PAGETOKYO ELECTRON ANNUAL REPORT 201617

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Sustainability

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
Results of the Company’s R&D efforts included the release

SPE and FPD production equipment segments, see

Sales and Income

net income per share rose 15.0% year on year, outpacing theof new products, such as coater/developers compatible with

Performance by Segment on page 18.

rise in net income, to ¥461.10.

advanced packaging technologies and single wafer deposi-

Operating Environment
The overall world economy in ﬁscal 2016 saw gradual recov-

Gross Proﬁt, SG&A Expenses and Operating Incometion systems for next-generation miniaturization.

Comprehensive Income

ery, despite slowing growth in China and some other emerg-

Cost of sales during ﬁscal 2016 increased 7.1% year on year to

Furthermore, the EXIM™ sputtering system, used to manu-

In ﬁscal 2016, Tokyo Electron recognized comprehensive

ing countries. In the electronics industry, demand grew for¥396.7 billion, while the cost of sales ratio dropped 0.6 offacture STT-MRAM* and other products, was adopted in theincome of ¥61.0 billion, down 24.1% from ﬁscal 2015 evenhigher capacity memory for mobile devices as well as fora percentage point to 59.8%, reﬂecting the 8.3% increase indevelopment lines of multiple customers.

though net income increased ¥6.0 billion year on year toCPUs and memory used in data centers, reﬂecting the further

net sales. Gross proﬁt was up 10.1% year on year to ¥267.2

In FPD production equipment, Tokyo Electron released¥77.9 billion. This was mainly due to ¥9.2 billion in loss on

sophistication of mobile devices and development of cloudbillion, and the gross proﬁt margin rose 0.6 of a percentage

new etch systems for high-resolution small- and medium-

remeasurements of deﬁned beneﬁt plans related to a reduc-services. The semiconductor production equipment (SPE)point to a record high of 40.2%.

sized panels.

tion in the discount rate used to calculate retirement beneﬁts

SG&A expenses fell 2.7% year on year to ¥150.4 billion. This

market, in which Tokyo Electron operates, was ﬁrm, as semiconductor manufacturers carried out capital investment

decrease was mainly due to a reduction in business merger-

driven by the dawn of the internet of things (IoT) as well as

related expenses as a result of the cancellation of the merger

as a result of the Bank of Japan’s negative interest rate policy* STT-MRAM (Spin Transfer Torque-Magnetoresistive Random Access
Memory): An emerging memory promising for its low power consumption

as well as ¥5.7 billion in loss on foreign currency translation
adjustments reﬂecting the appreciation of the yen, and a ¥1.6

the adoption of new forms of memory, such as 3D structureagreement with Applied Materials. The ratio of SG&A expens-devices, and cutting-edge logic semiconductors. The market

es to consolidated net sales dropped from 25.2% in the previ-

Other Income (Expenses) and Net Income Attributableto Owners of Parent

for ﬂat panel display (FPD) production equipment for thin-ous ﬁscal year to 22.6% in the ﬁscal year under review.

During ﬁscal 2016, main sources of other income were ¥1.0

Dividend Policy, Dividends and Stock Repurchasesbillion in gain on sale of the land and buildings of the former

It is the policy of Tokyo Electron to pay dividends on thebasis of business performance. As the Company aims forConsequently, operating income increased 32.5% year on

ﬁlm transistor (TFT) array processes saw overall growth asbillion loss on changes in fair value of investment securities.

capital investment in small- and medium-sized LCD panels

year to ¥116.8 billion, and the operating margin rose fromTechnology Center Tsukuba, ¥0.9 billion in foreign exchange

grew considerably, despite a decline in investment in large-

14.4% to 17.6%.

gain and ¥0.9 billion in interest and dividend income. Other

world-class proﬁtability, it seeks to bolster returns to share-

expenses included ¥9.7 billion in loss on impairment of good-

holders accordingly, and beginning with ﬁscal 2016, raised the

Research and Development

will and other assets and ¥2.2 billion in loss on businesspayout ratio from 35% to 50%. Furthermore, with an eye toSales

