comprehensive Income”(Statement No. 25) released by the AccountingStandards Board of Japan (ASBJ). Accordingly, comprehensive income (loss) have been disclosed from fiscal 2010.
4  Depreciation and amortization does not include amortization and loss on impairment of goodwill.
5  Capital expenditures only represent the gross increase in property, plant and equipment.
6  From fiscal 2007, “Total net assets” has been disclosed in accordance with “Accounting Standard for Presentation of Net Assets in the Balance Sheet”(Statement No. 5) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No. 8) released by the AccountingStandards Board of Japan (ASBJ). “Total net assets” through fiscal 2006 represents “Total shareholders’ equity” under the former accounting standards.

¥   86,882

7  From fiscal 2003, the Company applied “Accounting Standards Regarding Net Income per Share (Business Accounting Standards No. 2)” and “Practical Guidelines
for Applying Accounting Standards Regarding Net Income per Share (Practical Guidelines for Applying Accounting Standards No. 4)” released by the AccountingStandards Board of Japan (ASBJ).
8  From fiscal 2011, the Company calculated net income per share of common stock (diluted) in accordance with “Accounting Standard for Earnings Per Share”(Statement No. 2 issued as of June 30, 2010) and “Guidance on Accounting Standard for Earnings Per Share” (Guidance No. 4 issued as of June 30, 2010) releasedby the Accounting Standards Board of Japan (ASBJ).
Dilution is not assumed for the years ended March 31, 2010 and 2003.
9  Effective from fiscal 2005, Tokyo Electron changed its method of revenue recognition to receipt of customer confirmation of product set-up and testing of products for
Semiconductor and FPD production equipment. The effect of this change decreased net sales, operating income and income before income taxes by ¥80,956 million,¥20,541 million and ¥20,563 million, respectively, for the year ended March 31, 2005, compared with the corresponding amounts which would have been recorded if
the previous method had been applied.
10  Effective from fiscal 2005, Tokyo Electron changed its method to account for after-sale repair expenses by recording accrued warranty expenses for Semiconductor
and FPD production equipment. The effect of this change decreased operating income and income before income taxes by ¥635 million and ¥13,106 million, respectively, for the year ended March 31, 2005, compared with the corresponding amounts which would have been recorded if the previous method had been applied.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

24

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Balance Sheets
Tokyo Electron Limited and Subsidiaries
As of March 31, 2013 and 2012
Thousands of
U.S. dollars

Millions of yen

ASSETS

2013

2012

2013

Current assets:

Thousands of
U.S. dollars

Millions of yen

LIABILITIES AND NET ASSETS

2013

2012

2013

¥ 36,261¥ 46,987$  385,550

Current liabilities:

Cash and cash equivalents

¥ 85,314¥158,776$  907,113

Trade notes and accounts payable

Short-term investments

154,816

88,8491,646,103

Customer advances

18,98526,373201,861

Trade notes and accounts receivable

100,501

150,306

1,068,591

Accrued warranty expenses

8,345

8,904

88,729(1,180)(1,376)(12,546)

Accrued expenses and other current liabilities

43,07942,530458,044

Inventories

135,698

149,470

1,442,828   Total current liabilities

106,670

124,794

1,134,184

Deferred income taxes

15,66923,546

166,603

Prepaid expenses and other current assets

30,68337,480326,242

521,501

607,051

5,544,934

Accrued pension and severance costs

57,22555,266

608,453

Other liabilities

6,506

4,948

69,176

170,401

185,008

1,811,813

54,961

54,961

584,381

Allowance for doubtful accounts   Total current assets  Total liabilities

Property, plant and equipment:Land

25,03026,260266,135

Buildings

163,857

143,462

1,742,233

Machinery and equipment

140,066

115,834

1,489,271

Construction in progress

6,076

9,515

64,604

335,029

295,071

3,562,243   Common stock   Authorized: 300,000,000 shares
Issued: 180,610,911 shares as of March 31, 2013 and 2012

Less: Accumulated depreciation

199,331

168,186

2,119,415   Capital surplus

78,02378,023

829,591   Net property, plant and equipment

135,698

126,885

1,442,828  Retained earnings

467,921471,186

4,975,237(9,589)(9,748)(101,956)   Total property, plant and equipment

Net assets:
Shareholders’ equity   Treasury stock, at cost   1,424,203 and 1,446,079 shares
as of March 31, 2013 and 2012, respectively

Investments and other assets:
Investment securities

18,66916,082

198,501

Accumulated other comprehensive income

Deferred income taxes

23,206

17,585

246,741   Net unrealized gains on investment securities

4,214

3,576

44,805

Goodwill

38,373—408,006   Net deferred losses on hedging instruments

(15)

(51)

(159)

Intangible assets

21,545

4,704

229,080   Foreign currency translation adjustments

(2,484)(11,158)(26,412)

Other assets

18,64815,152

198,278

Share subscription rights

1,375

1,157

14,620Allowance for doubtful accounts

(2,112)(3,848)(22,456)

Minority interests

10,721

10,657

113,992   Total investments and other assets

118,329

49,675

1,258,150   Total net assets

605,127

598,6036,434,099

Total assets

¥775,528¥783,611$8,245,912

Total liabilities and net assets

¥775,528¥783,611$8,245,912

See accompanying Notes to Consolidated Financial Statements.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

25

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2013 and 2012

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2013 and 2012
Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

¥497,300¥633,091$5,287,613

Income before minority interests

Cost of sales Gross profit

338,545
158,755

421,646
211,4453,599,628
1,687,985

Other comprehensive income (loss):

Selling, general and administrative expenses
Operating income146,206
12,549151,00260,443

1,554,556
133,429

Changes in fair value of investment securities
Changes in deferred gains (losses) on hedging instruments
Foreign currency translation adjustments
Total other comprehensive income (loss)

Other income (expenses):
Interest and dividend income

1,659

1,010

17,640

Revenue from grants

2,672

1,740

28,410

Provision of allowance for doubtful accounts

—(1,848)—

Reversal of allowance for doubtful accounts

558

—

5,933

Gain on sale of property, plant and equipment

943

566

10,027

Loss on sale and disposal of property, plant and equipment

(153)

(406)

(1,627)

Gain on collection of written-off receivables

—

1,437

—

(1,520)(32)(16,162)

Loss on liquidation of subsidiaries and affiliates

(134)

—

(1,425)

Reorganization costs

(132)

—

(1,403)

Loss on business restructuring

—

(849)

—

Loss on devaluation of investment securities, net

(44)

(817)

(468)

Loss from natural disasters

—

(936)

—

1,369
17,767294
60,602

14,556
188,910

Current

6,255

15,023

66,507

Prior years

2,195

—

23,339

2,959
6,358

8,400
37,17931,462
67,602Foreign exchange loss, net

Other, net
Income before income taxes and minority interests
Income taxes:

Deferred
Income before minority interests
Minority interests
Net income

282

453

2,998

¥  6,076¥ 36,726$  64,604

Yen

U.S. dollars

Per share of common stock:
Net income — basic¥  33.91¥  205.04$    0.36

Net income — diluted

33.85

204.720.36

3,309.58

3,275.14

35.19

51.00

80.00

0.54

Net assetsCash dividends
See accompanying Notes to Consolidated Financial Statements.

Thousands of
U.S. dollars

Millions of yen

Net sales

Corporate Data

2013

2012

2013

¥ 6,358¥37,179$ 67,602

652

769

6,933

56

(69)

595

8,760

(925)

93,142

9,468

(225)

100,670

Comprehensive income

15,82636,954

168,272

Total comprehensive income attributable to:
Owners of the Company

15,42636,532

164,019

400

422

4,253

Minority interests
See accompanying Notes to Consolidated Financial Statements.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

26

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2013 and 2012

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2013 and 2012
Thousands of
U.S. dollars

Millions of yen

Millions of yen

Shareholders’ equity

Accumulated other comprehensive income

Commonstock

Capitalsurplus

Unrealized
gains oninvestment
securities

Deferred
losses on
hedging
instruments

Foreigncurrencytranslation
adjustments

Sharesubscription
rightsMinority
interests

Total
net assets

Balance as of April 1, 2011
Cash dividends
Net income
Repurchase of treasury stockDisposal of treasury stock
Other, net¥54,961—————¥78,046
—
—
—
(23)
—

¥457,658 ¥(10,484)(23,102)—36,726
—
—
(12)
(96)
748
—
—

¥2,807
—
—
—
—
769

¥(12)
—
—
—
—
(39)

¥(10,234)
—
—
—
—
(924)

¥1,499
—
—
—
—
(342)

¥10,561————96¥584,802(23,102)36,726
(12)
629
(440)

