TOKYO ELECTRONANNUALREPORT 2019
For the Year Ended March 31, 2019

PR57-156

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

1

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
Operations
Reviewand BusinessBusiness Outlook
andOutlook

Corporate Governance

Financial Section
Investor Information

Contents
Guide to Buttons

Contents

Corporate Philosophy
We strive to contribute to the development of a dream-inspiring society
through our leading-edge technologies
and reliable service and support.

2 To Our Stakeholders
3 Business Overview and Financial Highlights

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7 Review of Operations and Business Outlook

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VisionThe Corporate Philosophy defines the purpose of Tokyo Electron’s existence and its
mission in society. It represents Tokyo
Electron’s basic way of thinking and forms
the foundation for its corporate activities.
The Vision describes Tokyo Electron’s
medium- to long-term business aspirations
and the direction of Tokyo Electron’s near
future. Jointly with the Medium-termManagement Plan, the Vision defines Tokyo
Electron’s focus in the industry.

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4 Interview with the CEO

8 Corporate GovernanceA truly global company generatinghigh added value and profits
in the semiconductor andflat panel display industries throughinnovative technologies andgroundbreaking proactive solutions
that integrate diverse technologies.

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Message from the Chairman of the Board
12 Directors, Audit & Supervisory Board Members andExecutive Officers
13 Financial Section
29 Consolidated Subsidiaries
29 Investor Information

Disclaimer
Matters discussed in this annual report, including forecasts of future business performance of Tokyo Electron, management
strategies, beliefs and other 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 the forward-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 markets• Changes in the demand for products and services manufactured or offered by Tokyo Electron’s customers, such as
semiconductor manufacturers, FPD manufacturers and electronics makers• Tokyo Electron’s capabilities to continue to develop and provide products and services that respond to rapid technology innovation and changing customer needs in a timely manner
For details, please refer to Business-Related and Other Risks on page 15.

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TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

2

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Corporate Governance

Financial Section
Investor Information

To Our Stakeholders

To Our Stakeholders

Technology is Creating the Societiesof the Future

To begin, we would like to express our gratitude for the ongoing support and confidence of
our shareholders, investors and all of Tokyo Electron’s stakeholders.
In 2018, the wafer fab equipment market grew to its largest ever, spurred by continued
expansion in demand for mobile devices and data centers. In the flat panel display (FPD)
production equipment market, capital investment remained strong for large-size TV
production. Tokyo Electron increased its market share in these expanding markets andimproved productivity. As a result, fiscal 2019 net sales, operating income and net income
attributable to owners of the parent all reached record highs. Furthermore, ROE hit 30.1%,
surpassing our medium-term management plan target of 30%.
The semiconductor and FPD production equipment markets are expected to continue
expanding over the long term, reflecting broadening applications and growing technologicalneeds related to the adoption of such new technologies as next-generation 5G
telecommunications standards and artificial intelligence. By providing innovativetechnologies and solutions that integrate diverse technologies, we aim to sustainably
improve Tokyo Electron’s corporate value and thereby contribute to the development of a
dream-inspiring society.
We look forward to your continued confidence and support.

Tetsuo Tsuneishi

Toshiki Kawai

Representative Director
Chairman of the Board

Representative Director
President & CEO

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

3

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate GovernanceBusiness Overview and Financial Highlights

Business Overview and Financial Highlights

Semiconductor
Production
Equipment

P Cleaning System

P Etch System

P Wafer Prober

Semiconductor devices are broadly used in mobile devices,such as smartphones and tablets, as well as the data centersthat are indispensable for the processing of big data. With thearrival of the IoT, semiconductor applications will expand in
all fields, from consumer electronics and automobiles to
medicine and healthcare. Tokyo Electron provides a wide
range of semiconductor production equipment used to manufacture such semiconductors along with reliable technicalsupport and service. The main categories of our product lineup are coater/developers, etch systems, deposition systems
and cleaning systems used in wafer processing as well as
wafer probers used in the wafer testing process. In addition,
we also offer such products as wafer bonders/debonders
used in advanced packaging processes.

5.2%
Europe 8.0%

Southeast Asia

North America

11.3%

Taiwan

14.0%

Japan

17.6%

China

17.7%

South Korea

26.2%

Plasma Etch System
Tactras™

Net NetSales
Sales
and andGross
GrossProfitProfitMarginMargin(Billions(Billionsof yen) of yen)

ALD System
NT333™

(%)

42.0 42.041.2 41.244
39.6 39.640.2 40.240.3 40.3

(Billions(Billionsof yen) of yen)(%)

44
320 320

1,2001,200

1,278.2
1,278.233
1,130.7
1,130.7

240 24033

800 800

22

160 16022400 400

0

11

0

0

15 15 16 16 17 17 18 18 19 19
Net Sales
Net Sales

GrossGross
ProfitProfit
MarginMarginSingle Wafer Deposition
SystemTriase +™

OperatingOperating
IncomeIncomeand andOperatingMarginOperatingMargin1,6001,600

799.7799.7
663.9663.9
613.1613.1

FPD
Production
Equipment

P Deposition System

Sales by Region

Coater/Developer
CLEAN TRACK™
LITHIUS Pro™ Z

P Coater/Developer

1180

0 0

(%)

(Billions(Billionsof yen) of yen)
(%)

28

28
280 2802124.3 24.3
19.5 19.5281.1281.1
17.6 17.6

155.6155.6

14116.8116.8
8088.1 88.1

00

15 15 16 16 17 17 18 18 19 19
Operating
IncomeOperating
IncomeOverseas

Wafer Prober
Precio™ XLOperatingMarginOperatingMargin97.7%

FreeFree
CashCash
FlowFlow

Flat panel displays (FPDs) are an essential part of everyday
life, employed in such products as TVs, smartphones and tablets. Going forward, applications for FPDs are expected to
expand even further with the adoption of flexible displays.
Tokyo Electron supplies coater/developers and etch/ash systems for manufacturing FPDs along with solid technical support and service. We also offer inkjet printing systems for
manufacturing OLED panels to take advantage of the expanding OLED display market.

FPD Plasma Etch/Ash System
Betelex™

(%)(%)(Billions(Billionsof yen) of yen)

(Yen) (Yen)32

160 160

1,6001,600

120 12014
140 140

16

16

80

118.0118.0

80

8

0

0

1,513.58
1,513.58

8

0

15 15 16 16 17 17 18 18 19 19
Net Income
Attributableto Ownersof Parent
Net Income
Attributableto Ownersof Parent
ROE ROE

The amounts in this report in billions, millions and thousands of yen; thousands of U.S. dollars; and thousands of shares as of and for the years ended March 31, 2016 and prior are rounded to the nearest unit.
Such amounts as of and for the years ended March 31, 2017 and onward, including year-on-year differences, are truncated at the nearest unit. Accordingly, totals for the years ended March 31, 2017 and onward
do not necessarily agree with the sum of the corresponding individual amounts.

40

0

40

0

15 15 16 16 17 17 18 18 19 19Free Cash Flow = Cash flows from operating activities + Cash flows
from investing activities (excluding changes in short-term
investments with ­original maturities of less than one year)

1,245.48
1,245.48

1,2001,200

800 800

758 758
624 624600 600

400 400

800 800

352 352

702.26702.2664.2 64.260.4 60.4

7071.9 71.977.9 77.9

CashCashDividends
per Share
Dividends
per Share(Yen) (Yen)

149.5149.5
139.7139.7
24

Inkjet Printing System for
Manufacturing OLED Panels
Elius™

Net NetIncomeper Share
Incomeper Share

32

30.1 30.1
29.0 29.0

248.2248.2
24204.3204.3
19.1 19.1

0 0

2.3%

FPD Coater/Developer
Exceliner™

21
210 210770

P Inkjet Printing System for Manufacturing OLED Panels

Japan

13.0 13.0115.2115.2
11.8 11.8
7

P FPD Etch/Ash System

Sales by Region

Net NetIncomeIncomeAttributable
Attributableto Owners
to Ownersof Parent
and and
ROEROEof Parent

310.5310.5
24.9 24.9

14.4 14.4

Single Wafer Cleaning
SystemCELLESTA™ -i

P FPD Coater/Developer

461.10461.10400 400
401.08401.080

0

15 15 16 16 17 17 18 18 19 19

200 200

237 237

143 1430015 15 16 16 17 17 18 18 19 19

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

4

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Interview with the CEO

Interview with the CEO

The Dawn of
the Big Data Era
Targeting World-Class Profitability

Question

01

Tokyo Electron achieved record-high profit1 in fiscal 2019;
how is the medium-term management plan progressing?

Tokyo Electron has been working to expand sales

and support capabilities, the field solutions busi-

and profit in the key fields of etch, deposition andness (encompassing sales of parts and usedcleaning. We are focusing on these fields over theequipment, modifications and maintenance ser-medium term in expectation of ongoing techno-

vices) has grown substantially. As a result, sales

logical innovation and market expansion, andand profit growth has outpaced market growth,because they offer opportunities to leverage ourand we have reached the ROE target establishedaccumulated technologies and business expertise.

in the medium-term management plan. We areOver the last five years, the wafer fab equip-

very pleased with these achievements, which

ment (WFE) market has rapidly expanded from

reaffirm that our business strategies are progress-around US$30 billion to almost US$60 billion. In

ing as planned. Going forward, we will continuethat time, Tokyo Electron has reorganized its

to improve product competitiveness, responsive-business units to combine best known methods

ness to customers and productivity to realize

for various products while advancing highly effi-­further business expansion.

2

cient product development through coordination
between development and account sales divisions. These and other efforts have steadilygrown our market share and significantly
improved the profitability of our products. In
addition, thanks to increases in our installed base1 	Gross profit, operating income and net income attributable to owners of
the parent reached record highs.
2 	Wafer fab equipment (WFE): The semiconductor production process isdivided into front-end production, in which circuits are formed on wafers
and inspected, and back-end production, in which wafers are cut into
chips, assembled and inspected again. WFE refers to the production equipment used in front-end production and in wafer-level packaging production.

Toshiki Kawai
Representative Director
President & CEO

Corporate Governance

Financial Section
Investor Information

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

5

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Corporate Governance

Financial Section
Investor Information

Interview with the CEO

Interview with the CEO

Question

02

After several years of expansion,
the WFE market is expected to contract in 2019.
What changes are occurring in Tokyo Electron’s business environment?

Over the past two years in particular, we havedata centers is on hold as companies wait for the

seen brisk investment in expanding DRAM andrelease of new CPUs and peripheral devices suit-

NAND production capacity, reflecting increased

able for 5G applications.

memory in mobile devices and a shift in demand

Due to the shrinkage of the WFE market, Tokyo

from HDDs to SSDs for personal computers andElectron forecasts a year-on-year decrease in net

data centers. There has been a great deal ofsales in fiscal 2020. The importance of semicon-

greenfield investment in NAND, due to the shift

ductors going forward, however, is not goingfrom 2D to 3D device structures. Semiconductor

anywhere. Taking the current market adjustment

demand remains robust, but supply of CPUs,

as an opportunity, in fiscal 2020, we are steadily

which are necessary for use with memory devic-

investing in strategic technological developmentes, has fallen behind, so memory device manufac-

and human resources, with a focus on future

turers are temporarily adjusting their capital

growth. Maintaining industry-leading technologi-

investment. Furthermore, another factor behindcal innovativeness is, I believe, crucial.

the contraction is likely that some investment in

Question

03

terms. With such developments as the IoT and 5G,

making our target simply “over 30%.” We aim to

all kinds of things will be connected to networks,

realize growth in line with this model within fiveand data traffic will grow exponentially. At theyears. Previously, we linked our sales targets tosame time, the establishment of systems to pro-projected WFE market size, but the new model

cess and analyze vast amounts of data, including

intentionally drops this linkage. This decision

data centers and AI, will accelerate the transitionreflects a shift in focus from the WFE market size

to the big data era. The expansion of applications

estimates of external research institutions to theand technological innovation in semiconductor

SAM3 in which we are focusing our efforts on

and FPDs will power this transition.

business expansion and improved profitability.