R&D expenses were up 6.9% year on year to ¥76.3 billion. The

restructuring due to revisions to business plans for TEL FSI,

ensuring stable dividends, a lower limit of ¥150 per share has

Net sales in ﬁscal 2016 rose 8.3% year on year to ¥663.9 bil-main cause of this rise was increases in expenses in the key

Inc. As a result, net other income (expenses) came to ¥10.3

been set on annual dividends.*

lion. This reﬂected the steady development of business withﬁelds of etch, deposition and cleaning systems in the SPEbillion of net expense in ﬁscal 2016, compared with ¥1.3 bil-customers of Tokyo Electron’s mainstay products as well as

segment. The ratio of R&D expenses to net sales dropped 0.1

lion of net expense in ﬁscal 2015.

growth in sales of parts and used equipment as a result ofof a percentage point year on year to 11.5%.

sized panels.

As a result, income before income taxes came to ¥106.5

share (for a payout ratio of 51.4%), its highest ever. In addi-

Tokyo Electron regards advanced technological prowess as

billion, up 22.6% year on year. Net income attributable totion, the Company repurchased and cancelled stock (8.53% ofissued shares before the cancellation).

as a share of total consolidated sales came to 81.7% in ﬁscal

term management plan, the Company focused investment ontion of stock (8.53% of issued shares before the cancellation),

2016, down 2.8 percentage points from 84.5% in ﬁscal 2015.

ﬁelds in which market growth is forecast. In the SPE ﬁeld,

Orders received during ﬁscal 2016 came to ¥679.3 billion,

development centered on key technologies in the areas of

80¥612,170¥613,125¥663,949

Gross proﬁt

211,445

158,755

201,892

242,774

267,210

33.4%

31.9%

33.0%

39.6%

40.2%

Selling, general and administrative expenses

151,002146,206

169,687

154,661

150,421

Operating income

60,443

12,54932,205

88,113

116,789

Gross proﬁt margin

Operating margin

9.5%

2.5%

5.3%

14.4%

17.6%

Income (loss) before income taxes

60,602

17,767(11,756)

86,828106,467

Net income (loss) attributable to owners of parent

36,726

6,076(19,409)71,88877,892

400

13

14

15

16

88.1

60

40
10

9.5
30

12
왎 Domestic
왎 Overseas

14.4
60

200

0

15

20

32.2

¥497,300

17.6

5.3

5

12.5

¥633,091

90

60.4

Net sales

121.8

2016

518.1

2015

95.0

2014

378.8

2013

461.7

2012

116.8

(Billions of yen)

20

542.1 663.9

(%)

120
613.1

(Billions of yen)

171.4

Sales and Income

Net Income (Loss) Attributableto Owners of Parent

800

600

Millions of yen

Operating Income andOperating Margin(Billions of yen)612.2

ture NAND ﬂash memory and the adoption of new materials.

450.5

year on year. For orders received and order backlog in theDomestic and Overseas Sales

161.6

ed for multiple patterning for further miniaturization, 3D struc-497.3

backlog at the end of March 2016 was ¥311.1 billion, up 5.2%

118.5

etching, deposition and cleaning. These technologies are need-

633.1

up 2.8% compared with the previous ﬁscal year. The order* This lower limit may be revised in the event that the Company does not generate net income for two consecutive ﬁscal years.

77.9

8.4% from ﬁscal 2015. Due in part to the repurchase and cancella-

71.9

generation products and achieve the goals of the medium--19.4

the source of its growth. Accordingly, to produce strong next

while overseas sales grew 4.6% to ¥542.1 billion. Overseas sales

6.1

Domestic sales grew 28.2% year on year to ¥121.8 billion,

owners of the parent totaled ¥77.9 billion in ﬁscal 2016, up

36.7

increased demand for older generation technologies.