Balance as of March 31, 2012
Cash dividends
Net income
Repurchase of treasury stockDisposal of treasury stock
Other, net¥54,961—————¥78,023—————¥471,186 ¥ (9,748)(9,317)
—
6,076
—
—
(15)
(24)
174
—
—

¥3,576
—
—
—
—
638

¥(51)
—
—
—
—
36

¥(11,158)
—
—
—
—
8,674

¥1,157————
218¥10,657————64¥598,603(9,317)
6,076
(15)
150
9,630

Balance as of March 31, 2013

¥54,961¥78,023¥467,921¥4,214¥(15)¥ (2,484)¥1,375¥10,721¥605,127

Retainedearnings

Treasurystock¥ (9,589)

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Treasurystock

Unrealized
gains oninvestment
securities

Deferred
losses on
hedging
instruments

Foreigncurrencytranslation
adjustments

Sharesubscription
rightsMinority
interests

Total
net assets

Balance as of March 31, 2012
Cash dividends
Net income
Repurchase of treasury stockDisposal of treasury stock
Other, net$584,381—————$829,591 $5,009,952 $(103,647)—(99,064)——
64,604
—
—
—
(159)
—
(255)
1,850
—
—
—

$38,022
—
—
—
—
6,783

$(542)————
383$(118,639)————
92,227$12,302
—
—
—
—
2,318

$113,312 $6,364,732—(99,064)—
64,604
—
(159)
—
1,595
680
102,391

Balance as of March 31, 2013

$584,381$829,591 $4,975,237 $(101,956)$44,805$(159)$ (26,412)$14,620$113,992 $6,434,099

See accompanying Notes to Consolidated Financial Statements.

2013

2012

2013

Cash flows from operating activities:
Income before income taxes and minority interests

¥ 17,767¥ 60,602$  188,910

Depreciation and amortization

26,631

24,198283,158

Amortization of goodwill

1,141

—

12,132

Increase in accrued pension and severance costs

1,825

2,446

19,405

Increase (decrease) in allowance for doubtful accounts

(2,167)2,111(23,041)

Decrease in accrued employees’ bonuses(2,750)(2,506)(29,240)

Increase (decrease) in accrued warranty expenses(2,918)1,343(31,026)

Interest and dividend income(1,659)(1,010)(17,640)(Increase) decrease in trade notes and accounts receivable

57,549(15,540)

611,898

Decrease in inventories

20,27916,023

215,619

Decrease in prepaid consumption tax

2,862

1,508

30,431

Increase (decrease) in accrued consumption tax

596(2,417)

6,337

Decrease in trade notes and accounts payable(15,482)(5,807)(164,615)

Decrease in customer advances(12,456)(4,567)(132,440)

1,928(1,890)20,500(Increase) decrease in specific doubtful receivables
Thousands of U.S. dollars

Corporate Data

Other, net(2,726)

1,912(28,984)

Subtotal

90,42076,406

961,404

Receipts from interest and dividends

1,587

978

16,874

(68)

(43)

(723)

Income taxes paid

(7,672)(47,629)(81,574)

Net cash provided by operating activities

84,267

29,712895,981

Payment for purchases of short-term investments

(192,057)(284,500)(2,042,073)

Proceeds from maturities of short-term investments

126,000

315,500

1,339,713

Payment for purchase of property, plant and equipment

(19,012)(36,010)(202,148)

Proceeds from sale of property, plant and equipment

3,630

1,102

38,596

Payment for acquisition of intangible assets

(1,234)(2,140)(13,121)(55,079)(348)(585,635)(1,097)—(11,664)

Interest paidCash flows from investing activities: Payment for acquisition of investments in newly consolidated
subsidiaries
Payments for transfer of business
Other, netNet cash used in investing activities

(2,920)(1,956)(31,047)(141,769)(8,352)(1,507,379)(646)(3,594)(6,869)Cash flows from financing activities:
Decrease in short-term borrowings
Increase in treasury stock, net
Dividends paid
Other, netNet cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents

(15)

(12)

(159)

(9,317)(23,102)(99,064)

(647)

(627)

(6,880)(10,625)(27,335)(112,972)(5,335)(300)(56,725)

Net decrease in cash and cash equivalents(73,462)(6,275)(781,095)

Cash and cash equivalents at beginning of year

158,776

165,051

1,688,208

Cash and cash equivalents at end of year¥ 85,314¥158,776$  907,113

See accompanying Notes to Consolidated Financial Statements.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

27

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2013 and 2012

1. Basis of Presentation of Consolidated
Financial Statements
The accompanying consolidated financial statements of Tokyo
Electron Limited (hereinafter “the Company”) and its subsidiaries(hereinafter collectively referred to as “Tokyo Electron”) have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Law of Japan and its related accounting
regulations, and in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial
Reporting Standards.
The Company uses financial statements prepared by foreignsubsidiaries in accordance with International Financial ReportingStandards or U.S. generally accepted accounting principles for the
preparation of the consolidated financial statements, together withadjustment for certain items which are required to be adjusted in
the consolidation process.
The accompanying consolidated financial statements have been
restructured and translated into English from the statutory
Japanese language consolidated financial statements. Some supplementary information included in the statutory Japanese language consolidated financial statements is not presented in theaccompanying consolidated financial statements.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥94.05 to$1.00, the approximate rate as of March 31, 2013. The translation
should not be construed as a representation that the Japanese
yen amounts shown could be converted into U.S. dollars at that or
any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its 58 and 30 subsidiaries for the years ended
March 31, 2013 and 2012, respectively.
All significant inter-company accounts, transactions and unrealized profits or losses have been eliminated through consolidation
procedures.
The fiscal year-end of all entities is March 31, except for 19 consolidated foreign subsidiaries. Financial statements for the fiscal
year ending December 31 are used for 14 subsidiaries. Significant
differences in inter-company transactions and accounts arisingfrom consolidating financial statements of different fiscal year-ends
have been adjusted through consolidation procedures. Financial
statements for the provisionally closed financial period ending
March 31 are used for five subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies aretranslated into Japanese yen at the year-end rates, except for

those hedged by forward exchange contracts, which are translated at the contracted rates. Resulting exchange gains and losses
are included in earnings for the year.
Revenue and expense items are translated at the rates thatapproximate those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries are translated into Japanese yen at the rates of exchange in effect at the balance sheet date, except for shareholders’ equity accounts, which
are translated at the historical rates. Revenue and expense
accounts of foreign subsidiaries are translated at average rates of
exchange in effect during the year. Resulting translation adjustments are presented in net assets as a component of accumulated other comprehensive income and minority interests in the
consolidated balance sheets.
(c) Cash equivalents
Tokyo Electron considers all highly-liquid instruments purchasedwith original maturities of three months or less to be cash­equivalents.
(d) Short-term investments
Short-term investments consist of short term deposits and lowrisk financial instruments with original maturities of more than threemonths.
(e) Investment securities
Tokyo Electron examines the intent of holding each security andclassifies those securities as trading securities, held-to-maturity
debt securities or other securities. Tokyo Electron has no trading
securities. Held-to-maturity debt securities are stated mainly atamortized cost. Other securities with market prices are valued atfair market value prevailing at the balance sheet date. The differences between the book and market prices of other securities, netof applicable income taxes, are presented in net assets as a component of accumulated other comprehensive income. Other securities without market value are valued at cost using theweighted-average method.
The cost of sold securities is calculated using the weightedaverage method.
(f) Inventories
Inventories other than raw materials are stated at the lower ofcost, determined by the specific identification method, or net realizable value, which is defined as selling price less estimated additional manufacturing costs and estimated direct selling expenses.
Raw materials are stated at the lower of cost, determined principally by the moving-average method, or net realizable value.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation ofbuildings, machinery and equipment of the Company and its domestic
subsidiaries is computed using the declining balance method, except
for buildings acquired subsequent to March 31, 1998 which are depreciated using the straight-line method, based on the estimated useful
lives of assets. Foreign subsidiaries mainly apply the straight-line method over the estimated useful lives of assets.