We amended our financial model to reflect thisGoing forward, we will strive to achieve an oper-

medium- to long-term outlook. We retained theating margin of over 30% and ROE of over 30%.

projections of the model announced last year for

3 SAM: Served available market

net sales and operating income and supplemented these with a new scenario of ¥2 trillion in net
sales. We also removed the upper limit on ROE,

Could you explain how you arrived at the newfinancial model announced in May 2019?

Financial Model (within 5 years)

Net sales
In addition to the adjustment in investment by

However, as when we announced our previous

semiconductor manufacturers, we continue tofinancial model last year, we still expect contin-

monitor risks to the macro economy, such as theued growth in the semiconductor and flat panel

U.S.-China trade friction and Brexit negotiations.

display (FPD) markets over the medium and longFor details on the medium-term management plan,
please visit our website.
www.tel.com/ir/policy/mplan/

OperatingmarginROE¥1,500 billion ¥1,700 billion ¥2,000 billion

26.5%

28%
>30%

>30%

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

6

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Corporate Governance

Financial Section
Investor Information

Interview with the CEO

Interview with the CEO

Question04

How does Tokyo Electron aim to grow inthe medium- to long-term in order to achieve
the new financial model’s targets?

Question05

What led to the decision to implementa share repurchase of up to ¥150 billion,
and what is your approach to using cash on
hand going forward?

The big data era is upon us, requiring even higher-­conduct joint development with customers fromperformance semiconductors and FPDs. In turn,the early stages of each new technology node. In

Our shareholder return policy is to maintain a­constantly evolving challenges our customers

the technological requirements facing production

addition, by identifying and addressing techno-

payout ratio of 50% of net income attributable toface. In addition to our internal research andequipment manufacturers are constantly growing

logical needs and product requirements before

owners of the parent and flexibly consider sharedevelopment, we will collaborate with consortia.

more sophisticated. Boasting diverse technolo-

mass production, we will further improve the effi-

repurchases. Based on this policy, annual cash

We are often asked about M&A, and we do notgies and a wide-ranging product lineup, Tokyo

ciency of technology marketing and development.

dividends for fiscal 2019 came to ¥758 per share,rule out the possibility. M&A could be an option

Electron is among the few manufacturers that

We will reflect the technological expertise gained

a record high. The share repurchase announced inprovided we can realistically expect solid returncan meet these rising expectations. We are focus-

through these initiatives in next-generation

May 2019 is also in line with this policy. The deci-

on investment, medium- to long-term businessing on fields where we expect ongoing techno-

equipment to create a virtuous cycle, enhancing

sion to implement the buyback stems from our

expansion, clear benefit to our stakeholders andlogical innovation and market growth, and incustomer satisfaction and advancing develop-

belief that our growth potential was not ade-increased shareholder value. When approachingwhich we can leverage our strengths, working toment, always a step ahead of the competition.

quately reflected in our stock price, as well as oursuch opportunities, however, we will also consid-

confidence that Tokyo Electron will realize profit

er the potential for business collaboration. We will

growth going forward.

continue to manage our balance sheet appropri-

increase our market share and profitability.

Furthermore, we are targeting stable growth in

As you know, Tokyo Electron is a manufacturer.

the field solutions business by leveraging the

We believe that constantly striving to provide theinsights provided by our installed base, which is

As for uses of cash on hand, investment inbest products and best services on the market isthe largest in the industry. Increasingly sophisti-

future growth is our foremost priority. Tokyo

to generate cash, maintain necessary cash on

the key to sustained growth. In line with thiscated process technologies are more reliant on

Electron’s growth depends on continuously cre-hand and preserve capital for growth invest-

belief, we will invest ¥400 billion in research andproper maintenance to ensure that equipment

ating innovative technologies that solve thements going forward.

development over the coming three years. We

consistently operates at optimal performance. By

will also enhance development and production

realizing high-value-added services, such as pre-capabilities in etch and deposition, where we

dictive maintenance using equipment operational

expect outsized growth. Tokyo Electron possess-data, we will provide support that maximizes

es technologies related to such key processes as

uptime and improves yields for our customers.

lithography, etching, deposition and cleaning. To

Through these measures, we aim to achieve theleverage these strengths and provide solutions

targets of the new financial model and increasethat co-optimize multiple processes, we will

corporate value over the long term.

ately with due consideration placed on our ability

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

7

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Corporate Governance

Financial Section
Investor Information

Review of Operations and Business Outlook

Review of Operations and Business Outlook

Semiconductor Production Equipment (SPE)FPD Production Equipment

2018 Business Environment

Share of Net Sales

2018 Business Environment

Share of Net Sales

Investment in semiconductors for mobile devices and data centers was robust, backed by growing data traffic due in part to the spread of streaming and downloadable video services. Under
these conditions, capital investment, especially in DRAM, saw significant growth. As a result, the2018 global market for wafer fab equipment (WFE)1 grew 16% year on year to a record high ofabout US$59 billion.

Capital investment in small- and medium-sized panels edged down year on year, reflecting
stagnant demand for OLED panels for smartphones and other mobile devices. However, capital
investment in generation 10.5 LCD panels for large-sized TVs over 65 inches increased significantly year on year. As a result, the equipment market for TFT array processes,1 in which Tokyo
Electron operates, remained strong at about US$9.8 billion.

8.7%

1 T FT (Thin-film transistor) array process: The process of manufacturing the substrates with the electric circuit functions that drive displays

1 Wafer fab equipment (WFE): The semiconductor production process is divided into front-end production, in which circuits are formedon wafers and inspected, and back-end production, in which wafers are cut into chips, assembled and inspected again. WFE refers to
the production equipment used in front-end production and in wafer-level packaging production.

91.3%

Fiscal 2019 Business Overview
Segment net sales rose 48.2% year on year to ¥111.2 billion.

Fiscal 2019 Business Overview

T he segment profit margin reached 21.8%, a record high, due to product differentiation in eachgeneration.

Segment net sales grew 10.6% year on year to ¥1,166.7 billion.
• By application, sales of equipment for DRAM grew substantially year on year.

Segment Net Sales
and Profit Margin(Billions of yen)

(%)

29.8

1,200

1,166.7
1,055.2

1,000

24.4

28.0

800

30

25

20

749.8
600

15

400

10

200

5

0

0

17

18

Segment Net Sales
and Profit Margin• By product, etch systems saw especially large growth in both market share and sales, due insignificant part to increased market share of products for key 3D NAND processes.

19

Segment Net Sales
Segment Profit Margin
Segment profit corresponds to income before income
taxes on the consolidated statements of income.

• Sales in the field solutions business (encompassing sales of parts and used equipment, modifications and maintenance services) rose 14.8% year on year to ¥288.2 billion, reflecting
growth in parts sales.
T he segment profit margin decreased from 29.8% in the previous fiscal year to 28.0%, due toaggressive investment aimed at medium- and long-term growth.

Business Outlook
Semiconductor demand is expected to expand over the medium to long term, due to dramatically increasing data traffic resulting from the adoption of such technologies as IoT and AI. Within
the SPE market, Tokyo Electron particularly expects ongoing innovation and market expansion inetch, deposition and cleaning systems, and has designated these as its three key fields. By differentiating our technologies and services in these fields, we aim to grow sales and profit.
As the miniaturization of DRAM and logic chips continues and the number of layers in 3D
NAND increases, the use of new materials and increasingly complex device structures are creating greater technological challenges. To turn these business opportunities into growth, in thearea of etch, we will strengthen our competitive advantage based on process performance andproductivity in HARC,2 interconnects and patterning processes. In deposition, we boast technologies for batch, semi-batch and single wafer processes, and we will leverage this strength to offer
optimal deposition methods while advancing the development of technologies for new materials. In cleaning, we will provide technologies to reduce fine pattern collapse and remove foreign
particles and residue that reduce yields. In these ways, Tokyo Electron seeks to expand its SAM3
share in its three key fields.
In the longer term, the importance of co-optimizing multiple processes will grow, creating
greater needs for services that help increase uptime and yields. Tokyo Electron will leverage theinsights provided by its diverse product lineup to conduct joint development with customers
from the early stages of each new technology node. By doing so, we aim to be at the forefront
in offering integration technologies that realize co-optimization. In addition, by providing services with higher added value, such as remote equipment maintenance and equipment diagnosis
using AI, we aim to achieve further business growth.
2 HARC (High aspect ratio contact) process: A process for forming deep holes or trenches that requires advanced processing technology
3 SAM: Served available market• Tokyo Electron expanded its highly profitable PICP™2 etch systems from small- and mediumsized panels to generation 8.5 panels.

(Billions of yen)

(%)

120

30
2 PICP™: A plasma source that produces extremely uniform high-density plasma on panel substrates

111.2
100

25

80

75.0

21.8

17.7

60

20

15

49.3
10

40

9.4
20

5

0

0

17

18

• Tokyo Electron used its track record in generation 10 panels to secure a large share of theequipment market for generation 10.5 panels.

19

Segment Net Sales
Segment Profit Margin
Segment profit corresponds to income before income
taxes on the consolidated statements of income.