Reﬂecting the Company’s ﬁrm business results, Tokyo
Electron paid annual dividends for ﬁscal 2016 of ¥237 per

13

14

0

2.5
0

0

12
왎 Operating Income쎲 Operating Margin

13

14

15

16

-20

12

15

16

PAGE

TOKYO ELECTRON ANNUAL REPORT 201618

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Consolidated Eleven-Year Summary

Financial Review

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Sustainability

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

a result of revisions to business plans for TEL FSI, Inc. The왎 Otherand insurance. Net sales to external customers amounted tosegment proﬁt margin fell from 23.6% in ﬁscal 2015 to 20.1%.

Tokyo Electron’s photovoltaic panel production equipment¥6.2 billion, up 49.3% year on year.

Orders received in this segment edged down 0.1% tobusiness, from which it has been withdrawing, no longer왎 Semiconductor Production Equipment

Financial Position and Cash Flows

In 2015, the SPE market was roughly level with the previous¥626.3 billion. The order backlog as of March 31, 2016 was up

meets the standards of importance speciﬁed by the

year. Demand for DRAM and NAND ﬂash memory was ﬁrm,

5.1% year on year to ¥273.7 billion.

Accounting Standard for Disclosures about Segments of an

For a business overview of this segment, please see page 9.

reﬂecting demand for higher performance in smartphones
and the shipment growth of data center servers, with partic-* ALD (Atomic Layer Deposition): An atomic level ﬁlm deposition technique** HARC (High Aspect Ratio Contact) process: A deep hole etching process that
requires advanced technology

ular growth in capital investment for cutting-edge nodes by
DRAM manufacturers. However, electronics demand grewless than anticipated, leading to restrained capital investment

왎 FPD (Flat Panel Display) Production Equipment

by logic chip manufacturers and foundries.

Capital investment in the FPD production equipment market

In these circumstances, Tokyo Electron’s sales of deposi-grew overall, as strong growth in investment in small- andtion and cleaning systems, which it positions as key businessmedium-sized panels for mobile devices more than made up

areas, saw year-on-year growth. In deposition systems, theremoved from the reportable segments, and its results are

Assets, Liabilities and Net Assets
왎 Assets

now included under Other. Comparisons with the previous

Current assets decreased ¥53.5 billion from the end of theﬁscal year hereinafter are based on recalculations of the ﬁscal

previous ﬁscal year to ¥617.4 billion, reﬂecting decreases of2015 results using the current segment classiﬁcations.

¥81.0 billion in total liquidity on hand (cash, cash equivalents

Enterprise and Related Information. Accordingly, it has been

In addition to the abovementioned photovoltaic panel

and short-term investments with original maturities of lessproduction equipment-related sales, other sales mainly

than one year) and ¥1.2 billion in prepaid expenses and otherinclude group-wide logistics services, facility maintenancecurrent assets, as well as increases of ¥19.5 billion in inventories

for a decrease in investment in large-sized panels. In thismarket position of the Company’s batch and semi-batch

context, sales remained favorable, boosted by a gain in mar-systems used in ALD* processes improved. Adoption of theMillions of yen

ket share of Tokyo Electron’s inductively coupled plasma

Company’s cleaning systems in key logic chip and memory
manufacturing processes also progressed. Sales of etch systems, however, fell slightly year on year, reﬂecting decreased
investment by logic chip manufacturers and foundries,(ICP) etch systems, which have a competitive edge among

Segment Information

products for large-sized panels. The Company also recorded

2016:

sales of its ﬁrst inkjet printing system for manufacturing

Net sales

Segment net sales to external customers increased 36.6%

HARC processes**.

year on year to ¥44.7 billion. Segment proﬁt amounted toSales in the ﬁeld solutions business, which handles sales of¥4.7 billion, a turnaround from a segment loss of ¥1.3 billion

parts and used equipment, modiﬁcations and maintenance

Semiconductor
production
equipment

Eliminations
andCorporate

Consolidated¥¥663,949

FPD
production
equipment

Other¥613,033¥44,687¥ 6,229¥663,949——

11,592

11,592(11,592)—

Total

613,033

44,687

17,821

675,541(11,592)

663,949

Segment proﬁt

123,163

4,747

2,036

129,946(23,479)