Estimated useful lives of property, plant and equipment are
as follows:   Buildings
2 to 60 years   Machinery and equipment
2 to 17 years
Changes in accounting policies with amendment of respective
law or regulation which are difficult to distinguish from changes inaccounting estimates
Effective from the year ended March 31, 2013, the Company
and its domestic subsidiaries have changed their depreciation
method for property, plant and equipment acquired on or after
April 1, 2012, in accordance with the revision of the Corporation
Tax Act. The changes had no significant impact on the consolidated financial statements.
(h) Intangible assets
Intangible assets are amortized by the straight-line method overtheir estimated useful lives.
(i) Goodwill
Goodwill is evaluated on an individual basis and amortized by
the straight-line method over a period not exceeding 20 years.
(j) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of fixed assets held
for use in the business.
If the carrying value of a fixed asset is impaired, a loss is recognized based on the amount by which the carrying value exceeds
its recoverable amount, being the higher of the net selling price or
the value in use of the assets. Net selling price is determined using
the fair value less disposal costs and value in use is based on the
total amount of discounted cash flows estimated to be generated
from the continuing use of the individual assets or the asset groupand the disposal of the assets.
(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amountdetermined based on the historical experience of bad debts withrespect to ordinary receivables, and an estimate of uncollectible
amounts determined by reference to specific doubtful receivablesfrom customers which are experiencing financial difficulties.
(l) Accrued pension and severance costs
The Company and its domestic subsidiaries provide an accrualfor defined benefit employees’ pension and severance costs
based on the projected benefit obligation and the fair value of pension assets. Prior service costs are charged to earnings on astraight-line basis, beginning from the fiscal year in which they are
incurred, over a fixed number of years (four years) within the average remaining years of service of employees when the changes
occur. Actuarial differences are charged to earnings on a straightline basis, beginning from the following fiscal year after they are
incurred, over a fixed number of years (four years) within the averageremaining years of service of employees when the differences occur.
The provision for accrued pension and severance costs for
directors and audit & supervisory board members of the Company
and its domestic subsidiaries is calculated in accordance withinternal regulations.

The Company and certain domestic subsidiaries decided to discontinue the payment of severance pay for directors and audit &supervisory board members after April 1, 2005, and at the generalshareholders’ meeting in June 2005, it was resolved that the­severance pay for directors and audit & supervisory board members until March 31, 2005 would be paid at the termination of their­service and the decision regarding the payment amount for eachdirector and audit & supervisory board member was delegated tothe board of directors and audit & supervisory board members. As
discussed in note 11, the accruals for severance costs for directors and audit & supervisory board members are included in accrued
pension and severance costs in the consolidated balance sheets.
(m) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty, andTokyo Electron accrues such estimated costs when product revenue is recognized. To prepare for future repairs during warranty
periods, estimated after-sale repair expenses over warranty periods are accrued based on the historical ratio of actual repair
expenses to corresponding sales.
(n) Leases
Until the year ended March 31, 2008, non-cancelable leases of
the Company and its domestic subsidiaries had been primarily
accounted for as operating leases (whether such leases were classified as operating or finance leases), except for leases that transfer ownership to the lessee at the end of the lease, which had
been accounted for as finance leases.
Effective from the year ended March 31, 2009, the Company
and its domestic subsidiaries adopted “Accounting Standard forLease Transactions” and “Guidance on Accounting Standard forLease Transactions.” As a result, the Company and its domestic
subsidiaries capitalized leased assets under finance leases commencing after March 31, 2008 and such leased assets are depreciated using the straight-line method over the period of the lease
contract with zero residual value.
(o) Derivatives and hedge accounting
The Company and a domestic subsidiary make use of derivatives in order to manage certain risks arising from adverse fluctuations in foreign currency exchange rates. The amount of derivatives
is limited to the extent of foreign currency assets, liabilities andactual orders, and the Company and the domestic subsidiary do
not trade in derivatives for speculative purposes.
Derivatives are carried at fair value in the consolidated balance
sheet with changes in unrealized gain or loss charged or credited
to earnings, except for those which meet the criteria for hedge
accounting. Unrealized gains or losses on hedging derivatives, netof taxes, are reported in net assets as a component of accumulated other comprehensive income. Receivables and payables
hedged by qualified forward foreign exchange contracts are translated at the corresponding foreign exchange contract rates.
(p) Income taxes
Tokyo Electron records deferred tax assets and liabilities on temporary differences between the carrying amounts of assets and­liabilities for financial reporting purposes and the amounts used for

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

28

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

income tax purposes, which are measured using the enacted tax
rates and laws which are expected to be in effect when the differences are expected to reverse.
(q) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)/PV(Photovoltaic panel) production equipment is principally recognizedat the time of the customer confirmation of set-up and testing ofproducts. Revenue from such equipment not requiring substantial
installation is recognized at the time of shipment. Revenue fromother products, such as electronic components, is recognized at
the time of shipment. Service revenue from maintenance is recognized ratably over the term of the maintenance contract.
(r) Per share information
Net income per share and net assets per share are computed
based on the weighted-average number of shares of common
stock outstanding during each year.

Standards Board of Japan) for accounting changes and corrections of prior period errors which are made from the fiscal year
beginning on April 1, 2011. The adoption of this standard had no
significant impact on the consolidated financial statements.

Dividends per share has been presented on an accruals basis
and include, in each fiscal year ended March 31, dividends
approved or to be approved after March 31 but applicable to theyear then ended.
(s) Research and development expenses
Research and development expenses are charged to earnings
as incurred and amounted to ¥73,249 million ($778,830 thousand)and ¥81,506 million for the years ended March 31, 2013 and2012, respectively.
(t) Reclassifications

unrecognized past service, to change the calculation formula for
projected benefit obligations and current service cost, and toenhance disclosures.
These standards are effective from the year ending March 31,
2014, except for amendments relating to determination of retirement benefit obligations and current service costs, which are
effective from the year ending March 31, 2015.

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation
used for the year ended March 31, 2013.

3. Change in Accounting Policies and Adoptionof New Accounting Standards(a) Accounting standards for earnings per share
Effective from April 1, 2011, the Company adopted “AccountingStandard for Earnings Per Share” (Statement No. 2 issued as of June30, 2010 by the Accounting Standards Board of Japan) and“Guidance on Accounting Standards for Earnings Per Share”(Guidance No. 4 issued as of June 30, 2010 by the AccountingStandards Board of Japan). Based on these new standards, theCompany has changed its method of calculating diluted net income
per share. Under the new method, for share option rights which vest
after a specified period of service, the fair value amount of the shareoptions for service expected to be provided in the future is included in
the proceeds assumed to be received when options are exercised.
(b) Accounting standard for accounting changes anderror corrections
Effective from April 1, 2011, the Company and its domestic subsidiaries adopted “Accounting Standard for Accounting Changes
and Error Corrections” (Statement No. 24 issued by the
Accounting Standards Board of Japan) and “Guidance on
Accounting Standard for Accounting Changes and Error
Corrections” (Guidance No. 24, issued by the Accounting

6. Securities

7. Inventories

Other securities as of March 31, 2013 and 2012 are as follows:
2013:

4. Accounting Standards issued
but not yet adopted

Cost

Finished products

Securities with market prices  Equity securities

The Company and its domestic subsidiaries are currently in theprocess of determining the effects of these revised standards onthe consolidated financial statements.

5. Supplemental Information on
the Consolidated Statements of Cash Flows
Information of assets and liabilities of newly consolidated subsidiaries by acquisition of shares as of the beginning of consolidation,and the relationship between acquisition cost of shares and net
payment for the acquisitions for the year ended March 31, 2013 is
as follows:
Millions of yen

Current assets

Thousands of
U.S. dollars

2013

2013

¥21,811$231,909  Unlisted stock

793

897
1,141

Total

¥12,152¥18,669

2012:

Cost

Millions of yen

Securities with market prices  Equity securities

Carrying value$108,644$176,831

8,432

9,538

Securities without market prices  Unlisted stock  OtherTotal

12,132

12,132$129,208$198,501

Held-to-maturity securities classified as current assets are¥190,498 million ($2,025,497 thousand) and ¥211,790 million asof March 31, 2013 and 2012, respectively.
Reconciliation of held-to-maturity securities as of March 31, 2013
and 2012 to the amounts of short-term investments in the consolidated balance sheets are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥190,498¥211,790$2,025,497

Deposits and low-risk financial instruments with original
maturities of three months
or less

(45,498)(132,790)(483,764)

Deposits with original maturities
of more than three months

9,816

9,849

104,370¥154,816¥ 88,849$1,646,103

Noncurrent liabilities(30,544)(324,764)

Acquisition cost of shares

41,102437,023(348)(3,700)$585,635

Cost

Securities with market prices  Equity securities

(179,266)¥55,079910¥16,082

Noncurrent(16,860)

Net payment for acquisition of investments
in newly consolidated subsidiaries

910¥10,607

Thousands of U.S. dollars

2013:

Current liabilities

253,875

473

Total

Held-to-maturity (current)

(101,563)

485  Other

335,832(9,552)¥14,699  Unlisted stock

373,31223,877¥ 9,212Securities without market prices

31,585Loans as of the date of business combination

Carrying value

Noncurrent

35,110Cash and cash equivalents ofacquired companies¥16,631

1,141  OtherNoncurrent assets

Payment in prior year

¥10,218

Securities without market prices

Goodwill

Short-term investments

Millions of yen

Carrying value

Noncurrent“Accounting Standard for Retirement Benefits (Statement No.
26 issued as of May 17, 2012 by the Accounting Standards Boardof Japan)”“Guidance on Accounting Standard for Retirement Benefits(Guidance No. 25 issued as of May 17, 2012 by the AccountingStandards Board of Japan)”
These accounting standards have been revised to mainly
change the treatment of unrecognized actuarial differences andInventories as of March 31, 2013 and 2012 are as follows:

Millions of yen

Net loss on devaluation of investment securities was ¥44 million($468 thousand) and ¥817 million for the years ended March 31,
2013 and 2012, respectively.
Net gain on sale of investment securities was nil and ¥38 million
for the years ended March 31, 2013 and 2012, respectively.