Business Outlook
In the FPD market, technological innovation is expected in both products for mobile devices andfor TVs. In response to increasingly advanced technological requirements, Tokyo Electron aims toachieve differentiation using its superior process technologies to expand its market share andraise the operating margin to 30%.
In small- and medium-sized panels for mobile devices, in addition to such technologies as
LTPS3 and IGZO4 that enable even greater resolution, self-lighting OLED panels and foldable
devices made with flexible displays are expected to gain broader utilization going forward. Thesechanges will drive an increase in the number of masks and dry etch processes as well as a needfor more precise patterning. Tokyo Electron will further enhance the performance of its dry etchsystems and coater/developers to leverage these expanding business opportunities and achievebusiness growth.
Looking at large-sized panels, a shift from LCD to OLED is expected across a wide range ofapplications, including televisions, high-end monitors, and displays installed in vehicles and public places. Tokyo Electron will maintain its competitive advantage in generation 10.5 panels while
expanding its PICP™ etch systems, which provide superior processing uniformity, from smalland medium-sized panels to generation 8.5 and 10.5 panels. Furthermore, Tokyo Electron has
begun sales of inkjet printing systems, which until now it has sold only for large-sized panels, forgeneration 4.5 panels in anticipation of expansion in OLED panel applications. Tokyo Electron’s
inkjet printing systems can be used to manufacture high-resolution panels for 8K TVs and monitors. Leveraging the overwhelmingly high productivity of the inkjet method, Tokyo Electron willtake advantage of the coming mass production of OLED displays.
3 LTPS: Low temperature poly-silicon
4 IGZO: An oxide semiconductor containing indium, gallium and zinc

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

8

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Message from the Chairman of the Board

Corporate GovernanceCorporate Governance

Financial Section
Investor Information

Directors, Audit & Supervisory Board Members and Executive Officers

Message from the Chairman of the Board

Steadily Enhancing
Board Effectiveness
Four years have passed since the introduction of Japan’s Corporate Governance Code, and governance reforms are
beginning to extend beyond form and into substance. Tokyo Electron has strengthened its corporate governance, as
this is the foundation supporting our efforts to attain world-class profitability and increase corporate value over the
short, medium and long terms. Using the Audit & Supervisory Board System, Tokyo Electron achieves an effectivebalance of aggressive management and careful oversight. We seek to continually enhance corporate governance,
adapting to the changing business environment and requirements of society.
In fiscal 2019, the year ended March 31, 2019, to further improve the effectiveness of our corporate governance andenhance our corporate value, we continued the practice inaugurated in fiscal 2018 of holding an off-site meeting as anopportunity for our directors and Audit & Supervisory Board members to discuss important matters other than Boardof Directors meeting agenda items. At this two-day meeting, we exchanged views on Tokyo Electron’s vision of
becoming a truly global company, renewing our shared understanding of the Company’s long-term direction in aneffort to make corporate governance more effective. In addition, the directors and Audit & Supervisory Board members
actively debated measures necessary to achieve the goals of the medium-term management plan as well as initiatives
related to ESG issues and the Sustainable Development Goals that will improve corporate value. We engaged in fruitful
discussion on how the Board of Directors and Audit & Supervisory Board, which oversee the execution of suchmeasures, can function best, including the optimal composition of internal and outside members. The meeting thus
enabled us to set a course to address a range of important issues.
We welcomed a new outside director in June 2019, the first woman to serve on the Board. As a result, six of 16 current
directors and Audit & Supervisory Board members are independent outside members. The new outside director, Ms.
Makiko Eda, brings global insight fostered by experience living overseas as well as many years of experience working inmarketing for a major American semiconductor manufacturer. As Chief Representative Officer at World Economic
Forum Japan, she possesses broad-ranging knowledge of sustainable global economic growth and related challenges. I
am sure that she will put her knowledge of the semiconductor industry, corporate management and economics togreat use at Tokyo Electron. Our other outside directors, Mr. Charles Ditmars Lake , who is an executive at an American
life insurance company, and Mr. Michio Sasaki, who served for many years as president of Keyence, a corporation wellknown for being highly profitable, also provide us with tremendous advice and suggestions based on their deep insight.
The diverse values and perspectives of all of our directors and Audit & Supervisory Board members contribute to highly
productive discussion, further enhancing the effectiveness of the Board of Directors.
As we enter a new era of IoT, AI and big data, the semiconductor and FPD markets continue to expand. As chairman, I
am working to ensure the Board of Directors can take decisive action and sustainably enhance corporate value in a
dynamic business environment.

Tetsuo Tsuneishi
Representative Director
Chairman of the Board

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

9

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Message from the Chairman of the Board

Corporate GovernanceCorporate Governance

Financial Section
Investor Information

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate Governance
Basic StanceIn an environment where over 80% of our sales come fromoverseas, Tokyo Electron regards maintaining governance as
essential to becoming a truly global company that achieves
sustainable growth.
To that end, Tokyo Electron strives to build frameworks
to maximize the use of its worldwide resources. In addition
to strengthening its management platform and technology
base, the Company maintains a governance structure thatwill enable it to attain world-class profitability.
Tokyo Electron uses the Audit & Supervisory Board
System, which consists of a Board of Directors and an Audit& Supervisory Board. Effective governance is achieved
based on the supervision of management by the Audit &Supervisory Board.

Board of Directors
Roles and Responsibilities of the Board of Directors
The Board of Directors works to achieve sustainable growthand increase corporate value over the medium to long term
based on its fiduciary responsibility to shareholders. The roles
and responsibilities of the Board of Directors are as follows:(1) Establishing management strategy and vision(2) Making major operational decisions based on strategic
direction(3) Engaging in constructive, open-minded debate

The Board of Directors seeks the active participation of
those present in discussions in order to obtain a wide range
of opinions, and supervises management and operational
execution based on active debate.
The Board of Directors respects minority or opposing
viewpoints, including opinions voiced by outside directors;
revises the conditions for implementation or the content ofproposals as necessary; and engages in extensive debatewith the goal of reaching decisions based on consensus.
However, emphasis is placed on making necessary decisions
quickly to avoid missing opportunities.
Board Size and Independent Outside Directors
Tokyo Electron considers it essential to maintain a Board of
Directors with the appropriate size to ensure high quality,
active debate; a robust balance of knowledge, experienceand skills among both executive directors and independent
directors; and diversity, including gender and nationality.
The current Board of Directors consists of 11 directors,
including one woman and one foreign national, and Tokyo
Electron believes this to be the appropriate size, at present,to achieve a good balance in terms of knowledge, experience and skills.
Tokyo Electron regards the active expression of opinions,
not only by independent directors, but also by Audit &Supervisory Board members, as the cornerstone that supports the sound decision making of the Board of Directors.
Currently, six out of the 16 participants in the Board ofDoes Tokyo Electron have these major components of corporate governance?

(As of July 1, 2019)

Compensation Committee

Yes

Composed of directors, including outside directors
and excluding representative directors, or
Audit & Supervisory Board members

Nomination Committee

Yes

Composed of directors or Audit & Supervisory
Board members, excluding the CEO and including atleast one outside director or Audit & Supervisory Board member

Outside directors

Yes

Three of the 11 directors are outside directors

Outside Audit & Supervisory Board members

Yes

Three of the five Audit & Supervisory Board members
are outside Audit & Supervisory Board members

Executive officer system

Yes

Disclosure of individual remuneration of representative directors

Yes

Annual performance-linked compensation system

Yes

Medium-term performance-linked compensation scheme

Yes

Adopted in 2018

Stock options system

Yes

Does not apply to outside directors andAudit & Supervisory Board members

Retirement allowance system for executives

NoAnti-takeover measures

No

Disclosed since 1999

Directors meetings, including the Audit & Supervisory Board
members, are outside members, consisting of three independent directors and three outside Audit & Supervisory
Board members. Tokyo Electron believes that the current
Board of Directors meetings achieve an appropriate senseof productive tension and constructive debate essential formaking operational decisions due to the combined presenceof executive directors, who are highly knowledgeable about
Tokyo Electron’s businesses, and outside members, whoprovide objectivity.
Nominations for Director and CEO
Tokyo Electron has established a Nomination Committee toensure fairness and efficacy in management. The
Nomination Committee proposes director candidates to theBoard of Directors prior to their election at the General
Meeting of Shareholders and also nominates CEO candidates for appointment by the Board of Directors. The
Nomination Committee is composed of four directors andAudit & Supervisory Board members, including at least one
outside director or outside Audit & Supervisory Board
member; the CEO is not a member of the committee. The
authority to propose the election or dismissal of the CEO or
directors is entrusted to the Nomination Committee.
In addition, to develop the next generation of management and executive human resources, the Nomination
Committee carefully surveys and analyzes the status of thesuccessor pool, then reports to the Board of Directors,
which provides appropriate supervision to ensure that adequate time and resources are being devoted to implementing the successor development plan.
Director and CEO Compensation
Tokyo Electron’s compensation policy prioritizes the following considerations.
(1) Globally competitive compensation levels and systems that can secure excellent management humanresources(2) Strong correspondence with short-term performanceand medium- and long-term increases in corporate
value aimed at sustainable growth(3) Assuring transparency and fairness in the process ofdetermining compensation as well as the appropriateness of compensation
In line with this policy, Tokyo Electron has adopted a
director and executive officer compensation system that isclosely linked to performance and shareholder value. The

compensation of directors currently comprises a fixed basic
wage, annual performance-linked compensation and medium-term performance-linked compensation. Outside directors receive only a fixed basic wage and an annual
performance-linked cash bonus.
To ensure management transparency and fairness as wellas the appropriateness of compensation, Tokyo Electron
maintains a Compensation Committee, which comprises
three or more directors (excluding the representative directors) or Audit & Supervisory Board members and includes atleast one outside director. The Compensation Committee
utilizes advice from external experts and conducts an analysis of compensation at high-tech companies in and outside
Japan. Based on this analysis, the committee proposes a policy and system for the compensation of the Board of
Directors and executive officers that will be globally competitive and optimally suited to the Company as well as individual compensation amounts for the representative directors.
In principle, annual performance-linked compensationconsists of monetary compensation and stock option
share-based compensation; the ratio of these two components is roughly 1:1 for directors. Stock options are awarded
with the exercise price set at one yen per share, and athree-year vesting period from the date of allotment before
the options may be exercised.
In order to incentivize the CEO and other directors to
improve corporate performance, Tokyo Electron has designated the net income attributable to owners of the parent
and return on equity (ROE) for the current period, which areindicators related to profit, as the main benchmarks for calculating their annual performance-linked compensation.
The medium-term performance-linked compensation
utilizes performance shares (share-based compensation)with the aim of using shareholdings to align the perspectives of directors with those of shareholders and incentivize
directors to increase corporate value. The number of Tokyo
Electron shares issued to directors is calculated based oneach director’s position and duties and varies from 0% to150% according to the attainment of performance targets
over the relevant three-year term.
In the determination of medium-term performancelinked compensation, the operating margin is used as anindicator of profitability and ROE as an indicator of capitalefficiency to assess the attainment of performance targets
and appropriately link such compensation with mediumterm enhancement of corporate value.

TOKYO ELECTRON ANNUAL REPORT 2019

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10

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Message from the Chairman of the Board

Corporate GovernanceCorporate Governance

Financial Section
Investor Information

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceEvaluation of the Effectiveness of the Board of Directors
To evaluate the Board of Directors, including theNomination Committee and Compensation Committee,
Tokyo Electron conducts a question-based survey of all
directors and Audit & Supervisory Board members as wellas interviews with some of these individuals.
In fiscal 2019, Tokyo Electron hired a third-party institution to provide advice on the drafting of the survey, holdthe interviews, and compile and analyze the results. Using
the compiled data and analysis, the outside directors andoutside Audit & Supervisory Board members held discussions of the Board of Director’s effectiveness. These findings
were then shared with and discussed by the entire Board of
Directors, which evaluated its effectiveness and disclosed asummary of the results.
At meetings of the Board of Directors, directors and Audit& Supervisory Board members actively engage in discussion
based on their diverse viewpoints and experiences.
Important items are examined in terms of risk, openly
debated and considered carefully. To complement Board of
Directors meetings, Tokyo Electron held an off-site meeting
focused on operational strategy, vision and governance.
Tokyo Electron thus believes that its Board of Directors isappropriately carrying out its role as defined in the
Corporate Governance Guidelines, namely (1) Establishingmanagement strategy and vision and (2) Making major
operational decisions based on strategic direction.

Accordingly, Tokyo Electron believes that the Board of
Directors, including the Nomination Committee andCompensation Committee, is functioning effectively.
Going forward, the Board of Directors will strive to increase
its diversity, including gender and nationality, and create
more opportunities to discuss Tokyo Electron’s medium- andlong-term vision and growth strategy. The Board will also
examine ways to reinforce Group governance systems,
including those overseas, and the proper division of roles andauthority between the Board of Directors and executive bodies. Furthermore, the Board regards the effective operation of
the successor development plan and provision of value tosociety in areas related to ESG issues and the United Nations’Sustainable Development Goals (SDGs) as important management priorities that it will continue to discuss.