106,467

Segment assets

321,100

25,1862,134

348,420444,948

793,368

8,792

424

45

9,261

9,996

19,257

970

—

—

970

—

970

Loss on impairment

9,711

—

—

9,711

16

9,727

Capital expenditures, including intangible assets

8,500

285

13

8,798

5,952

14,750

Sales to external customers

large-sized OLED panels for televisions.

despite increased use in advanced patterning and 3D-NAND

Reportable Segment

Intersegment sales or transfers

Total

—

in ﬁscal 2015. The segment proﬁt margin was 10.6%.

services, rose 8% year on year, due to rising demand for used

Orders received in this segment increased 43.1% year on

equipment and parts certiﬁed by highly reputable manufacturers.

year to ¥50.5 billion. The order backlog as of March 31, 2016

Segment net sales to external customers increased 6.4%

was up 18.4% to ¥37.4 billion.

from ﬁscal 2015 to ¥613.0 billion in ﬁscal 2016. Segment proﬁt

For a business overview of this segment, please see page 9.

declined 9.4% compared with ﬁscal 2015 to ¥123.2 billion, due

Depreciation and amortization
Amortization of goodwill

in part to the recording of loss on impairment of goodwill as왎 Selling, General and Administrative Expenses
쎲 Ratio to Net Sales

13

14

15

16

15

16

The ﬁscal 2013 annual dividend of ¥51 includes
a commemorative 50 year anniversary dividend of ¥20.

39.2

14

0

12

12
왎 Cash Dividends
왎 Share Repurchases

25.6

13

0

12

9.0

0

30
14.3

50

80

20

9.1

16

4.9

13

14

15

200

3.9
3.6

3.7

4
3
2
1

100

0

16

5

451.4

400

400
300

100

50

15

60

4.9

200

0

14

600

500

498.1

40

51
0

90
143

150.4

154.7

20

10

13

150

6

451.0

60

22.6

50

12

73.2

25.2

151.0

100

27.7
169.7

146.2

23.9

800

(Times)

482.3

120

600

793.4

200

30

(Billions of yen)

1,000

876.2

80

29.4

150

(Billions of yen)

828.6

150
237

(Billions of yen)

250

76.3

(Yen)

100

71.3

(Billions of yen)

40

78.7

(%)

200

81.5

(Billions of yen)

Working Capital andCurrent Ratio

414.8

Total Assets

775.5

Shareholder Returns

783.6

Cash Dividends per Share

144.7

R&D Expenses

105.5

Selling, General and Administrative
Expenses and Ratio to Net Sales

0

12

13

14

15

16

0

12
왎 Working Capital쎲 Current Ratio

13

14

15

16

PAGE

TOKYO ELECTRON ANNUAL REPORT 201619

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Consolidated Eleven-Year Summary

Financial Review

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Sustainability

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
and ¥5.7 billion in trade notes and accounts receivable. The

due to a ¥19.3 billion decrease in accrued expenses and otherturnover period for trade notes and accounts receivablecurrent liabilities accompanying a decrease in customer advanc-the end of March 2015 to 70.9% at the end of March 2016.

depreciation and amortization and ¥9.7 billion in loss on

improved from 66 days in ﬁscal 2015 to 64 days in ﬁscal 2016,

es, a ¥1.8 billion decrease in accrued warranty expenses and a ¥1.4

ROE climbed to 13.0% from 11.8% in ﬁscal 2015.

impairment. Major negative factors included a ¥23.5 billion

and the inventory turnover period worsened slightly frombillion decrease in trade notes and accounts payable.

¥106.5 billion in income before income taxes, ¥19.3 billion in

As a result, the equity ratio fell 2.1 percentage points fromincrease in inventories, ¥15.4 billion in income taxes paid andto ¥63.1 billion, due to an increase in net liability for deﬁned

Capital Expenditures* and Depreciation andAmortization**a ¥15.0 billion decrease in customer advances.