Work in process, raw materials
and supplies
Total

Thousands of
U.S. dollars

2013

2012

2013

¥ 87,398¥101,790$  929,272

48,30047,680513,556¥135,698¥149,470$1,442,828

The amounts of change in inventory provision included in cost of
sales in the consolidated statements of income for the years
ended March 31, 2013 and 2012 were an increase of ¥1,162 million ($12,355 thousand) and ¥1,115 million, respectively.

8. Impairment of Property, Plant and Equipment
and Intangible Assets
For assessing fixed asset impairment, the Company generallygroups fixed assets used for normal operations at a business unit
level for which profits are reasonably controllable. Also, theCompany assesses the recoverability of individual assets not usedin normal operations or that are idle.
No significant impairment losses of property, plant and equipment
and intangible assets were recognized for the years ended March
31, 2013 and 2012.

9. Pledged Assets
Tokyo Electron did not hold any assets pledged as collateral asof March 31, 2013 and 2012.

10. Short-term Borrowings
Short-term borrowings classified as current liabilities are ¥3,756
million ($39,936 thousand) and ¥4,403 million as of March 31,
2013 and 2012, respectively. These borrowings are from banks
and bore interest at an average annual rate of 0.50% and 0.40% as
of March 31, 2013 and 2012, respectively.
As of March 31, 2013, Tokyo Electron has unused lines of credit
amounting to ¥151,885 million ($1,614,939 thousand).

11. Accrued Pension and Severance Costs
The Company and its domestic subsidiaries have defined benefit
plans (cash balance plan and noncontributory retirement and severance benefit plans) covering substantially all their employees whomeet eligibility requirements. The benefits under the plans are
based on length of service and certain other factors.
The cash balance plan provides for pension or lump-sum payment benefits to employees who retire or terminate their employment for reasons other than dismissal for cause. Under the cash

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

29

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

balance plan, each participant has an account which is credited
yearly based on the current rate of pay and market-related interest
rate. The noncontributory plans provide for lump-sum payment
benefits to employees who retire or terminate their employment forreasons other than dismissal for cause. Certain foreign subsidiaries
have noncontributory retirement and severance benefit plans thatprovide for pension or lump-sum payment benefits to employees
who retire or terminate their employment for reasons other thandismissal for cause.
The funded status of the defined benefit plans, a substantial
portion of which consists of domestic benefit plans, as of March
31, 2013 and 2012 is as follows:
Thousands of
U.S. dollars

Millions of yen

2013

Benefit obligation

¥(106,972)

2012

2013

¥(94,369) $(1,137,395)

Fair value of plan assets

52,15245,139554,514

Funded status

(54,820)(49,230)(582,881)

1,150(1,809)12,227(53,670)(51,039)(570,654)

Unrecognized actuarial difference
Net amount recognized
Amounts recognized in the consolidated balance
sheets consist of: Prepaid pension andseverance costs (Note 1)
 Accrued pension andseverance costs (Note 2)
Net amount recognized

2,974(56,644)¥ (53,670)

3,607

31,621(54,646)(602,275)¥(51,039) $  (570,654)

Notes: 1. The prepaid pension and severance costs as of March 31, 2013 and 2012 isincluded in other assets in the consolidated balance sheets.
2. The provision for accrued pension and severance costs for directors and audit& supervisory board members (¥581 million ($6,178 thousand) as of March 31,
2013 and ¥620 million as of March 31, 2012) is not included.

Net periodic pension cost of the plans is as follows:

2013

2012

2013

Service cost¥5,513¥5,597$58,618

Interest cost

1,864

1,768

19,819

Expected return on plan assets

(887)

(814)

(9,431)

Amortization of actuarial
difference

(501)

401

(5,327)

Amortization of prior service cost

—

25

—

¥5,989¥6,977$63,679

Significant assumptions of domestic pension plans used todetermine the above amounts are as follows:
2013

Allocation method of benefit obligation
Discount rate

Significant components of the deferred tax assets and liabilitiesof Tokyo Electron as of March 31, 2013 and 2012 are as follows:

2012

Straight-line Straight-line
methodmethod
1.40%

2.00%

Expected rate of return on plan assets

2.00%

2.00%

Amortization period of actuarial difference

4 years

4 years

Amortization period of prior service cost

4 years

4 years

Thousands of
U.S. dollars

Millions of yen

Deferred tax assets
Accrued pension andseverance costs
Net operating loss
carryforwards
Tax credit for research anddevelopment
Devaluation of inventories
Elimination of unrealized profit
in inventories
Accrued employees’ bonuses
Accrued warranty expenses
Other
Total gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities
Intangible assets identified
through business combination
Undistributed earnings offoreign subsidiaries
Net unrealized gains on
investment securities
Reserves under Special
Taxation Measures Law
Prepaid pension andseverance costs
Other
Total deferred tax liabilities
Net deferred tax assets

2013

2012

2013

¥20,326¥19,538$216,119

15,864

1,609

168,676

6,811
4,666

12,564
4,749

72,41949,612

2,967
2,202
1,875
8,593
63,304(13,352)
49,952

9,161
2,954
2,971
8,029
61,575(15,134)
46,441

31,547
23,413
19,93691,367673,089(141,967)
531,122(6,110)—(64,966)(4,789)(3,760)(50,920)(2,341)(1,981)(24,891)(1,058)(1,084)(11,249)(1,051)(547)(15,896)¥34,056(1,200)(748)(8,773)¥37,668(11,175)(5,816)(169,017)$(362,105)

Net deferred tax assets are included in the consolidated balance
sheets as of March 31, 2013 and 2012 as follows:

Thousands of
U.S. dollars

Millions of yen

Net pension cost

12. Income Taxes

Millions of yen

Current assetsInvestments and other assets
Other current liabilities
Other liabilities

Thousands of
U.S. dollars

2013

2012

2013

¥15,669
23,206(2)(4,817)¥23,546
17,585(1)(3,462)$166,603
246,741(21)(51,218)

The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the period inwhich temporary differences become deductible. For assessmentof the realizability of deferred tax assets, management considers
the scheduled reversal of deferred tax liabilities, future estimatedtaxable income, tax planning strategies and level of net operating
loss carryforwards, if any, in accordance with accounting principles
generally accepted in Japan.
Based on the level of historical taxable income and future estimated taxable income over the periods which the temporary differences are deductible, management believes Tokyo Electron willrealize the benefits of these deferred tax assets, net of valuation
allowance, as of March 31, 2013 and 2012.
The Company and its wholly-owned domestic subsidiaries apply
a consolidated tax filing system for corporate tax purposes.

The Company is subject to corporate tax, inhabitants’ tax and adeductible enterprise tax, which in the aggregate resulted in a statutory income tax rate of approximately 38.01% and 40.69% for
the years ended March 31, 2013 and 2012, respectively. On
December 2, 2011, amendments to the Japanese tax regulations
were enacted into law. As a result of these amendments, the statutory income tax rate for the Company has been reduced to
38.01% for years beginning on or after April 1, 2012 and 35.64%
for years beginning on or after April 1, 2015. Based on the amendments, the statutory income tax rates utilized for the measurementof deferred tax assets and liabilities expected to be settled or realized from April 1, 2013 to March 31, 2015 and on or after April 1,2015 are 38.01% and 35.64%, respectively, as of March 31, 2013.

The Company believes that it will be able to eliminate the double
taxation by agreement achieved through consultations, and accordingly, has reported the total tax expense of ¥2,195 million ($23,339
thousand) for the fiscal year ended March 31, 2013, as the difference in amounts resulting from the different corporate tax rates
between Japan, the United States of America and South Korea
and the additional amount in conjunction with the imposition of
additional taxes.

Significant components of the difference between the statutory
and effective tax rates for the years ended March 31, 2013 and2012 are as follows:

Under Japanese laws and regulations, the entire amount paid for
new shares is required to be designated as common stock. However,a company may, by a resolution of the board of directors, designate an
amount not exceeding one half of the price of the new shares as additional paid-in capital which is included in capital surplus.