Audit & Supervisory Board
The Audit & Supervisory Board currently consists of fivemembers and includes three outside Audit & Supervisory
Board members. Two members are full-time. The full-time
Audit & Supervisory Board members collect information
through onsite surveys, and the board maintains appropriate coordination with the Internal Audit Department andthe independent auditors as part of a structure that enables
Audit & Supervisory Board members to obtain all information necessary for audits.

Corporate Governance Framework, Internal Control System and Risk Management System(As of July 1, 2019)

Shareholders’ Meeting
Appointment or Dismissal

Board of Directors
Nomination Committee

Compensation Committee

Appointment
or Dismissal

Appointment or Dismissal

Audit

Audit & Supervisory Board
Audit

Cooperate

Cooperate

Independent Auditors
Cooperate

Business Execution
Representative Directors
Audit

CSS & Executive Officers

Internal Control Executive Officers
Risk Management Executive Officers
Compliance Executive Officers
Committees• Ethics Committee• Information Security Committee• Export Trade Control Committee
Department in Charge• Risk Management (General Affairs Dept.)• Compliance (Compliance Dept.)

Business Execution Organization(All Division/All TEL Group Companies)

Internal Audit Dept.
(Global Audit Center)

Audit

Moreover, the composition of Audit & Supervisory Board
members provides a good balance of knowledge requiredfor operational audits and accounting audits, including
financial and accounting knowledge, legal knowledge, andaudit experience at other companies. Tokyo Electron thus
believes its Audit & Supervisory Board members are able toperform their auditing functions effectively.

Risk Management
Approach to Risk Management
Reflecting changes in society and the business environment,
the risks facing businesses are growing increasingly complex
and diverse. Tokyo Electron considers understanding andappropriately addressing the risks that it may face in its
businesses, as well as their impacts, to be a crucial factor tosustainable corporate growth.
Risk Management System
In order to promote more effective risk management, Tokyo
Electron carries out enterprise risk management through abody established within the General Affairs Department at
its headquarters. This body supervises risk management,
analyzing a wide range of risks arising in business activities(such as compliance risk, human resource and labor risk, andbusiness continuity risks) to identify key risks. It then monitors the management of these risks by the respective
departments responsible and supports their risk management activities. The status of these activities is regularly
reported to the Board of Directors and the Audit &Supervisory Board.
Auditing by the Internal Audit Department
The Global Audit Center serves as the internal audit department for the entire Group and implements audits based on
the audit plan. Based on the results of these audits, theCenter then gives instructions for making improvements asneeded, follows up on progress toward these improvements and provides support. The Group’s internal control
over financial reporting in fiscal 2019 was evaluated as
effective by the independent auditors.
Risk Management Initiatives
Each year, we set priority management targets and strive to
steadily reduce risk. In fiscal 2019, we reinforced measuresin the following areas.

Compliance
We appointed people responsible for compliance at key
overseas bases and established a system whereby theyreport the progress of compliance-related activities to theGroup headquarters each month. In addition, compliancerisk audits are conducted through systematic visits to overseas subsidiaries.
Business Continuity Plans (BCPs)
Tokyo Electron is improving its plans based on lessons frompast disasters and is surveying the earthquake risks at its
overseas locations. We are also working, on an ongoing basis,to establish alternate production structures within our network and to develop multiple sources of important parts.
Mental Health, Long Work Hours, and Harassment
Tokyo Electron carries out mental health-related measures
based on employee stress checks and multiple seminars
aimed at helping managers look after their employees. In
addition, we have introduced a mechanism to monitor
excessive work hours that lead to health risks. Tokyo
Electron also holds harassment prevention seminars led bylawyers. The Ethics Committee Chairman and Human
Resource Department provide messaging about changing
mindsets and behaviors.
Management of Confidential Information
The Human Resources Department and the Intellectual
Property Department cooperate to strengthen measures toprevent leaks of confidential information, particularly targeting employees who leave the Company to ensure theproper return and destruction of confidential information.
We also take thoroughgoing steps to ensure that midcareer hires do not divulge confidential information about
their previous employers. We use a combination of industry-leading security systems, provide security training for
employees, and work to protect our information from thesabotage of our servers or computers as well as data theft,
data manipulation and other forms of cyber attack. The
information security environment, including cyber attack
methods, is changing constantly. To stay ahead of thesechanges, Tokyo Electron is constantly gathering informationand formulating and implementing necessary countermeasures on a global basis.

TOKYO ELECTRON ANNUAL REPORT 2019

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11

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Message from the Chairman of the Board

Corporate GovernanceCorporate Governance

Financial Section
Investor Information

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceComplianceApproach to Compliance
Stakeholder trust is essential to business activities. In order tomaintain this trust, it is essential to continuously ensure compliance and enhance corporate ethics. The Fundamental Policies
concerning Internal Controls within the Tokyo Electron Groupand the Code of Ethics of the Tokyo Electron Group (Code of
Ethics) stipulate that all Group executives and employees mustcomply with laws and regulations and act with high ethicalstandards and a strong awareness of compliance.
Compliance Systems and Initiatives
Compliance System
Tokyo Electron has built a structure to implement its compliance program globally. Under the head of the Legal,
Compliance Division, compliance representatives havebeen newly appointed at major overseas bases to create asystem for direct reporting through the chain of commandto the Legal, Compliance Division. The Company has
restructured its compliance system. Specifically, compliancerelated issues are immediately reported by the head of theLegal, Compliance Division to the CEO, Board of Directors,
and the Audit & Supervisory Board so that they can beaddressed quickly and effectively.
Corporate Ethics
Tokyo Electron has established the Code of Ethics as a standard of conduct by which employees and executives should
abide. To ensure awareness of this code, we distribute it in
the form of booklets in Japanese and four other languages
to all employees. Tokyo Electron revises its Code of Ethics asneeded, in response to changes to external and internal
conditions. In addition, an Ethics Committee has been
established to support and supervise the activities of Group
companies in Japan and overseas aimed at more effectively
promoting and raising awareness of compliance and corporate ethics. Furthermore, directors and senior executives
sign an oath to uphold the Code of Ethics and comply withcorruption-related laws every year.

Compliance Regulations
Based on its Code of Ethics, each Group company in Japanand abroad has established its own compliance regulations
to ensure that every individual taking part in the businessactivities of the Group clearly understands the pertinentlaws, regulations and internal company rules, and consistently applies these in all of their activities.
Compliance Education
Tokyo Electron conducts online education and face-to-facetraining on topics including corporate ethics and the basics
of compliance, export compliance, insider trading prevention, the Act for Subcontracting, and the prevention ofharassment. Depending on the topic, this education is
implemented for specific levels or across the board. We also
implement ongoing testing to check the degree of understanding among employees. From fiscal 2020, we will
deploy a more comprehensive, systematic education program, advancing multilingual support in an effort to foster
compliance awareness and reinforce behavior-oriented
awareness-building activities among all Group employees.
Internal Reporting System
As a means for employees to provide information outside
the chain of command about behavior that may be in­violation of laws or corporate ethics, we have established ahotline (organized around the tenets of confidentiality,­anonymity, and prohibition of retribution) to receive internal reports. In addition, we established an external contact
point for employees and another contact point specificallyfor suppliers and third parties. Each overseas location has its
own internal reporting hotline, and we are building a unified
internal reporting system for all overseas bases.
As a result of these initiatives, in fiscal 2019 there were noreports or cases of noncompliance with laws, regulations, or
the Code of Ethics that could have had a material impact on
the Tokyo Electron Group’s business or local communities.

Promoting Dialog with Investors
Basic StanceTokyo Electron endeavors to provide opportunities for constructive dialog with growing numbers of investors aroundthe world to contribute to the Company’s sustainablegrowth and increase corporate value over the medium andlong term. Furthermore, to the extent that this is reasonable and possible, the Company places emphasis on having
the Chairman of the Board and CEO communicate withinvestors through direct dialog.
IR Activities
Striving to maintain dialog with investors, Tokyo Electron
maintains a dedicated Investor Relations Department under
the direct control of the CEO. The Chairman of the Board
and CEO serve as spokespersons for the Company at such
events as earnings release conferences and medium-term
management plan briefings for securities analysts and institutional investors, IR conferences in and outside Japan, andindividual meetings.
The spokespersons for the IR Department hold individual
meetings with investors and periodically relay the opinions

of investors at these events to the Chairman of the Board
and CEO so that feedback can be of use in management.
Shareholders’ Meeting
Tokyo Electron schedules its shareholders’ meeting to avoid
days on which many such meetings are concentrated aspart of its measures to vitalize these meetings and to promote smooth and efficient voting. The Company also mailsa Notice of Annual General Meeting of Shareholders toshareholders more than three weeks in advance of themeeting and discloses notices on its website before they
are mailed, striving to provide shareholders with information as early as possible. Shareholders are free to cast theirvotes via the internet, and Tokyo Electron participates in
the web based voting platform for institutional investors
operated by ICJ, Inc.
To supplement the above shareholder meeting-related
initiatives, Tokyo Electron’s website carries the resolutions,voting results and presentation materials of shareholders’meetings.
 For more details on our corporate governance, please refer to the Tokyo Electron
Corporate Governance Guidelines.
www.tel.com/about/cg

Third-Party Recognition
Tokyo Electron has been selected for inclusion in world-leading environmental, social and governance (ESG)­investment indices.
In fiscal 2019, following from the previous fiscal year, Tokyo Electron was again selected as a constituent stock underindices including DJSI1 Asia Pacific 2018, FTSE4Good,2 FTSE Blossom Japan Index, MSCI World ESG Leaders Index,3 andMSCI Japan ESG Select Leaders Index.4
1	DJSI (Dow Jones Sustainability Index): ESG investment indices developed by U.S.-based S&P Dow Jones Indices LLC and Switzerland-based RobecoSAM AG. The Asia Pacific index covers companies
in that region.
2	FTSE4Good: An index related to environmental performance and corporate social responsibility developed by the UK-based FTSE Group3	MSCI World ESG Leaders Index: Companies that have high ESG performance are selected from the MSCI Global Sustainability Index, an ESG investment index developed by Morgan Stanley CapitalInternational (MSCI)
4	MSCI Japan ESG Select Leaders Index: The MSCI Japan ESG Select Leaders Index is an index constructed from companies that have high ESG performance selected from its parent index (MSCI Japan IMI
Top 500 Index: Top 500 securities based on free float-adjusted market capitalization). The index targets 50% of the free float-adjusted market capitalization within each GICS sector of the parent index.

For details on Tokyo Electron’s ESG-related initiatives, please refer to our Sustainability Report 2019.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

12

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Interview with the CEO

Review of Operations
and Business Outlook

Message from the Chairman of the Board

Corporate GovernanceCorporate Governance

Financial Section
Investor Information

Directors, Audit & Supervisory Board Members and Executive Officers

Directors, Audit & Supervisory Board Members and Executive Officers (As of July 1, 2019)
Directors

Executive Officers
Tetsuo Tsuneishi

Seisu Ikeda

Masaki Yoshizawa

Toshiki Kawai

Yoshinobu Mitano

Tadashi Shimizu

VP & GM, Business Innovation Project

VP & GM, Deputy GM,
Corporate Innovation Division(Digital Transformation)
President, TEL FSI, Inc.

