TOKYO ELECTRON ANNUAL REPORT 2014

PAGE

9CONTENTS
CONTENTS

Financial Highlights

Business Overview

Talking about
Tokyo Electron

Top Message

Review of Operationsand Business Outlook

Corporate GovernanceCorporate Citizenship

R&D / Intellectual 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(Billions of yen)
0150

10300

450600262.4

11Net Sales

511.3

12

¥ 478.8 billion

477.9

13392.01478.2%478.8

FPD Production Equipment(Billions of yen)0204060

10804.6%

71.4

11Net Sales

66.7

12¥ 28.3 billion

69.9

13

20.1

14

Capital investment in semiconductor production
equipment saw remarkable recovery in the second half of 2013, reflecting the worldwide spreadof mobile devices as well as demand for servers
accompanying the growing use of cloud computing. In particular, investment to enhance manufacturing capability through miniaturization
resumed for mobile DRAMs, while investment forearly 3D-NAND volume production commenced.
Demand for logic semiconductors remained firm,and investment in cutting-edge technologies byfoundries was brisk.

In flat panel displays (FPD), capital investment forsmall- and medium-sized high-definition panels
remained solid in 2013, reflecting the global
spread of mobile devices. Capital investment inproduction equipment for large-sized panels for
TVs also began to recover in the second half ofthe year, mainly in China. As a result, the overallbusiness environment improved.

BUSINESS OVERVIEW» Segment net sales were up 22.1% year on year to¥478.8 billion.
» Reflecting recovery in memory-related investment,
sales rose 145% in China, 90% in Japan and 28%in South Korea.
» Sales in Taiwan rose 24% on the back of solid
logic-related investment.
» Sales of cleaning systems reached their highest
level ever.

» Segment net sales rose 41.0% to ¥28.3 billion.
» Sales in China accounted for approximately 60%of the total sales.
» Sales of new ICP etch systems, for higher definition
panels, were strong.
» Tokyo Electron began to receive orders for inkjet
printing systems for manufacturing OLED panels.

28.3

PV Production Equipment(Billions of yen)
024680.6%

1011Net Sales12¥ 3.8 billion

13BUSINESS ENVIRONMENT

Aiming to break into the thin-film silicon photovoltaic panel market, Tokyo Electron became
the exclusive sales representative of Switzerland-based Oerlikon Solar in 2009 and begansales of end-to-end production lines for photovoltaic panels. In 2012, the Company
acquired Oerlikon Solar, with the aim of generating growth by merging its technologies withthe production equipment technologies of the Group. However, due to changes in the market environment, panel production equipment has since been in oversupply. While Tokyo
Electron boosted development efforts to increase conversion efficiency and took all available
measures to reduce costs, the business environment remained extremely harsh. Having
determined that it could not expect a reasonable return on investment going forward, Tokyo
Electron ended all research and development, manufacturing and sales operations in the PV
production equipment business at the end of March 31, 2014. Going forward, the Company
will continue only support operations for delivered units.

In 2013 the market for electronic components
reached a new high, driven by demand in theUnited States and Asia. Domestic demand forindustrial electronics recovered, and demand for
devices used in smartphones and automobiles
grew in Asia. In the domestic information andcommunication equipment market, capital
investment related to data centers was firm,
reflecting the rapid growth of cloud computing.

» Segment net sales rose 19.0% year on year to¥100.7 billion.

This segment has been operated by Tokyo Electron Device Limited and its subsidiaries.
Considering the future development of the distinct businesses in which Tokyo Electronand Tokyo Electron Device engage, the Company determined that the establishment ofgrowth strategies more uniquely attuned to each party would benefit the corporate valueof both companies. Accordingly, in April 2014, Tokyo Electron sold a portion of its sharesin Tokyo Electron Device. As a result, from fiscal 2015 onward, Tokyo Electron Device will
be classified as an equity method affiliate rather than a consolidated subsidiary, and Tokyo
Electron’s equity in income of Tokyo Electron Device will be included in investment profit orloss on equity method affiliates on the consolidated statements of income.

From FY2010 to FY2012, PV production equipment sales are included inFPD production equipment sales.

(Billions of yen)
03010116090

16.5%

84.590.2

1284.91384.714120

Net Sales¥ 100.7 billion
100.7

The overall market for FPD production equipment is firm, reflecting capital investment insmall- and medium-sized panels for smartphones, tablets and other mobile devices andaccelerating investment for large-sized panels in China. In thin-film transistor (TFT) processes, the use of low-temperature polysilicon (LTPS) and indium gallium zinc oxide(IGZO) in place of conventional amorphous silicon is growing. Tokyo Electron is working toincrease sales by introducing new products to accommodate these new technologies.
The Company furthermore aims to expand the production equipment market for OLED
displays, which are hailed as the next generation of display technology, with the release of
inkjet printing equipment for use in the manufacture of large-sized OLED panels.

» Segment net sales came to ¥3.8 billion, up from theprevious fiscal year’s ¥83 million.

3.8

Electronic Components and Computer Networks

Demand for semiconductors and for increasingly advanced and diverse technologies is
expected to continue growing. This growth will be driven by the further adoption of smartphones and other mobile devices, the arrival of the “internet of things” and more sophisticated use of big data as well as the rapid development of the networks that support thesetechnologies.
Tokyo Electron regards these technological changes as opportunities for growth and isaggressively bringing to market new high performance, high productivity products. For
finer patterning, the Company is introducing coater/developers with new defect-reducing
features, ALD systems that achieve both nano-scale deposition and high productivity, andsingle wafer cleaning systems with reduced pattern damage to expand sales. TokyoElectron is also working to boost its position in markets for such new technologies as 3D
NAND flash memory and FinFET by introducing etch systems featuring low damage andhigh selectivity as well as dry cleaning systems.

Amid steadily growing worldwide demand forphotovoltaic panels, the number of panels
installed continued to grow in 2013. However,production equipment remained in oversupply
around the globe, and new investment did notrecover.

0.1

14

BUSINESS OUTLOOK» In the electronic components business, sales ofgeneral-purpose integrated circuits (IC) for use inautomobiles increased, buoyed by an expansion ofcommercial rights.
» In the computer networks business, sales ofequipment for data centers increased.
» Increasing sales abroad caused the segment’s
overseas sales ratio to rise from 19.3% in theprevious fiscal year to 22.0%.