Statutory tax rate in JapanAdjustments:
Effect of elimination of unrealized profit
in inventories
Prior years income taxes from transfer
pricing adjustment
Difference in statutory tax rates
of subsidiaries
Change in deferred tax liabilities for undistributed earnings of foreign subsidiaries
Tax credit for research anddevelopment
Change in valuation allowance
Amortization of goodwill
Expenses not deductible for tax purposes
Effect of enacted changes in Japanese
tax rates on net deferred tax assets
Others, net
Effective tax rate

2013

2012

38.01%

40.69%

16.70(0.16)

12.35—(7.12)(4.04)

5.63

0.87(3.65)(2.44)
2.14
1.14(5.20)
0.38
­—
0.82

—
1.45
64.21%

5.92(0.63)
38.65%The Company received a notice of correction pursuant to transfer pricing taxation from the Tokyo Regional Taxation Bureau on
July 4, 2012 based on the determination that income arising fromtransactions with the Company’s consolidated subsidiaries in the
United States of America and South Korea during the six years
beginning from the year ended March 31, 2006 to the year ended
March 31, 2011 was insufficiently allocated to the Company.
The Company filed its objections with the tax authorities, and toeliminate double taxation, filed a request for inter-governmental
consultations (Mutual Agreement Procedures) to be performed
pursuant to the tax treaties ratified by Japan, the United States ofAmerica and South Korea on March 29, 2013. The Company also
filed for Advance Pricing Agreement (APA) with the tax authorities
for future fiscal periods.

13. Net Assets
Net assets comprises four subsections, which are shareholders’equity, accumulated other comprehensive income, share subscription rights and minority interests.

In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or the excess, ifany, of 25% of common stock over the total of additional paid-in
capital and legal reserve must be set aside as additional paid-in
capital or legal reserve. Legal reserve is included in retained earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in capital used to eliminate or reduce a deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be distributed as dividends. All additional paid-in capital and legal reserve may
be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The Company adopted the restriction of dividends, which
restricts the amount of dividends to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings toshareholders on dates other than the mid-term and year-end, by aresolution of the board of directors in accordance with Japaneselaws and regulations.
At the board of directors’ meeting held on May 15, 2013, thedistribution of cash dividends amounting to ¥4,659 million($49,537 thousand) was resolved. Such appropriations have notbeen accrued in the consolidated financial statements as of March
31, 2013 since they are recognized in the period in which they are
resolved at the board of directors’ meeting.

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

30

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

14. Other Comprehensive Income (loss)

Thousands of
U.S. dollars

2013

2012

2013

Net unrealized gains on investment securities

Weighted-average exercise price

Number ofsharesOther comprehensive income (loss) for the years ended March 31, 2013 and 2012 is as follows:
Millions of yen

2012

2013

Tokyo Electron Device Limited

Outstanding at the beginning of year

650

Yen

U.S. dollars

Number ofshares¥308,698$3,282.28

650Weighted-average
exercise priceYen¥308,698

Granted

—

—

—

—

—

Exercised

—

—

—

—

—

¥1,011¥ 302$ 10,750

Expired (forfeited)

—

—

—

—

—

—

531

—

Outstanding at the end of year

650

308,698

3,282.28

650

308,698

Sub-total, before tax

1,011

833

10,750Exercisable at the end of year

650

308,698

3,282.28

650

308,698

Tax expense

(359)

(64)

(3,817)

Sub-total, net of tax

652

769

6,933

(339)

(9)

(3,604)

Reclassification adjustments

431

(101)

4,582

Sub-total, before tax

92

(110)

978

Tax benefit

(36)

41

(383)

Sub-total, net of tax

56

(69)

595

Adjustments during the year

8,760

(925)

93,142

Reclassification adjustments

—

—

—

8,760

(925)

93,142 Unrealized gains arising during the year
Reclassification adjustments

Net deferred losses on hedging instruments Deferred losses arising during the year

Foreign currency translation adjustments

Sub-total, before taxTax (expense) or benefit
Sub-total, net of taxTotal other comprehensive income (loss)

—

—

—

8,760

(925)

93,142¥9,468¥(225)$100,670

15. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock
option plans for directors and selected employees since the year
ended March 31, 1999. The options under the plans vest immediately with restriction on exercise up to two or three years after thedate of grant, and have an exercise period of eight to twenty years
from the date of grant.
Options to purchase 130,700 and 234,200 shares of theCompany were authorized and granted at an exercise price of ¥1

for the year ended March 31, 2013 and 2012, respectively. The
options under the plans with restriction on exercise up to three
years after the date of grant, and have an exercise period of twenty years from the date of grant.
Shareholders of Tokyo Electron Device Limited, a domestic listed
subsidiary, have approved annual stock option plans for directors
and selected employees since the year ended March 31, 2005.

A summary of stock options outstanding and exercisable as of March 31, 2013 and 2012 is as follows:
2012

2013

Tokyo Electron Limited
Number ofshares

Weighted-average exercise priceYen

U.S. dollars

Number ofshares

Weighted-average
exercise price
Yen

Outstanding at the beginning of year

833,300¥3,139$33.381,296,800¥5,086

Granted

130,700

1

0.01

234,200

1

Exercised

25,8001

0.01

111,100

1

Expired (forfeited)

381,300

5,894

62.67

586,600

6,786

Outstanding at the end of year

556,900

661

7.03

833,300

3,139

Exercisable at the end of year

192,000

1,914

20.35

599,100

4,365

16. Leases

17. Fair Value of Financial Instruments

As mentioned in note 2 (n), effective from the year ended March
31, 2009, the Company and its domestic subsidiaries adopted“Accounting Standard for Lease Transactions” and “Guidance on
Accounting Standard for Lease Transactions.” As permitted under
the standards, finance leases which commenced on or before
March 31, 2008 continue to be accounted for as operating leases.
Pro forma information of leased property acquired on or before
March 31, 2008 including acquisition cost, accumulated depreciation, obligation under finance leases, and depreciation expense offinance leases that do not transfer ownership of leased property to
the lessee on an “as if capitalized” basis for the years ended March
31, 2013 and 2012, is as follows:
Leased assets not recorded in the consolidated balance sheets:

Policy for Financial Instruments
Tokyo Electron limits its fund management to short-term bankdeposits and low-risk financial instruments, and obtains funds byutilizing bank-loans or liquidating trade-receivables.
Trade receivables, which consist of notes and accounts receivable, are exposed to credit risk in the event of non-performance by
the counterparties. Execution and management of credit risk,
maturity and receivable balance are conducted pursuant to theinternal management rules for credit control. Credit risk of major
customers is assessed on a regular basis.
Short-term investments consist of time deposits and low risk
financial instruments and Tokyo Electron trade with highly-rated
financial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests in listedcompanies exposed to equity market risks. Conditions, including
market prices, for these investment securities are monitored on aregular basis.
Trade payables, which consist of notes and accounts payable,
mainly mature within one year. Trade payables are exposed toliquidity risks which are managed through activities such as implementing cash management plans.
See note 18 for detailed discussion on derivative financial­instruments.

Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

Acquisition cost

¥286

¥286

$3,041

Accumulated depreciation

264

216

2,807

Net leased property

¥ 22

¥ 70

$  234

Future minimum lease payments:
Millions of yen

Due within one yearThousands of
U.S. dollars

2013

2012

2013

¥22

¥48

$234

Due over one year

—

22

—

Total

¥22

¥70

$234

Lease payments relating to finance leases accounted for as
operating leases amounted to ¥48 million ($510 thousand) and¥97 million, which approximated the corresponding depreciationon the respective leased property computed by the straight-line
method over the lease terms, for the years ended March 31, 2013
and 2012, respectively.
Future minimum lease payments on non-cancelable operatingleases:Millions of yen

Due within one yearThousands of
U.S. dollars

2013

2012

2013

¥1,628¥2,013$17,310Due over one year

2,834

2,905

30,133

Total

¥4,462¥4,918$47,443

Fair Value of Financial Instruments
Carrying amount and estimated fair value of financial instruments as of March 31, 2013 and 2012, are set out below. Fairvalue of financial instruments which is practically difficult to estimate are excluded (see note 6).
Millions of yen

2013:

AssetsCash and cash equivalents
Short-term investments Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥1,180 million)
Investment securities
Liabilities
Trade notes and accounts payable
Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied

Carrying
value

Estimated
fair value1¥ 85,314
154,816¥ 85,314
154,811

99,321

99,321

16,631

16,631

36,261

36,261(3,325)(62)(3,325)(62)

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

31

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate CitizenshipIntellectual Property

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Millions of yen
Carrying
value

2012:

AssetsCash and cash equivalents
Short-term investments Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥1,376 million)
Investment securities¥158,776¥158,776

88,84988,638148,930

148,930

14,69914,699Liabilities
Trade notes and accounts payable

46,987

46,987

Derivatives (see note 18)
Hedge accounting not applied

(400)

(400)

Hedge accounting applied

(153)

(153)