Barry Mayer

Hiroshi Kawamoto

Masayuki Kojima

David BroughTakeo Sasaki

Chairman of the Board
President & CEO, GM,
Corporate Innovation Division

Sadao Sasaki

Tetsuo Tsuneishi

Representative Director
Chairman of the Board

Toshiki Kawai

Representative Director
President & CEO

Sadao Sasaki

Corporate Director

Yoshikazu Nunokawa
Corporate Director

Tatsuya Nagakubo
Corporate Director

EVP & GM, Development & Production
1st Division, Development &Production 4th Division, EHS, Quality,
Procurement, Production Technology
President, Tokyo Electron Technology
Solutions Ltd.

Yoshikazu Nunokawa

EVP & GM, Finance Division, Export &Logistics Control Division, IT Division,
Internal Control

Tatsuya Nagakubo

Kiyoshi Sunohara
Corporate Director

Seisu Ikeda

Corporate Director

Yoshinobu Mitano
Corporate Director

Charles Ditmars Lake II*

Corporate Director
Chairman and Representative
Director, Aflac Life Insurance
Japan Ltd.
President, Aflac International
Incorporated

Michio Sasaki*

Corporate Director
Outside Director,
ZUIKO CO., LTD.
Outside Director, SHIFT, Inc.

Corporate Director
Chief Representative Officer,
World Economic Forum Japan* Outside Director

Audit & Supervisory Board Members

Yoshiteru Harada

Kazushi Tahara

Audit & Supervisory Board
MemberTakatoshi Yamamoto*

Audit & Supervisory Board
MemberRyuji Sakai*

Audit & Supervisory Board
MemberAttorney at law, Nagashima
Ohno & Tsunematsu

Kiyoshi Sunohara

SVP & GM, Field Solutions Business
Division, Business Innovation Project

SVP & GM, SPE Business Division
SVP & GM, Global Strategy

VP & GM, Strategy

VP & GM, Finance Division

SVP & GM, Global Strategy
President, Tokyo Electron Europe Ltd.

VP & GM, Export & Logistics Control
Division

Tetsuro Hori

Yutaka Nanasawa

SVP & GM, Business Innovation Project

Kenji Washino

SVP & GM, Backend Process Business Division

Tsuguhiko Matsuura

SVP & GM, FPD Business Division

Hideyuki Tsutsumi

SVP & GM, Vice Division GM,
Corporate Innovation Division

Takeshi Okubo

VP & GM, IT Division, Business
Innovation Project
President, TEL Solar Services AG

Keiichi Akiyama

VP & GM, CTSPS BU

Isamu Wakui

VP & GM, ES BU

Hiroshi IshidaToshihiko Nishigaki

VP & GM, Development & Production
2nd Division
President, Tokyo Electron Miyagi Ltd.

Shinichi Hayashi

VP & GM, Development & Production
3rd Division, Deputy GM, Corporate
Innovation Division
President, Tokyo Electron Kyushu Ltd.

Shingo Tada

VP & GM, Deputy GM, Account Sales
Division

Masahiro Morita

VP & GM, Account Sales, Global Sales

VP & GM, TFF BU

SVP & GM, Global Sales Division

EVP: Executive Vice President
SVP: Senior Vice President
VP: Vice President
GM: General Manager

Makiko Eda*

Audit & Supervisory Board
MemberSVP & GM, Human Resources, General
Affairs, CSR Division, Legal, Compliance
Division, Chairman of Ethics Committee

SVP & GM, Account Sales Division

Kyosuke Wagai*

Audit & Supervisory
Board Member
Certified Public Accountant,
Wagai CPA Office* Outside Audit & Supervisory Board Member

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

13

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate GovernanceConsolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Financial Review
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Investor Information

Financial Review
Sales and Income
Operating Environment
The overall world economy in fiscal 2019 held firm, with
the United States economy remaining solid, despite
signs of stagnation in the economies of China, Asia andEurope.
In the electronics industry, investment in mobile
devices and data centers remained brisk. Demand forsemiconductors, especially memory, increased. As aresult, the wafer fab equipment market grew a further
16% year on year from the previous year’s recordbreaking US$50 billion, reaching approximately US$59
billion. At the same time, the display industry saw fullscale investment in large generation 10.5 panels,
despite adjustments in investment in small- and­medium-sized OLED panels due to slower growth inshipments of mobile devices. Accordingly, the market
for flat panel display (FPD) production equipment
maintained the brisk level from the previous year,­staying at around US$20 billion.
Sales
Net sales in fiscal 2019 rose 13.0% year on year to¥1,278.2 billion. This reflected the favorable market
environment for semiconductors and FPD as well as
the increase in the Company’s share of each market. By
segment, net sales in the semiconductor production
equipment (SPE) segment grew 10.6% year on year to¥1,166.7 billion. Net sales in the FPD production equipment segment grew 48.2% year on year to ¥111.2 billion.
For details on performance by segment, please refer to
Review of Operations and Business Outlook on page 7.
Furthermore, net sales in the field solutions business(encompassing sales of parts and used equipment,
modifications and maintenance services) rose 14.8%
year on year to ¥288.2 billion, accounting for 22.6% ofconsolidated net sales.

Gross Profit, SG&A Expenses and Operating Income
Gross profit in fiscal 2019 was up 10.8% year on year to¥526.1 billion, reflecting the growth in net sales. The
gross profit margin fell 0.8 percentage points to 41.2%,
due to an increase in the production cost ratio following an expansion of the production and service systems.
SG&A expenses rose 11.2% year on year to ¥215.6 billion, but the ratio of SG&A expenses to consolidated
net sales dropped 0.2 percentage points from the previous fiscal year to 16.9% in the fiscal year under review.
The Group actively advanced R&D with the aim of outperforming the SPE market, where growth is expected.
Consequently, operating income increased 10.5% year
on year to ¥310.5 billion, and the operating margindecreased 0.6 percentage points to 24.3%. This wasdue to increases in the R&D expense ratio and the production cost ratio.
R&D Expenses
R&D expenses were up 17.4% year on year to ¥113.9 billion. The increase was focused consistently with theprevious year: the reinforcement of R&D in the fieldsof etch, deposition and cleaning systems, in which theCompany is working to expand its market share underthe medium-term management plan. Tokyo Electron
also focused on R&D aimed at enhancing the competitiveness of future products. This included not only
enhancing the performance of individual products, butdeveloping innovative technologies to optimize entire
processes, as well as making products more intelligent.
Tokyo Electron regards advanced technologicalprowess as the source of its growth. Accordingly, theCompany actively invests in growth to produce nextgeneration products, mainly focusing on fields in whichmarket growth is forecast. In the fiscal year underreview, Tokyo Electron increased its market share in
key fields related to cutting-edge DRAM and 3D NAND

flash memory production, making progress toward thegoals of the medium-term management plan.
In FPD production equipment, Tokyo Electron developed a new version of the PICP™ plasma etch system
for generation 10.5 panels, which are expected to see
rapid market growth. This system excels in uniformity andwas originally released for small- and medium-sizedpanels. In addition, the Company released a high-­
resolution inkjet printing system for small- and mediumsized panels amid growing demand for higher
definition OLED displays.

Net Sales and Gross Profit Margin

Millions of yen

Sales and Income

2017

2018

2019

Net sales¥613,125¥663,949¥799,719¥1,130,728¥1,278,240

Gross profit

242,774

267,210322,291

475,032

526,183

39.6%

40.2%

40.3%

42.0%

41.2%

Selling, general and administrative expenses

154,661

150,421

166,594

193,860

215,612

Operating income

88,113

116,789

155,697

281,172

310,571

Gross profit margin

Operating margin

14.4%

17.6%

19.5%

24.9%

24.3%

Income before income taxes

86,828106,467

149,116

275,242

321,508

Net income attributable to owners of parent

71,88877,892

115,208

204,371248,228

1 This lower limit may be revised in the event that the Company does not generate net income for two consecutive fiscal years.

Financial Position and Cash Flows
Assets, Liabilities and Net Assets
M Assets
Current assets increased ¥36.2 billion from the end of
the previous fiscal year to ¥982.8 billion, reflecting a¥25.2 billion decrease in cash and cash equivalents and¥44.0 billion increase in short-term investments. The
turnover period for trade notes and accounts receivablein fiscal 2019 was 42 days, compared with 52 days in fiscal 2018, and the inventory turnover period in fiscal
2019 was 101 days, compared with 111 days in fiscal 2018.

Comprehensive Income
In fiscal 2019, Tokyo Electron recognized comprehensive
income of ¥242.6 billion, up from ¥206.1 billion in fiscal
2018. This was mainly due to the ¥248.2 billion in net
income, ¥4.1 billion in unrealized loss on investment

1,600

2016

Dividend Policy and Dividends
It is the policy of Tokyo Electron to pay dividends on
the basis of business performance. The Company aims
for a payout ratio of 50% of net income attributable toowners of the parent. Furthermore, with an eye toensuring stable dividends, a lower limit of ¥150 per
share has been set on annual dividends.1 Reflecting theCompany’s strong sales and profit growth, Tokyo
Electron paid annual dividends for fiscal 2019 of ¥758
per share (for a payout ratio of 50.1%), its highest ever.
Going forward, the Company will seek to build worldclass profitability and reciprocate the support of shareholders by delivering profit growth.

Other Income (Expenses) and Net Income
Attributable to Owners of Parent
During fiscal 2019, net other expenses came to ¥0.1 billion (digits below ¥0.1 billion are truncated), reflecting¥1.0 billion in extraordinary loss due mainly to a loss on
sales and disposal of property, plant and equipment, as
well as net unrealized losses on investment securities,
offsetting ¥0.8 billion in extraordinary income due toa gain on sales of investment securities and property,
plant and equipment. Income before income taxes
came to ¥321.5 billion, up 16.8% year on year. As
a result, net income attributable to owners of the parent
totaled ¥248.2 billion in fiscal 2019, up 21.5% from fiscal
2018. Net income per share (basic) rose 21.5% year on
year to ¥1,513.58.

(Billions of yen)

2015

securities related to strategically held shares, ¥0.2 billion
in net deferred loss on hedging instruments, and ¥1.1 billion in loss on foreign currency translation adjustments.

42.0 41.2

39.6 40.2 40.3

1,278.2

1,200

1,130.7

613.1

320
24.9

33

19.5 281.1

240

160

14.4

663.9

16

(%)

(Billions of yen)

310.5

28

280

24.3

21

210

14

140

17

18

(%)

29.0

19

11

80

0

0

155.6

 Operating Income Operating Margin

16

32

24

204.3
19.1

16
11.8

88.1

15

30.1
248.2

116.8

0
 Net Sales
 Gross Profit Margin(Billions of yen)

22

400

15

(%)

44

Net Income Attributableto Owners of Parent and ROE

17.6

799.7

800

Operating Income andOperating Margin

17

18

19

7

70

0

0

13.0

115.2

71.9 77.9

8

0

15

16

17

18

19

 Net Income Attributable to Owners of Parent
 ROE
ROE = Net income attributable to owners of parent /Average total equity x 100

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

14

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate GovernanceConsolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Financial Review
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Investor Information

Financial Review
Net property, plant and equipment increased ¥24.1
billion year on year to ¥150.0 billion. This was largely
due to finishing construction of a new developmentbuilding at the Miyagi Plant to bolster the developmentof next-generation technologies, beginning construction of new production buildings at the Yamanashi and
Tohoku plants, and acquiring new evaluation tools.
Investments and other assets decreased ¥5.5 billion
year on year to ¥124.6 billion. This reflected a ¥6.8 billion
year-on-year decrease in intangible assets to ¥9.0 billion,
due primarily to depreciation and amortization, as well as
the removal of TEL NEXX, Inc. from the scope of consolidation. As a result, total assets as of March 31, 2019 stoodat ¥1,257.6 billion, up ¥54.8 billion year on year.