Net property, plant and equipment decreased ¥10.6 billion
year on year to ¥96.3 billion due to ¥19.3 billion in deprecia-

beneﬁts of ¥4.2 billion and a decrease in other liabilities ofCapital expenditures were ¥13.3 billion in ﬁscal 2016, a 1.2%

compared with ¥155.7 billion provided in the previous ﬁscal

tion and amortization as well as impairment related to TEL¥3.3 billion.

year-on-year increase. Main factors in these expenditures

year. Major outﬂows included a ¥141.0 billion net increase in

105 days in ﬁscal 2015 to 107 days in ﬁscal 2016.

Non-current liabilities increased ¥0.9 billion year on year

were the acquisition of process evaluation equipment andshort-term investments and ¥11.3 billion used as payment forstood at ¥229.1 billion, down ¥5.9 billion from the end of the

R&D machinery and equipment, primarily for key areas withpurchases of property, plant and equipment.

previous ﬁscal year.

high growth potential in the SPE business as part of efforts to

FSI, Inc. These factors more than offset ¥13.3 billion in new

Total liabilities (current liabilities and non-current liabilities)

ﬁxed asset acquisitions.
Investments and other assets decreased ¥18.7 billion year
on year to ¥79.6 billion. This was mainly attributable to a

Net assets came to ¥564.2 billion at the end of ﬁscal 2016,¥10.0 billion decrease in intangible assets, due in part to loss

down ¥76.9 billion from the end of ﬁscal 2015. This wason impairment at TEL FSI, Inc., as well as a ¥7.2 billion

mainly due to a ¥61.2 billion decrease in retained earnings,

decrease in net asset for deﬁned beneﬁts and a ¥4.0 billion

reﬂecting the recording of ¥77.9 billion in net income attrib-

decrease in investment securities due to sales of stocks held.

utable to owners of the parent and ¥33.0 billion paid in cash

As a result, total assets as of March 31, 2016 stood at

dividends (¥12.2 billion for the ﬁscal 2015 year-end dividend¥793.4 billion, down ¥82.8 billion year on year.

Net cash used in investing activities was ¥150.0 billion,

Cash used in ﬁnancing activities came to ¥138.6 billion,

achieve the goals of the medium-term management plan.

compared with ¥18.2 billion in ﬁscal 2015. Major outﬂows

Depreciation and amortization decreased 7.8% to ¥19.3 bil-

included ¥105.5 billion used in payment for repurchases oflion, reﬂecting continued low levels of capital investment.

treasury stock and ¥33.0 billion in dividends paid.
The balance of cash and cash equivalents at the end of* Capital expenditures represent only the gross increase in property, plant andequipment.
** Depreciation and amortization does not include amortization of goodwill or
losses on impairment.

March 2016 stood at ¥95.6 billion, a decrease of ¥222.0 billion
from the end of ﬁscal 2015. Total liquidity on hand, whichand ¥20.8 billion for the ﬁscal 2016 interim dividend), as wellconsists of cash, cash equivalents and short-term invest-

as a ¥9.6 billion decrease in accumulated remeasurements ofCash Flowsments with original maturities of less than one year,왎 Liabilities and Net Assets

deﬁned beneﬁt plans and a ¥5.7 billion decrease in foreign

Net cash provided by operating activities came to ¥69.4 billion,

decreased ¥81.0 billion year on year to ¥236.7 billion at theCurrent liabilities decreased ¥6.8 billion from the end of ﬁscal

currency translation adjustments due to the appreciation of

down ¥2.4 billion from ﬁscal 2015. Major contributors wereend of March 2016.

2015 to ¥166.1 billion at the end of ﬁscal 2016. This was mainly

the yen.