Thousands of U.S. dollars
Carrying
value

2013:

Estimated
fair value1

AssetsCash and cash equivalents$  907,113$  907,113

Short-term investments

1,646,103

1,646,050

1,056,045

1,056,045

176,831

176,831385,550

385,550(35,354)(35,354)

(659)

(659)

 Trade notes and accounts receivable, net of allowance for doubtful
accounts ($12,546 thousand)
Investment securities
Liabilities
Trade notes and accounts payable
Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied

Receivables and payables derived from derivative transactions are stated on a net
basis. The figures in parentheses represent net payables.
Notes: 1. Fair value calculation of financial instruments
Cash and cash equivalents, short-term investments, trade notes and accounts
receivable and trade notes and accounts payable The carrying amounts approximate fair value because of the short maturity ofthese instruments.
Investment securities
The fair values of marketable securities are based on quoted market prices.
     See note 6 for further information by classification of investment securities.
    Derivatives      See note 18 for detailed discussion on derivative financial instruments.
2. Maturities of financial assets and securities are as follows:
Millions of yen
2013:

Within 1 year

2. Derivative financial instruments designated as hedging instruments

Thousands of U.S. dollars

Estimated
fair value1

After 1 through5 years

2013:

Within 1 year

Cash and cash equivalents$  907,113

2013: Hedge accounting

Contract
amountFair value

Contract
amountFair value

Sell U.S. dollars¥ 5,872¥(90)$ 62,435$(957)

Short-term investments

1,646,103—

Trade notes and accounts receivable

1,068,591—

18. Derivative Financial Instruments
Tokyo Electron is subject to risk from adverse fluctuations in foreign currency exchange rates in its operating and financing activities. The Company and its listed domestic subsidiary enter into
forward foreign exchange contracts in order to hedge such risks,
but do not enter into such transactions for speculative purposes.
The Company and its domestic subsidiary implement a ratio analysis of the total cumulative cash flow fluctuations to assess effectiveness of hedging for all derivative transactions, except fortransactions where the critical terms of the hedging instrument andhedged item match and the Company could conclude that changes
in fair value or cash flows are expected to completely offset.
Execution and management of all derivative transactions in chargeof finance department are conducted pursuant to the internalm­ anagement rule.
The estimated fair values of the derivative financial instruments
as of March 31, 2013 and 2012 are as follows:

Millions of yen

(32)

1,669

(447)

Sell Swiss francs

60

1

638

11

Sell EURO

22

(2)

234

(21)

6,180

33

65,710

351

769

41

8,177

436

¥13,350¥(62)$141,946$(659)

Buy U.S. dollars
Total

Millions of yen

2012: Hedge accounting

Contract
amountFair value

Sell U.S. dollars

¥6,879¥(181)

Sell Korean won

85

(7)

Sell Chinese yuan

192

1

Buy U.S. dollars

4,325

17

Buy EURO
Total

195

17¥11,676¥(153)

The contract amounts of forward foreign exchange contracts,
entered into to hedge receivables and payables denominated inforeign currencies that have been translated by the corresponding
contracted rates, are as follows:

2013:

Sell U.S. dollars

Contract
amountFair value¥50,652¥(3,021)

Unrealized gains(losses)¥(3,021)

Sell Swiss francs

25,787(50)(50)

Sell Korean won

1,068

(295)

(295)

50

(3)

(3)

Sell Singapore dollars
Buy U.S. dollars

Thousands of U.S.
dollars

2013

2012

2013

¥ 9,760¥9,854$103,775

Sell U.S. dollars

404

58

4,295

Buy U.S. dollars

74

65

787

¥10,238¥9,977$108,857

Sell Chinese yuan

4,368

44

44

Total

¥81,925¥(3,325)¥(3,325)

2012:

Contract
amountFair value

Unrealized gains(losses)

Total

Note: The fair value of these derivative financial instruments, which is based on the quoted foreign exchange rates, is included in the carrying value of hedged assets
and liabilities.

19. Other Income (Expenses)

Millions of yen

Sell U.S. dollars

¥ 9,874¥(464)¥(464)

Sell Korean won

701

23

23

5,804

41

41

¥(400)¥(400)¥—

154,816—

Total

¥16,379

Trade notes and accounts receivable

100,501—2013:

Contract
amountFair value

Unrealized gains(losses)Thousands of U.S. dollars

Sell U.S. dollars$538,564$(32,121)$(32,121)¥158,776¥—

Sell Swiss francs

274,184

(532)

(532)

Short-term investments

88,849—Sell Korean won

11,356(3,137)(3,137)

Trade notes and accounts receivable

150,306—

Sell Singapore dollars

532

(32)

(32)

46,443468

468$871,079$(35,354)$(35,354)

Within 1 year

3,083

(42)

Millions of yen¥ 85,314

Cash and cash equivalents

(3)

157

1. Derivative financial instruments not designated as hedging
instruments

Cash and cash equivalents

2012:

290

Contract amount

Short-term investments

After 1 through5 years

Sell Chinese yuan
Sell Korean won

Buy EURO

Buy U.S. dollars
Total

Note: The fair values are based on the quoted forward foreign exchange rates.

20. Business Combinations

Thousands of U.S. dollars$—

Buy U.S. dollarsMillions of yen

Millions of yen

After 1 through5 years

Loss from natural disasters of ¥936 million for the year ended
March 31, 2012, represents losses relating to the Great East
Japan Earthquake which occurred on March 11, 2011, whichmainly ­consists of repair costs for damaged facilities.
Loss on business restructuring of ¥849 million for the year ended
March 31, 2012 consists of devaluation of inventories, loss on impairment of property, plant and equipment and loss on disposal of inventories and property, plant and equipment.

Business combinations by acquisition(A) Acquisition of shares of NEXX Systems, Inc.
(1) Overview of business combination
		 (a) Name of the acquired company and business description
			 Name of the acquired company: NEXX Systems, Inc.
			 Business description: Advanced deposition equipment
for wafer level packaging, electrochemical deposition(ECD) and physical vapor deposition (PVD) systems
		 (b) Primary reasons for business combination			  Tokyo Electron aims to broaden its business portfolio
by securing the advanced packaging application of NEXX
Systems, Inc. and to strengthen the semiconductor production equipment business.
(c) Date of business combination
			 May 1, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL NEXX, Inc.
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by Tokyo
Electron U.S. Holdings, Inc., the Company’s consolidated
subsidiary(2) Period of acquired company’s financial results included in
the consolidated financial statements
		  From May 1, 2012 to March 31, 2013
(3) Acquisition cost of the acquired company
Millions of yen

Thousands of
U.S. dollars

Compensation paid for acquisition¥15,961$169,708

Acquisition cost

¥15,961$169,708(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized			 ¥8,379 million ($89,091 thousand)		 (b) Basis for recognition of goodwill
  Goodwill was recognized based on future increase in profitability expected from the future business development.
(c) Amortization method and period
		 Straight-line method over 10 years(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination
Millions of yen

Thousands of
U.S. dollars

Current assets¥ 2,183$ 23,211

Noncurrent assets

10,702

11,791

Total assets¥12,885$137,002

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

32

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Millions of yen

Thousands of
U.S. dollars(3) Acquisition cost of the acquired company

Current liabilities¥1,659$17,640

Millions of yen

Thousands of
U.S. dollars

Noncurrent liabilities

3,644

38,745Compensation paid for acquisition¥19,772$210,229

Total liabilities¥5,303$56,385

Acquisition cost

¥19,772$210,229(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year
Millions of yen

Thousands of
U.S. dollars

Net sales¥415$4,413Operating income (loss)(259)(2,754)

Income (loss) before income taxes andminority interests(303)(3,222)

Method of estimate calculation
The estimated impact is calculated as the difference between
the net sales and income of the acquired company assuming thatthe business combination had been completed at the beginning of
the fiscal year and the actual net sales and income recorded in the
Company’s consolidated statement of income. This estimate
includes the equivalent of goodwill and other intangible assets
amortization from the beginning of the fiscal year until the date ofbusiness combination.
The estimated impact has not been audited.
(B) Acquisition of shares of FSI International, Inc.
(1) Overview of business combination
		 (a) Name of the acquired company and business description
			 Name of the acquired company: FSI International, Inc.
Business description: Development and manufacture ofsemiconductor production equipment (surface preparation equipment)		 (b) Primary reasons for business combination			  Tokyo Electron aims to expand its business portfolioand strengthen the business for the surface preparationequipment by including product lineup of FSI, Inc.
(c) Date of business combination
			 October 11, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL FSI, Inc.
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by Tokyo
Electron U.S. Holdings, Inc., the Company’s consolidated
subsidiary(2) Period of acquired company’s financial results included in
the consolidated financial statements
		  From October 11, 2012 to March 31, 2013(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized			 ¥3,856 million ($40,999 thousand)			  Amount of goodwill is calculated on a provisional basis as
the allocation of acquisition cost is yet to be completed.
		 (b) Basis for recognition of goodwill
  Goodwill was recognized for the difference between
the acquisition cost and the assets acquired and liabilities
assumed.
(c) Amortization method and period  Goodwill is amortized by the straight-line method overthe estimated period expected to yield benefits.
(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination
Millions of yen