Non-current liabilities increased ¥1.7 billion year on
year to ¥64.6 billion.
Net assets came to ¥888.1 billion at the end of fiscal
2019, up ¥116.6 billion from the end of fiscal 2018. Thiswas mainly due to a ¥123.4 billion increase in retained
earnings, reflecting the recording of ¥248.2 billion in
net income attributable to owners of the parent and¥124.7 billion paid in cash dividends (¥56.9 billion for
the fiscal 2018 year-end dividend and ¥67.8 billion for
the fiscal 2019 interim dividend).
As a result, the equity ratio rose 6.2 percentage
points year on year to 70.0% at the end of March 2019.
ROE climbed to 30.1% from 29.0% in fiscal 2018.
In addition, Tokyo Electron adopted Partial
Amendments to Accounting Standard for Tax EffectAccounting (ASBJ Statement No. 28, February 16, 2018)from April 1, 2018. Prior year comparisons retroactively
apply these standards to the abovementioned figures
for assets, liabilities and net assets as of March 31, 2018.

M Liabilities and Net Assets
Current liabilities decreased ¥63.5 billion from the endof fiscal 2018 to ¥304.8 billion at the end of fiscal 2019.
This was mainly due to a ¥33.1 billion decrease in tradenotes and accounts payable and a ¥22.9 billion
decrease in customer advances.

Millions of yen

Financial Position

2015

2016

2017

2018

2019

Total current assets¥670,883¥617,416¥775,938¥ 946,597¥ 982,897

Net property, plant and equipment

106,896

96,317

100,441

125,952

150,069

Total investments and other assets

98,375

79,63581,067130,246

124,661

Total assets

876,154793,368

957,447

1,202,796

1,257,627

Capital Expenditures1 and Depreciation andAmortization2
Capital expenditures totaled ¥49.7 billion in fiscal 2019,
a 9.1% year-on-year increase. Major expenditures
included the acquisition of evaluation tools in order tostrengthen key areas in the SPE business as well as thecompletion of construction of a new developmentbuilding at the Miyagi Plant and start of constructionof new production buildings at the Tohoku andYamanashi plants to meet rising demand for etch anddeposition equipment.
Depreciation and amortization increased 18.0% to¥24.3 billion.

one year not included in cash and cash equivalents,
increased ¥18.7 billion year on year to ¥392.6 billion at
the end of March 2019. Cash flows during the fiscal
year under review were as follows.
Net cash provided by operating activities came to¥189.5 billion, up ¥2.9 billion from fiscal 2018. Major
contributors were ¥321.5 billion in income before
income taxes, ¥24.3 billion in depreciation and amortization, and a ¥10.5 billion decrease in trade notes andaccounts receivable. Major outflows included ¥102.9
billion in income taxes paid, a ¥31.7 billion decrease intrade notes and accounts payable, a ¥22.0 billion
decrease in customer advances, and a ¥14.7 billion
increase in inventories.
Net cash used in investing activities was ¥84.0 billion, compared with ¥11.8 billion used in the previous
fiscal year. This was mainly due to ¥46.5 billion used as
payment for purchases of property, plant and equipment and a net outflow of ¥44.0 billion due to anincrease in short-term investments.
Net cash used in financing activities came to ¥129.7 billion, compared with ¥82.5 billion in fiscal 2018. This was
mainly attributable to ¥124.7 billion in dividends paid.

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

Cash FlowsThe balance of cash and cash equivalents at the end of
March 2019 stood at ¥232.6 billion, a decrease of ¥25.2
billion from the end of fiscal 2018. Cash on hand, which
consists of cash and cash equivalents as well as shortterm investments with original maturities of less thanMillions of yen

Cash Flows

2015

2016

2017

2018

2019

Cash flows from operating activities¥ 71,806¥ 69,398¥136,948¥186,582¥189,572

Total current liabilities

172,812

166,061

247,770

368,452

304,882

Cash flows from investing activities

155,738(150,014)(28,893)(11,833)(84,033)

Total liabilities

234,991

229,129

311,447

431,287

369,510

Cash flows from financing activities(18,214)(138,601)(39,380)(82,549)(129,761)

Total net assets

641,163564,239645,999

771,509888,117

Cash and cash equivalents at end of year

317,632

95,638164,366

257,877

232,634

Note: From fiscal 2019, the Company applied the Accounting Standards Board of Japan’s “Partial Amendments to Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28, revised on February 16, 2018). Total current assets, total investments and other assets, total assets and total liabilities for fiscal 2018
have been restated in accordance with the revised accounting standard.

Selling, General and Administrative
Expenses and Ratio to Net Sales

R&D Expenses(Billions of yen)(%)(Billions of yen)

240

40

120

Cash Dividends per Share
(Yen)

113.9

215.6
193.8
180
154.7 150.4
120

90
71.3

20

624

600

83.8

(Days)(Billions of yen)

160

50

105 107

108

10

200

30

20
66

237

0

0

16

17

18

19

 Selling, General and Administrative Expenses
 Ratio to Net Sales

0

64

40

61

16

17

18

19

16

17

18

19

20.9

15
 Receivable Turnover
 Inventory Turnover

16

17

18

19

315.3

200

20.6
19.320.6
17.8
100

10

0

0

15

317.7

392.6

236.7

13.2 13.3

52
42

0

15

373.8

30
24.3

143

15

101

352
17.1 16.9

400

300

111

80

20.8

60

(Billions of yen)

49.7

40

120

400

Cash on Hand

45.6

76.3

60

Capital Expenditures andDepreciation and Amortization

758

97.1
30

166.5

25.2
22.6

800

Receivable Turnover andInventory Turnover

0

15

16

17

 Capital Expenditures Depreciation and Amortization

18

19

15

16

17

18

19

Cash on Hand = Cash and cash equivalents +Short-term investments with original maturities of less than
one yearTOKYO ELECTRON ANNUAL REPORT 2019

PAGE

15

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Financial Review
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Financial Section
Investor Information

Investor Information

Financial Review
Business-Related and Other Risks
The following risks may have a material impact onTokyo Electron’s business performance, stock price, or
financial position.
(1) Impact from Changes in the Semiconductor
MarketTokyo Electron has achieved a high profit margin byconcentrating resources in high-tech fields, including
semiconductor production equipment, where technological innovation is rapid but Tokyo Electron caneffectively use its strengths. Although technologicalchange is responsible for the semiconductor market’s
rapid growth, Tokyo Electron has actively undertaken
structural reforms to be able to generate profits under
any circumstances, including when the market contracts temporarily due to imbalance of supply anddemand. However, order cancellations, excess capacityand personnel and increased inventories resulting froman unexpectedly large market contraction, losses frombad debts resulting from the worsening of a customer’s financial position, and supply shortages resulting
from the worsening of a supplier’s management situation, could adversely affect Tokyo Electron’s businessperformance considerably.
(2) Impact from Concentration of Transactions on
Particular Customers
Tokyo Electron has been successful at increasing transactions with the leading semiconductor manufacturers
worldwide, including those in Japan, through the provision of products featuring outstanding, cutting-edge
technology and of services offering a high level of customer satisfaction. However, Tokyo Electron’s sales mayfrom time to time be temporarily concentrated on particular customers due to the timing of large capital
investments of major semiconductor manufacturers.
The resulting escalation in sales competition could
adversely affect Tokyo Electron’s business performance.

(3) Impact from Research and Development
Through ongoing and proactive R&D investment andactivities in cutting-edge technologies—miniaturization, vacuum, plasma, thermal processing, coating/developing, cleaning, wafer-transfer and clean technologies—Tokyo Electron has created advanced technologies. At the same time, by quickly bringing to market
new products incorporating these technologies, Tokyo
Electron has successfully captured a high market sharein each of the product fields it has entered and generated a high profit margin. However, delays in the
launch of new products and other factors could
adversely affect Tokyo Electron’s business performance.
(4) Safety-Related Impact
Tokyo Electron’s basic philosophy is to always bear inmind safety and health in the execution of businessactivities, including development, manufacturing, sales,
services and management. In accordance with this philosophy, Tokyo Electron works actively and continuously to improve the safety of its products and toeliminate any harmful impact on health. However,harm to customers, order cancellations or other circumstances resulting from safety or other problems
related to Tokyo Electron’s products could adversely
affect Tokyo Electron’s business performance.
(5) Impact from Quality Issues
Tokyo Electron actively develops outstanding, cuttingedge technologies for incorporation in new productsthat are brought quickly to market. At the same time,
Tokyo Electron works to establish a quality assurance
system, efforts that include obtaining ISO 9001 certification, as well as to establish a world-class service system. These actions have resulted in a large number ofcustomers adopting Tokyo Electron’s products.
However, because Tokyo Electron’s products are basedon cutting-edge technologies, and due to other factors,
many of the technologies developed are in unfamiliar
fields. The occurrence of unforeseen defects or otherissues could adversely affect Tokyo Electron’s businessperformance.

(6) Impact of Intellectual Property Rights
In order to distinguish its products and make themmore competitive, Tokyo Electron has promoted its
R&D strategy for the early development of cuttingedge technologies together with its business and intellectual property strategies. This approach has enabledTokyo Electron to obtain sole possession of many proprietary technologies that have been instrumental to
the Company’s ability to capture a high market shareand generate high profit margins in each of its productfields. Tokyo Electron’s products incorporate and optimize many of these proprietary cutting-edge technologies. There may be cases in which, by avoiding the useof third-party technologies and intellectual property
rights, Tokyo Electron’s business performance could be
adversely affected.
(7) Impact of Fluctuating Foreign Exchange Rates
Success in the development of overseas operations has
increased the share of sales generated overseas. As arule, Tokyo Electron conducts export transactions on a
yen basis to avert exposure to foreign currency risks.
However, some exports are denominated in foreign
currencies. In these cases, Tokyo Electron hedges foreign currency risk by using a forward foreign exchange
contract when an order is received or by other means.
However, foreign exchange rate risks can arise fromfluctuations in prices due to sudden foreign exchange
movements, which could have an indirect adverse
effect on Tokyo Electron’s business performance.
(8) Influence of Corporate Acquisitions
As part of its business strategy, Tokyo Electron conducts corporate acquisitions in order to expand into
new business areas, secure new technologies and business platforms, and strengthen the competitiveness ofexisting businesses. The Company conducts due diligence and carefully deliberates each specific acquisition. However, in the event that the results following an
acquisition do not meet expectations, Tokyo Electron’sbusiness performance could be adversely affected.