Millions of yen

Millions of yen

2016

Total current assets¥607,051¥521,501¥621,492¥670,883¥617,416

Net property, plant and equipment

126,885

135,698

112,344

106,896

96,317

Total investments and other assets

49,675

118,329

94,756

98,375

79,635

Total assets

783,611775,528

828,592

876,154793,368

Total current liabilities

124,794

106,670

170,510

172,812

166,061

Total liabilities

185,008

170,401

237,978

234,991

229,129

Total net assets (Total shareholders' equity)

598,603605,127590,614641,163564,239

Equity and Equity Ratio

Receivable Turnover andInventory Turnover

Cash Flows

2012

2013

2014

2015

2016

Cash ﬂows from operating activities¥ 29,712¥ 84,267¥ 44,449¥ 71,806¥ 69,398

Cash ﬂows from investing activities(8,352)(141,769)(19,599)

155,738(150,014)

Cash ﬂows from ﬁnancing activities(27,335)(10,625)(187)(18,214)(138,601)

Cash and cash equivalents at end of year

158,776

85,314

104,797

317,632

95,638ROE

ROA

Capital Expenditures andDepreciation and Amortization

Total Liquidity on Hand

(Billions of yen)

(%)

(%)

(%)

(Billions of yen)(Billions of yen)

150

800

100

15

15

40

350

1.0

0

10

4.4

25
0

쎲 Receivable Turnover
쎲 Inventory Turnover

13

14

15

0

12

16
왎 Equity쎲 Equity Ratio

13

14

15

16

0

0

13

14

12

13

100

1.8

-5

12

150

50

-3.3

12

13.3

25

13.2

5
200

0

19.3

64

12.8

66

20.9

77

50

200

24.9

20

7.7

26.6

6.3

5

250

10.5

10
50

300

30

10

21.8

74

75

24.2

400

86

70.9
562.4

87
75

73.0
639.5

107

69.8
578.1

105

76.5
593.0

100

74.9
586.8

100

100

600

14.1

13.0

11.8

125

39.5

(Days)

236.7

2015

317.7

2014

268.1

2013

240.1

2012

247.6

Financial Position

15

16

ROE = Net income (loss) attributable to owners of parent /Average total equity x 100

12

13

14

15

16

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

0

12

13

14

왎 Capital Expenditures왎 Depreciation and Amortization

15

16

14

15

16

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

PAGE

TOKYO ELECTRON ANNUAL REPORT 201620

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review(3) Impact from Research and Development(6) Impact of Intellectual Property Rights(9) Impact from Major Lawsuits or Legal Actions

Through ongoing and proactive R&D investment and activi-

In order to distinguish its products and make them more

Tokyo Electron is not currently involved in any lawsuits or

The following risks may have a material impact on Tokyo

ties in cutting-edge technologies—miniaturization, vacuum,competitive, Tokyo Electron has promoted its R&D strategy

other legal actions that are likely to signiﬁcantly inﬂuence its

Electron’s business performance, stock price, or ﬁnancial

plasma, thermal processing, coating/developing, cleaning,for the early development of cutting-edge technologies

business results. However, in the event that the Company’s

position.

wafer-transfer and clean technologies—Tokyo Electron has

together with its business and intellectual property strate-business or other activities become the subject of a major

created advanced technologies. At the same time, by quickly

gies. This approach has enabled Tokyo Electron to obtain solelawsuit or other legal action, depending on the outcome of(1) Impact from Changes in the Semiconductor Market

bringing to market new products incorporating these tech-possession of many proprietary technologies that have beensuch action, Tokyo Electron’s business results could beTokyo Electron has achieved a high proﬁt margin by concen-

nologies, Tokyo Electron has successfully captured a highinstrumental to the Company’s ability to capture a high mar-adversely affected.

trating resources in high-tech ﬁelds, including semiconductor

market share in each of the product ﬁelds it has entered andket share and generate high proﬁt margins in each of its

production equipment, where technological innovation is

generated a high proﬁt margin. However, delays in the launch

product ﬁelds. Tokyo Electron’s products incorporate and(10) Other Risks

rapid but Tokyo Electron can effectively use its strengths.

of new products and other factors could adversely affectoptimize many of these proprietary cutting-edge technolo-

Tokyo Electron is actively engaged in reforming its corporate

Although technological change is responsible for the semi-

Tokyo Electron’s business performance.