Thousands of
U.S. dollars

Current assets¥ 8,446$ 89,803

Noncurrent assets

12,461

132,494

Total assets¥20,907$222,297

Millions of yen

Thousands of
U.S. dollars$26,125

Current liabilities¥2,457

Noncurrent liabilities

2,534

26,943

Total liabilities¥4,991$53,068(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year(C) Acquisition of shares of Magnetic Solutions Ltd.
(1) Overview of business combination
		 (a) Name of the acquired company and business description
			 Name of the acquired company: Magnetic Solutions Ltd.
Business description: Development and manufacture ofmagnetic field annealing systems
		 (b) Primary reasons for business combination
  Tokyo Electron acquired the magnetic field annealing
technologies of Magnetic Solutions Ltd. to accelerate thedevelopment of the thermal processing systems for processes used in the manufacturing of magneto-resistive
random-access memory (MRAM), which is increasingly
attracting attention as a key device for the future.
Additionally, Tokyo Electron aims to strengthen its thermal
processing system business by combining the acquired
technologies with its technologies.
(c) Date of business combination
December 3, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL Magnetic Solutions Ltd.
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by Tokyo
Electron Europe Ltd., the Company’s consolidateds­ ubsidiary(2) Period of acquired company’s financial results included in
the consolidated financial statements
From December 3, 2012 to March 31, 2013
(3) Acquisition cost of the acquired company
Millions of yen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Compensation paid for acquisition¥2,065$21,956¥6,697$71,207

Acquisition cost

¥2,065$21,956

Operating income

70

744

Income before income taxes andminority interests

21

223

Net sales

Method of estimate calculation
The estimated impact is calculated as the difference between
the net sales and income of the acquired company assuming thatthe business combination had been completed at the beginning of
the fiscal year and the actual net sales and income recorded in the
Company’s consolidated statement of income. This estimate
includes the equivalent of goodwill and other intangible assets
amortization from the beginning of the fiscal year until the date ofbusiness combination.
The estimated impact has not been audited.

(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized		  ¥1,089 million ($11,579 thousand)		 (b) Basis for recognition of goodwill
  Goodwill was recognized based on future increase in profitability expected from the future business development.
(c) Amortization method and period
			 Straight-line method over 10 years(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination

Current assets
Noncurrent assets
Total assets

Millions of yen

Thousands of
U.S. dollars¥  560$ 5,954

971

10,325¥1,531$16,279

Current liabilities
Noncurrent liabilities
Total liabilities

Millions of yen

Thousands of
U.S. dollars¥555$5,901——¥555$5,901(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year

Net sales

Millions of yen

Thousands of
U.S. dollars¥1,068$11,356

Operating income

93

989

Income before income taxes andminority interests

89

946

Method of estimate calculation
The estimated impact is calculated as the difference between
the net sales and income of the acquired company assuming thatthe business combination had been completed at the beginning of
the fiscal year and the actual net sales and income recorded in the
Company’s consolidated statement of income. This estimate
includes the equivalent of goodwill and other intangible assets
amortization from the beginning of the fiscal year until the date ofbusiness combination.
The estimated impact has not been audited.
(D) Acquisition of shares of Oerlikon Solar Holding AG(1) Overview of business combination
		 (a) Name of the acquired company and business description			Name of the acquired company: Oerlikon Solar
Holding AG
Business description: Development and manufacture ofthin-film silicon photovoltaic panel production equipment
		 (b) Primary reasons for business combination
  The Company acquired Oerlikon Solar Holding AG
which has a track record in thin-film silicon solar photovoltaic panel production equipment to achieve growth in
the photovoltaic panel production equipment business.
Additionally Tokyo Electron aims to strengthen the business by integrating the thin film deposition technologies
of Oerlikon Solar Holding AG with the production equipment technologies developed by Tokyo Electron.
(c) Date of business combination
			 November 26, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL Solar Holding AG
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by
the Company

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

33

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Corporate CitizenshipIntellectual Property

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(2) Period of acquired company’s financial results included in
the consolidated financial statements		  Financial results of the acquired company are not includedin the consolidated statements of income according to generally accepted accounting principles in Japan, as the financial year end of the acquired company and the deemed
acquisition date are December 31, 2012, which does notexceed three months prior to the consolidated balance
sheet date.
(3) Acquisition cost of the acquired company
Millions of yen

Compensation paid for acquisition
Expenses directly related to the acquisition
Acquisition cost

¥2,837

Thousands of
U.S. dollars$30,165

468

4,976

¥3,305$35,141(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized			 ¥21,787 million ($231,653 thousand)			  Amount of goodwill is calculated by the provisional basis
as the allocation of acquisition cost is yet to be completed.
		 (b) Basis for recognition of goodwill
  Goodwill was recognized for the difference between
the acquisition cost and the assets acquired and liabilities
assumed.
(c) Amortization method and period  Goodwill is amortized by the straight-line method overthe estimated period expected to yield benefits.
(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination

Current assets
Noncurrent assets
Total assets

Millions of yen

Thousands of
U.S. dollars¥10,622$112,940

7,451

79,224¥18,073$192,164

Millions of yen

Thousands of
U.S. dollars

Current liabilities¥12,189$129,601

Noncurrent liabilities

24,366

259,075

Total liabilities¥36,555$388,676(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year
Millions of yen

Thousands of
U.S. dollars

Net sales¥ 6,358$ 67,602

Operating income (loss)(12,280)(130,569)

Income (loss) before income taxes andminority interests(13,208)(140,436)

Method of estimate calculation
The estimated impact is calculated based on sales and incomeof the acquired company from January 1, 2012 to December 31,
2012, including the amortization of goodwill.
The estimated impact has not been audited.

Information about reportable segment net sales, segment profit (loss), segment assets and other items
Reportable segment information as of and for the years ended March 31, 2013 and 2012 are as follows:

21. Segment Information

2013:

General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo Electron. For each of the components, discrete
financial information is available and the operating result is regularly
reviewed by management to make decisions about resources tobe allocated to the segment and assess its performance.
The operation of Tokyo Electron consists of segments by products and services based on business units (BUs), and Tokyo
Electron identifies as a reportable segment, “Semiconductor
Production Equipment (SPE),” “Flat Panel Display and Photovoltaic
panel (FPD/PV) Production Equipment,” and “Electronic
Components and Computer Networks.”
Products of the SPE segment consist of coaters/developers,
plasma etch systems, thermal processing systems, single wafer
deposition systems, cleaning systems used in wafer processing,wafer probers used in the wafer testing process and other semiconductor production equipment. The SPE segment principallydevelops, manufactures, sells and distributes such products.
Products of the FPD/PV Production Equipment segment consistof coaters/developers, plasma etch/ash system used in the manufacture of flat panel displays, and photovoltaic panel production
equipment used in the manufacture of thin film silicon photovoltaic
panels. The FPD/PV segment principally develops, manufactures,
sells and distributes such products.
The Electronic Components and Computer Networks segmentprincipally designs, develops, procures, and distributes semiconductor products centering on integrated circuits (IC), other electronic components, computer networks and software.
Basis of measurement of reportable segment net sales, segment profit (loss), segment assets and other items
The accounting policies applied in each reportable segment are
generally consistent with those applied for the preparation of theconsolidated financial statements. Intersegment sales or transfers
are determined based on current market prices. Assets in common use have not been allocated to each reportable segment,
while costs associated with those assets have been allocated toreportable segments on a systematic basis.