(9) Impact from Major Lawsuits or Legal Actions
Tokyo Electron is not currently involved in any lawsuits
or other legal actions that are likely to significantly
influence its business results. However, in the eventthat the Company’s business or other activities
become the subject of a major lawsuit or other legal
action, depending on the outcome of such action,
Tokyo Electron’s business results could be adversely
affected.
(10) Impact of Laws and Regulations
Tokyo Electron operates globally and is therefore subject to and strives to ensure compliance with the laws
and regulations of the countries and regions where it
does business, including import and export regulations,environmental regulations and transfer pricing rules.
However, should the Company be unable to respondadequately to unforeseen tightening or other changes
to such laws or regulations, such changes could
adversely affect Tokyo Electron’s business performance.
(11) Other Risks
Tokyo Electron is actively engaged in reforming its corporate structure so that it can generate profits evenwhen markets contract. These reforms have entailed
creating new high-growth and high-return businesses
and pursuing higher earnings from existing businesses.
At the same time, Tokyo Electron has promoted activities to preserve the environment and worked torestructure its compliance, risk management and information security management systems. However, as
long as it conducts business activities, as with peer
companies or companies in different industries, Tokyo
Electron is subject to the effect of many other factors.
These include the world and regional economic environments, natural disasters, war, terrorism, infectious
diseases and other unavoidable occurrences, financial
or stock markets, government or other regulations,
supply chains, market conditions for products and realestate, the ability to recruit personnel in Japan andoverseas, competition over standardization, and loss of
key personnel. Any of these factors could adversely
affect Tokyo Electron’s business performance.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

16

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Investor Information

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

2019

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

$11,516,718
10,512,487
1,002,449——
1,780
2,798,191
2,896,735
2,236,489
2,186,648¥1,278,240
1,166,781
111,261——197
310,571
321,508248,228
242,696¥1,130,728
1,055,234
75,068——425
281,172
275,242204,371
206,152¥799,719
749,893
49,387——438
155,697
149,116
115,208
119,998¥663,949
613,033
44,687——
6,229
116,789
106,467
77,89260,984¥613,125
576,242
32,7103,618—
555
88,11386,82871,88880,295¥612,170
478,842
28,317
3,806
100,726
479
32,205(11,756)(19,409)(10,889)¥ 497,300
392,027
20,077
83
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
—

Domestic sales
Overseas sales

1,881,220
9,635,497

208,796
1,069,443

148,760
981,967

101,122698,597

121,808
542,141

95,046
518,079

161,631450,539

118,504
378,796

171,364
461,727

182,165
486,557

162,609
256,028

208,871299,211

Depreciation and amortization 3
Capital expenditures 4
R&D expenses

219,151448,277
1,026,946

24,32349,754113,980

20,61945,603
97,103

17,872
20,69783,80019,257
13,341
76,287

20,87813,18471,35024,888
12,79978,664

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

17,707
39,14070,56820,002
14,91954,07423,068
18,10860,988

Total assets 7
Total net assets

11,330,999
8,001,777

1,257,627
888,117

1,202,796
771,509957,447645,999

793,368
564,239

876,154641,163828,592
590,614775,528
605,127

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

12,742

11,946

11,241

10,62910,844

12,304

12,201

10,684

10,343

10,068

10,391

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

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

Net sales
Semiconductor production equipment
FPD production equipment
PV production equipment
Electronic components and computer networks
Other
Operating income (loss)
Income (loss) before income taxes
Net income (loss) attributable to owners of parent
Comprehensive income (loss) 2
1

Number of employees
U.S. dollars

Net income (loss) per share of common stock:
Basic
Diluted 5
Net assets per share of common stock
Cash dividends per share of common stock
Number of shares outstanding (thousands)
Number of shareholders

$

13.64
13.58
48.40
6.83

Yen

¥ 1,513.58
1,507.22
5,371.78758.00165,21050,843¥ 1,245.48
1,241.22
4,674.49
624.00165,21035,186¥ 702.26
700.35
3,919.50
352.00165,210
21,937¥ 461.10
460.003,428.37
237.00165,211
24,664¥ 401.08
400.153,567.23
143.00180,611
20,829

30.1
24.3
70.0
1.04

29.0
24.9
63.8
1.05

19.1
19.5
67.2
0.91

13.0
17.6
70.9
0.80

11.8
14.4
73.0
0.72

94,653¥ 71,143¥ 62,466¥ 56,540¥ (108.31)—
3,225.92
50.00
180,61130,563¥¥(50.47)—2,859.37
12.00
180,61139,285

¥

42.15
42.07
2,896.55
24.00
180,61142,509%ROE
Operating margin
Equity ratio 7
Total asset turnover (times) 7
U.S. dollars

Net sales per employee$

903,839

(3.3)
5.3
69.8
0.76
Thousands of yen¥ 100,317¥¥ 49,754

1	From fiscal 2015, Electronic components and computer networks was excluded because Tokyo Electron Device Limited, a former consolidated subsidiary, became an equity method affiliate. Photovoltaic panel (PV) production equipment was included in FPD production equipment until fiscal 2012 but from fiscal 2016, it has been included in Other.
2	From fiscal 2011, the Company applied “Accounting Standards for Presentation of Comprehensive Income” (Statement No. 25) released by the Accounting Standards Board of Japan (ASBJ). Accordingly, comprehensive income (loss) has been disclosed from fiscal 2010.
3	Depreciation and amortization does not include amortization and loss on impairment of goodwill.
4	Capital expenditures only represent the gross increase in property, plant and equipment.
5	From fiscal 2011, the Company calculated net income per share of common stock (diluted) in accordance with “Accounting Standard for Earning Per Share” (Statement No. 2) and “Guidance on Accounting Standard for Earnings Per Share” (Guidance No. 4) released by the ASBJ. Dilution is not assumed for the years ended March 31, 2014 and 2010.
6	The amounts in this summary in millions and thousands of yen; thousands of U.S. dollars; and thousands of shares as of and for the years ended March 31, 2016 and prior are rounded to the nearest unit. Such amounts as of and for the years ended March 31, 2017 and onward are truncated at the nearest unit. Accordingly, totals for the years ended
March 31, 2017 and onward do not necessarily agree with the sum of the corresponding individual amounts.
7 	From fiscal 2019, the Company applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (Statement No. 28, revised on February 16, 2018) released by the ASBJ. Accordingly, total assets, equity ratio and total asset turnover for fiscal 2018 have been restated.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

17

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Investor Information

Consolidated Balance Sheets
Tokyo Electron Limited and Subsidiaries
As of March 31, 2019 and 2018

Thousands of
U.S. dollars

Millions of yen

ASSETS

2019

2019

2018

Current assets:

Thousands of
U.S. dollars

Millions of yen

LIABILITIES AND NET ASSETS

2019

2018

75,448¥ 108,607

2019

Current liabilities:

Cash and cash equivalents

¥ 232,634¥ 257,877$ 2,095,997

Short-term investments

160,000

116,000

1,441,571

Income taxes payable

57,671

66,046519,605

Trade notes and accounts receivable

146,971

159,570

1,324,185

Customer advances

77,247100,208

695,990

(84)

(59)

(765)

Accrued employees’ bonuses

33,13934,467

298,584

Inventories

354,219

344,071

3,191,455

Accrued warranty expenses

14,097

11,284

127,012

Other current assets

89,156

69,137803,281

Other current liabilities

47,277

47,837425,961   Total current assets

982,897

946,597

8,855,726

304,882

368,452

2,746,935

Net defined benefit liabilities

60,97559,684549,382

Other liabilities

3,652

3,150

32,904   Total non-current liabilities

64,62862,834582,287  Total liabilities

369,510431,287

3,329,222  Common stock   Authorized: 300,000,000 shares
Issued: 165,210,911 and 165,210,911 shares
as of March 31, 2019 and 2018, respectively

54,961

54,961

495,190  Capital surplus

78,01178,011

702,865  Retained earnings

748,827625,3906,746,800   Treasury stock, at cost   1,252,517 and 1,097,342 shares
as of March 31, 2019 and 2018, respectively(11,821)(7,518)(106,513)

13,024

17,134

117,346

(34)

278

(314)

Allowance for doubtful accounts

Trade notes and accounts payable   Total current liabilities

¥$679,780

Non-current liabilities:

Property, plant and equipment:Land

26,84928,030241,907

Buildings

169,682

159,474

1,528,805

Machinery and equipment

153,830

138,932

1,385,980

Construction in progress

19,643

11,060176,988

370,005

337,498

3,333,682

Less: Accumulated depreciation

219,936

211,546

1,981,587   Net property, plant and equipment

150,069

125,952

1,352,094   Total property, plant and equipmentInvestments and other assets:

Net assets:
Shareholders’ equity

Investment securities

27,85333,128250,950

Accumulated other comprehensive income

Deferred tax assets

63,92562,442575,959   Net unrealized gains on investment securities

Net defined benefit assets

3,065

—

27,618   Net deferred gains (losses) on hedging instruments

Intangible assets

9,054

15,882

81,578   Foreign currency translation adjustments

4,366

5,507

39,339Other assets

22,18920,215

199,921   Accumulated remeasurements of defined benefit plans(6,585)(6,618)(59,330)

Allowance for doubtful accounts

(1,426)(1,422)(12,850)

7,368

4,363

66,391   Total investments and other assets

124,661

130,246

1,123,178

888,117771,5098,001,777¥1,257,627¥1,202,796$11,330,999¥1,257,627¥1,202,796$11,330,999

Total assets
See accompanying Notes to Consolidated Financial Statements.

Share subscription rights
   Total net assets
Total liabilities and net assetsTOKYO ELECTRON ANNUAL REPORT 2019

PAGE

18

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Eleven-Year Summary
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2019 and 2018

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2019 and 2018

Thousands of
U.S. dollars

Millions of yen

Net sales
Cost of sales Gross profit
Selling, general and administrative expenses
Operating income

2019

2018

2019

¥1,278,240
752,057
526,183
215,612
310,571¥1,130,728
655,695
475,032
193,860
281,172$11,516,718
6,775,900
4,740,817
1,942,626
2,798,191

2,573

859

23,188

817
378
3,623
101
768
(57)
(967)

571
334
(2,897)
77
—
(71)
(487)

7,361
3,410
32,647
916
6,927
(513)
(8,719)Other income (expenses):
Interest and dividend income
Share of profit of associates accounted for using the equity method
Insurance dividend income
Foreign exchange gain (loss), net
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Maintenance and operation costs of closed facilities
Loss on sales and disposal of property, plant and equipment Loss on impairment of property, plant and equipment,
goodwill and other assets
Loss on revision of retirement benefit plan
Other, net
Income before income taxes

—

(925)

—

—
3,698
321,508(3,154)(236)
275,242—
33,324
2,896,735

Income taxes:
Current
DeferredNet income

72,478801
248,228

83,434(12,591)
204,399

653,0227,223
2,236,489—¥ 248,22828¥ 204,371—$ 2,236,489

Net income attributable to non-controlling interests
Net income attributable to owners of parent

Yen

Per share of common stock:
Net income — basic
Net income — diluted
Net assetsCash dividends
See accompanying Notes to Consolidated Financial Statements.

¥1,513.58
1,507.22
5,371.78758.00Investor Information

U.S. dollars¥1,245.48
1,241.22
4,674.49
624.00$13.64
13.58
48.40
6.83

Thousands of
U.S. dollars

Millions of yen

Net income
Other comprehensive income (loss):
Net unrealized gains (losses) on investment securities
Net deferred gains (losses) on hedging instruments
Foreign currency translation adjustments
Remeasurements of defined benefit plans Share of other comprehensive income of associates accounted
for using the equity method
Total other comprehensive income (loss)
Comprehensive income 
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See accompanying Notes to Consolidated Financial Statements.