gies. There may be cases in which, by avoiding the use ofstructure so that it can generate proﬁts even when markets

third-party technologies and intellectual property rights,

contract. These reforms have entailed creating new high-Business-related and Other Risks

conductor market’s rapid growth, Tokyo Electron has actively
undertaken structural reforms to be able to generate proﬁts(4) Safety-related Impact

Tokyo Electron’s business performance could be adversely

growth and high-return businesses and pursuing higher

under any circumstances, including when the market con-Tokyo Electron’s basic philosophy is to always bear in mind

affected.

earnings from existing businesses. At the same time, Tokyo

tracts temporarily due to imbalance of supply and demand.

safety and health in the execution of business activities,

However, order cancellations, excess capacity and personnel

including development, manufacturing, sales, services and(7) Impact of Fluctuating Foreign Exchange Rates

ment and worked to restructure its compliance, risk manage-and increased inventories resulting from an unexpectedly

management. In accordance with this philosophy, Tokyo

Success in the development of overseas operations has

ment and information security management systems.

large market contraction, losses from bad debts resulting

Electron works actively and continuously to improve theincreased the share of sales generated overseas. As a rule,

However, as long as it conducts business activities, as withfrom the worsening of a customer’s ﬁnancial position, andsafety of its products and to eliminate any harmful impact onTokyo Electron conducts export transactions on a yen basis

peer companies or companies in different industries, Tokyo

supply shortages resulting from the worsening of a supplier’s

health. However, harm to customers, order cancellations or

to avert exposure to foreign currency risks. However, someElectron is subject to the effect of many other factors. These

management situation, could adversely affect Tokyo

other circumstances resulting from safety or other problems

exports are denominated in foreign currencies. In these cases,

include the world and regional economic environments, nat-

Electron’s business performance considerably.

related to Tokyo Electron’s products could adversely affect

Tokyo Electron hedges foreign currency risk by using a for-ural disasters, war, terrorism, infectious diseases and otherTokyo Electron’s business performance.

ward foreign exchange contract when an order is received or

unavoidable occurrences, ﬁnancial or stock markets, govern-by other means. However, foreign exchange rate risks canment or other regulations, supply chains, market conditions(5) Impact from Quality Issues

arise from ﬂuctuations in prices due to sudden foreignfor products and real estate, the ability to recruit personnel inTokyo Electron has been successful at increasing transactions

Tokyo Electron actively develops outstanding, cutting-edge

exchange movements, which could have an indirect adverse

Japan and overseas, competition over standardization, andwith the leading semiconductor manufacturers worldwide,

technologies for incorporation in new products that are

effect on Tokyo Electron’s business performance.

loss of key personnel. Any of these factors could adversely

including those in Japan, through the provision of productsbrought quickly to market. At the same time, Tokyo Electronfeaturing outstanding, cutting-edge technology and of ser-works to establish a quality assurance system, efforts that(8) Inﬂuence of Corporate Acquisitions

vices offering a high level of customer satisfaction. However,include obtaining ISO 9001 certiﬁcation, as well as to estab-

As part of its business strategy, Tokyo Electron conducts cor-Tokyo Electron’s sales may from time to time be temporarily

lish a world-class service system. These actions have resulted

porate acquisitions in order to expand into new businessconcentrated on particular customers due to the timing ofin a large number of customers adopting Tokyo Electron’sareas, secure new technologies and business platforms, andlarge capital investments of major semiconductor manufac-

products. However, because Tokyo Electron’s products arestrengthen the competitiveness of existing businesses. The

turers. The resulting escalation in sales competition could

based on cutting-edge technologies, and due to other fac-

Company conducts due diligence and carefully deliberates

adversely affect Tokyo Electron’s business performance.

tors, many of the technologies developed are in unfamiliar

each speciﬁc acquisition. However, in the event that theﬁelds. The occurrence of unforeseen defects or other issues

results following an acquisition do not meet expectations,

could adversely affect Tokyo Electron’s business performance.

Tokyo Electron’s business performance could be adversely(2) Impact from Concentration of Transactions on
Particular Customers

Electron has promoted activities to preserve the environ-

affect Tokyo Electron’s business performance.

affected.