Millions of yen
Reportable Segment
Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other¥392,027¥20,160¥84,665

43

—

813

392,070

20,16085,478

Total

Eliminations
andCorporate

Consolidated¥   448¥497,300¥    —¥497,300

10,613

11,469(11,469)—

11,061

508,769(11,469)

497,300

Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)

48,600(6,355)

1,283

1,321

44,849(27,082)

17,767

Segment assets

223,956

49,48947,5571,550

322,552

452,976775,528

Depreciation and amortization

12,330

462

448

78

13,31813,313

26,631

Amortization of goodwill

1,038

—

103

—

1,141

—

1,141

Capital expenditures, including intangible andother assets

13,464

1,661

482

54

15,661

9,834

25,495

Consolidated¥633,091

Millions of yen
Reportable Segment

2012:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Eliminations
andCorporate¥477,873¥69,889¥84,868¥   461¥633,091¥    —

—

—

1,432

14,565

15,997(15,997)—

477,873

69,88986,30015,026

649,088(15,997)

633,091

Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit

89,020

2,271

2,312

1,827

95,430(34,828)

60,602

Segment assets

262,789

21,29546,391

1,927

332,402451,209783,611

Depreciation and amortization

11,282

687

570

170

12,70911,48924,198

Capital expenditures, including intangible andother assets

13,518

672

407

36

14,63328,572

43,205

Eliminations
andCorporate

Consolidated

Thousands of U.S. dollars
Reportable Segment

2013:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other$4,168,283$214,354$900,213$  4,763

457

—

8,644

112,845

121,946(121,946)—

4,168,740

214,354908,857

117,608

5,409,559(121,946)

5,287,613

Total

Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)

$5,287,613 $       — $5,287,613

516,746(67,571)

13,642

14,046476,863(287,953)

188,910

2,381,244

526,199505,656

16,481

3,429,580

4,816,332

8,254,912

Depreciation and amortization

131,101

4,912

4,764

829

141,606

141,552

283,158

Amortization of goodwill

11,037

—

1,095

—

12,132—

12,132

Capital expenditures, including intangible andother assets

143,158

17,661

5,125

574

166,518

104,561

271,079

Segment assets

Notes: 1. “Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services, facility maintenance and insurance.
2. (1) “Eliminations and Corporate” segment profit (loss) totaling ¥27,082 million ($287,953 thousand) and ¥34,828 million for the years ended March 31, 2013 and 2012, respectively, includes corporate expenses not allocated to any reportable segments. The corporate expenses mainly consist of research and development costs of ¥20.359 million($216,470 thousand) and ¥26,071 million for the years ended March 31, 2013 and 2012, respectively, pertaining to fundamental research and element research, not allocated toany of the reportable segments.
(2) “Eliminations and Corporate” segment assets totaling ¥452,976 million ($4,816,332 thousand) and ¥451,209 million as of March 31, 2013 and 2012, respectively, consist
mainly of cash and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
3. “Eliminations and Corporate” capital expenditures totaling ¥9,834 million ($104,561 thousand) for the year ended March 31, 2013 consist mainly of capital expenditures for buildings,
machinery and equipment, and ¥28,572 million for the year ended March 31, 2012 consist mainly of capital expenditures for buildings not allocated to any of the reportable segments.
4. Reported segment profit (loss) is reconciled to Income before income taxes and minority interests in the consolidated statements of income.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

34

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Other Information(1) Domestic and overseas net sales by destination for the years ended March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen
Net sales

2013

2012

2013

Japan

¥118,504¥171,364$1,260,011

U.S.A.

117,194

114,951

1,246,082

Taiwan107,734

86,882

1,145,497

Korea

59,376114,218

631,324

Other

94,492

145,676

1,004,699

Total

¥497,300¥633,091$5,287,613(2) Net property, plant and equipment by location as of March 31, 2013 and 2012 are as follows:
Millions of yen

Property, plant and equipment

Japan

U.S.A.

Other

Total

¥99,888¥14,549¥21,261¥135,698

Millions of yen

2012:

Japan

Other

Total

Property, plant and equipment

¥107,874¥19,011¥126,885

2013:

Japan

U.S.A.

Other

Total

$1,062,073$154,694$226,061$1,442,828

Thousands of U.S. dollars

Property, plant and equipment(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2013

Intel Corporation

Semiconductor production equipment¥73,955$786,337

Taiwan Semiconductor
Manufacturing Company Ltd.

Semiconductor production equipment

68,769731,196

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD/PV production equipment

60,374

641,935

Related reportable segment

Name of customer

Millions of yen

Related reportable segment

Name of customer

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD/PV production equipment

Intel Corporation

Semiconductor production equipment

Note: The amounts include sales to the customer and its subsidiaries.

Millions of yen

2013:

2012

¥116,919
90,399

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer networks

Total

Amortization of goodwill¥ 1,038

¥

—

¥103

¥ 1,141

Goodwill

14,56523,397411

38,373

Semiconductor
production
equipment

FPD/PV
production
equipment

Thousands of U.S. dollars

2013:

Note: Sales are classified in countries or regions based on location of customers.

2013:

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the year ended March 31, 2013 and unamortized balances as of March
31, 2013 is as follows:

Amortization of goodwill$ 11,037

Goodwill

154,864$

Electronic
components &computer networks

Total

—

$1,095$ 12,132

248,772

4,370

408,006

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

35

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Independent Auditor’s Report

To the Board of Directorsof Tokyo Electron Limited:

We have audited the accompanying consolidated financial statements of Tokyo Electron Limited and its consolidated subsidiaries, which
comprise the consolidated balance sheets as at March 31, 2013 and 2012, and the consolidated statements of income, statements of comprehensive income, statements of changes in net assets and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparationof consolidated financial statements that are free from material misstatements, whether due to fraud or error.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Tokyo Electron Limited andits consolidated subsidiaries as at March 31, 2013 and 2012, and their financial performance and cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2013 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements.

Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  We conducted our audits in accordance with auditing standards generally accepted in Japan.  Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.  

June 21, 2013
Tokyo, Japan

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error.  In making those risk assessments, we consider internal control relevant to theentity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

36

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Special Feature

Review of Operations
and Business Outlook

Corporate GovernanceCorporate CitizenshipIntellectual Property

Financial Section

Corporate Data

Consolidated Subsidiaries / Investor Information

Consolidated Subsidiaries (As of March 31, 2013)

Investor Information (As of March 31, 2013)
Corporate Name and Head Office:Common Stock Listed on:

For Further Information, Contact:

The Tokyo Stock Exchange 1st Section(Stock code: 8035)• Tokyo Electron Tohoku Limited

Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan• Tokyo Electron Miyagi Limited

Established:• Tokyo Electron TS Limited

November 11, 1963

Investor Relations
Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan
Tel: +81-3-5561-7000• Tokyo Electron FE Limited• Tokyo Electron Device Limited

Annual General Meeting of
Shareholders:• Tokyo Electron BP Limited

June• Tokyo Electron Agency Limited

Common Stock:nJAPAN• Tokyo Electron Yamanashi Limited• Tokyo Electron Kyushu Limited

nU.S.A.
• Tokyo Electron U.S. Holdings, Inc.

Independent Auditors:
KPMG AZSA LLC

Administrator of Shareholders’Register:

Stock trading unit
100 shares
Authorized
300,000,000 shares
Issued and outstanding 180,610,911 shares
Number of shareholders 41,287

Sumitomo Mitsui Trust Bank, Limited
8-4 Izumi 2-chome, Suginami-ku,
Tokyo 168-0063, Japan
Tel (toll free): 0120-782-031 (available
only in Japan)

URL:
http://www.tel.com/• Tokyo Electron America, Inc.
• TEL Technology Center, America, LLC• TEL Venture Capital, Inc.

Principal Shareholders:Number ofshares held
(thousands)

Votingshare ratio(%)

Distribution of Ownership Among
Shareholders:

The Master Trust Bank of Japan, Ltd. (trust account)

19,146

10.68

Japan Trustee Services Bank, Ltd. (trust account)

13,824

7.71

Treasury stock
0.79%

Tokyo Broadcasting System Holdings, Inc.

7,727

4.31

• Tokyo Electron Europe Limited

Mellon Bank Treaty Clients Omnibus

5,247

2.92

• Tokyo Electron Israel Limited

State Street Bank and Trust Company 505225

4,389

2.44

• TEL Magnetic Solutions Limited

SSBT OD05 Omnibus Account - Treaty Clients  

3,744

2.08

Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension

3,623

2.02

The Bank of New York - JASDEC Treaty Account

3,465

1.93

Northern Trust Co. (AVFC) Sub Account American Clients

2,697

1.50

State Street Bank and Trust Company 505017

2,650

1.47

• TEL Epion Inc.
• TEL NEXX, Inc.
• TEL FSI, Inc.

nEUROPE• TEL Solar AG

nASIA• Tokyo Electron Korea Limited• Tokyo Electron Taiwan Limited• Tokyo Electron (Shanghai) Limited

Shares of less than one thousand have been rounded down in the “Number of shares held.”• Tokyo Electron (Kunshan) Limited

Voting share ratio is calculated by the number of shares held excluding treasury stock (1,424,203 shares).

Other Japanese
corporations
5.28%

Japanese individuals andothers
9.56%

Foreign institutions
and others
47.97%

Japanese financial institutions
and securities companies
36.40%• Tokyo Electron Singapore Pte. Limited

Stock Price and Trading Volume(Yen)

58 consolidated subsidiaries in total, including the above 25 companies(Thousands of shares)

8,000
Stock price
6,000

4,000

2,000

0

100,000

Trading volume

50,0000

FY2009FY2010FY2011FY2012FY2013

March 312013