2019

2018

2019

¥248,228¥204,399$2,236,489(4,102)(272)(1,170)
(106)

6,337
198
(242)
(4,494)(36,962)(2,450)(10,548)(957)

119(5,531)
242,696(46)
1,752
206,152

1,077(49,841)
2,186,648

242,696—

206,12229

2,186,648—

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

19

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Consolidated Subsidiaries
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2019 and 2018

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2019 and 2018

Investor Information

Thousands of
U.S. dollars

Millions of yen
Shareholders’ equity

Balance as ofMarch 31, 2017

Millions of yen

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Net deferred
Net unrealized
gains
Foreign
Accumulated
gains on(losses) on
currency
remeasurements
Shareinvestment
hedgingtranslation of defined benefit subscription
securities
instruments adjustments
plansrights

Noncontrollinginterests

Total
net assets¥54,961¥78,023¥503,325¥ (7,766)¥10,788¥ 59¥5,789¥(2,086)¥2,620¥284¥645,999

Cash dividends——(82,203)

—

—

—

—

—

—

—

(82,203)

Net income attributable toowners of parent——

204,371

—

—

—

—

—

—

—

204,371

Repurchase of treasury
stock

—

—

—

(16)

—

—

—

—

—

—

(16)

Disposal of treasury stock

—

—

(102)

264

—

—

—

—

—

—

161

Change in equity of parent arising from transactions
with non-controllingshareholders

—

(12)

—

—

—

—

—

—

—

—

(12)

Other, net

—

—

—

—

6,345

219

(281)

(4,531)

1,742

(284)

3,209

Balance as ofMarch 31, 2018

¥54,961¥78,011¥625,390¥ (7,518)¥17,134¥278¥5,507¥(6,618)¥4,363¥ —¥771,509

Cash dividends——(124,754)

—

—

—

—

—

—

—

(124,754)

Net income attributable toowners of parent——

248,228

—

—

—

—

—

—

—

248,228

Repurchase of treasury
stock

—

—

—

(5,004)

—

—

—

—

—

—

(5,004)

Disposal of treasury stock

—

—

(36)

701

—

—

—

—

—

—

664

Other, net

—

—

—

—

(4,109)(313)(1,141)

33

3,005

—

(2,526)¥54,961¥78,011¥748,827¥(11,821)¥13,024¥ (34)¥4,366¥(6,585)¥7,368¥ —¥888,117

Balance as ofMarch 31, 2019

Thousands of U.S. dollars
Shareholders’ equity

Commonstock

Balance as ofMarch 31, 2018

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Treasurystock

Net deferred
Net unrealized
gains
Foreign
Accumulated
gains on(losses) on
currency
remeasurements
Shareinvestment
hedgingtranslation of defined benefit subscription
securities
instruments adjustments
plansrights$495,190 $702,865 $5,634,655 $ (67,742) $154,375

Noncontrollinginterests

Total
net assets$2,510$49,625$(59,627)$39,310$—$ 6,951,163

Cash dividends—— (1,124,013)

—

—

—

—

—

—

—

(1,124,013)

Net income attributable toowners of parent—— 2,236,489

—

—

—

—

—

—

—

2,236,489

Repurchase of treasury
stock

—

—

—

(45,087)

—

—

—

—

—

—

(45,087)

Disposal of treasury stock

—

—

(330)

6,316

—

—

—

—

—

—

5,986

Other, net

—

—

—

—

(37,029)(2,825) (10,285)

297

27,080—(22,761)$495,190 $702,865 $6,746,800 $(106,513) $117,346$ (314) $39,339$(59,330)$66,391$—$ 8,001,777

Balance as ofMarch 31, 2019

See accompanying Notes to Consolidated Financial Statements.

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization Loss on impairment of property, plant and equipment,
goodwill and other assets
Amortization of goodwill
Increase (decrease) in accrued employees’ bonuses
Increase in accrued directors’ bonuses
Increase in accrued warranty expenses
Interest and dividend income
Decrease (increase) in trade notes and accounts receivable
Increase in inventories
Increase (decrease) in trade notes and accounts payable
Decrease (increase) in prepaid consumption tax
Increase (decrease) in accrued consumption tax
Increase (decrease) in customer advances
Other, net
Subtotal
Receipts from interest and dividends
Income taxes paidNet cash provided by operating activities
Cash flows from investing activities:
Payment for purchases of short-term investments
Proceeds from maturities of short-term investments
Payment for purchases of property, plant and equipment Proceeds from sales of shares of subsidiaries resulting in change
in scope of consolidation
Other, netNet cash used in investing activities
Cash flows from financing activities:
Payment for purchases of treasury stock
Dividends paid
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.

2019

2018

2019

¥321,508
24,323¥275,242
20,619$2,896,735
219,151—354(1,165)492
2,968(2,573)
10,541(14,765)(31,752)
6,818(2,845)(22,077)(2,062)289,766
2,738(102,932)
189,572925
600
12,710
2,573
2,769
(859)
(25,971)(109,846)
28,535(13,896)
1,297
31,684
8,851
235,238
1,115(49,771)
186,582—
3,197(10,501)
4,435
26,748(23,188)
94,979(133,036)(286,085)
61,431(25,636)(198,911)(18,579)
2,610,740
24,675(927,402)
1,708,013(209,500)
165,500(46,517)(131,000)
166,000(41,750)(1,887,557)
1,491,125(419,110)

10,75496,896(4,270)(84,033)—(5,082)(11,833)(38,479)(757,125)(5,004)(124,754)(3)(129,761)(1,020)(25,243)
257,877¥232,634(16)(82,203)(329)(82,549)
1,312
93,511
164,366¥257,877(45,087)(1,124,013)(28)(1,169,129)(9,194)(227,435)
2,323,433$2,095,997

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

20

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Financial Section
Investor Information

Investor Information

Notes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2019 and 2018

1. Basis of Presentation of Consolidated Financial
Statements
The accompanying consolidated financial statements ofTokyo 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 Act
of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to applicationand disclosure requirements of International Financial
Reporting Standards.
The Company uses financial statements prepared by foreign subsidiaries in accordance with International Financial
Reporting Standards or U.S. generally accepted accounting
principles for the preparation of the consolidated financial
statements, together with adjustment for certain items which
are required to be adjusted in the consolidation process.
The accompanying consolidated financial statements havebeen 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
the accompanying consolidated financial statements.
The amounts in the consolidated financial statements andassociated notes shown in millions and thousands of yen;
thousands of U.S. dollars; and thousands of shares as of andfor the years ended March 31, 2019 and 2018 are truncated at
the nearest unit. Accordingly, totals do not necessarily agreewith the sum of the corresponding individual amounts.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥110.99
to $1.00, the approximate rate as of March 31, 2019. 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 theaccounts of the Company and its 33 subsidiaries as of March
31, 2019 and 2018. All significant inter-company accounts,transactions and unrealized profits or losses have been eliminated through consolidation procedures.
There are 9 affiliates accounted for using the equity method as of March 31, 2019 and 2018.

The fiscal year-end of all entities is March 31, except for 3
consolidated foreign subsidiaries. Financial statements provisionally closed for the period ending March 31 are used for
those subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies
are translated into Japanese yen at the year-end rates, except
for those hedged by forward exchange contracts, which aretranslated 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 aretranslated 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 aretranslated at average rates of exchange in effect during theyear. Resulting translation adjustments are presented in net
assets as a component of accumulated other comprehensive
income in the consolidated balance sheets.
(c) Cash and cash equivalents
Cash and cash equivalents consist of cash, short term
deposits and low-risk financial instruments with original
maturities of three months or less.
(d) Short-term investments
Short-term investments consist of short term deposits
and low-risk financial instruments with original maturities ofmore than three months.
(e) Investment securities
Tokyo Electron examines the intent of holding each security and classifies those securities as trading securities, held-to
maturity debt securities or other securities. Tokyo Electron
has no trading securities as of March 31, 2019 and 2018. Heldto-maturity debt securities are stated mainly at amortizedcost. Other securities with market prices are valued at fairvalue at the balance sheet date. The differences between thebook value and fair value of other securities, net of applicable
income taxes, are presented in net assets as a component ofaccumulated other comprehensive income. Other securities
without market prices are valued at cost using the weightedaverage method.
The cost of sold securities is calculated using the weighted
average method.

(f) Inventories
Inventories are stated at the lower of cost, determined byprincipally the specific identification method, or net realizablevalue, which is defined as selling price less estimated additional manufacturing costs and estimated direct selling expenses.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation of buildings, machinery and equipment of theCompany and its domestic subsidiaries is computed using
the declining-balance method, except for buildings acquiredsince April 1, 1998 and facilities attached to buildings andstructures acquired since April 1, 2016 which are depreciatedusing the straight-line method, based on the estimated useful lives of assets. Foreign subsidiaries mainly apply thestraight-line method over the estimated useful lives ofassets.
Estimated useful lives of property, plant and equipment
are as follows:
Buildings
2 to 60 years
Machinery and equipment
2 to 17 years(h) Intangible assets (excluding goodwill)
Intangible assets are amortized by the straight-line method over their 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 and idle assets.
If the carrying value of a fixed asset is impaired, a loss isrecognized 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 priceis determined using the fair value less disposal costs andvalue 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 group and the disposal of
the assets.
(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an
amount determined based on the historical experience ofbad debts with respect to ordinary receivables, and an estimate of uncollectible amounts determined by reference tospecific doubtful receivables from customers which are­experiencing financial difficulties.
(l) Employee benefits
The Company and its domestic subsidiaries provide
defined benefit plans for their employees. Expected benefits
are attributed to accounting periods by the benefit formulabasis. Prior service costs are charged to earnings ona straight-line basis, beginning from the fiscal year in which
they are incurred, over a fixed number of years (4 years)
within the average remaining years of service of employees
when the changes occur. Actuarial differences are charged toearnings on a straight-line basis, beginning from the following fiscal year after they are incurred, over a fixed number ofyears (4 years) within the average remaining years of serviceof employees when the differences occur.
The provision for accrued pension and severance costs for
directors and audit & supervisory board members of theCompany and its domestic subsidiaries is calculated in accordance with internal regulations.
The Company and certain domestic subsidiaries decided to
discontinue the payment of severance pay for directors andaudit & supervisory board members after April 1, 2005, and at
the general shareholders’ meeting in June 2005, it was
resolved that the severance pay for directors and audit &supervisory board members until March 31, 2005 would be
paid at the termination of their service and the decision
regarding the payment amount for each director and audit &supervisory board member was delegated to the board of
directors and audit & supervisory board members. The accruals for severance costs for directors and audit & supervisoryboard members are included in Net defined benefit liabilities
in the consolidated balance sheets.
(m) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty,
and Tokyo Electron accrues estimated warranty costs when
product revenue is recognized. Estimated after-sale repair
expenses over warranty periods are accrued based on the historical ratio of actual repair expenses to corresponding sales.
(n) Derivatives and hedge accounting
The Company and certain subsidiaries make use of derivatives in order to manage certain risks arising from adverse
fluctuations in foreign currency exchange rates. The amountof derivatives is limited to the extent of foreign currency
assets, liabilities and actual orders, and Tokyo Electron does
not trade in derivatives for speculative purposes.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

21

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Investor Information

Notes to Consolidated Financial Statements
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
instruments, net of taxes, are reported in net assets as
a component of accumulated other comprehensive income(loss). Receivables and payables hedged by qualified forward
foreign exchange contracts are translated at the corresponding foreign exchange contract rates.
(o) Income taxes
Tokyo Electron records deferred tax assets and liabilities on
temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and theamounts used for income tax purposes and net operating
loss carryforwards. Deferred tax assets and liabilities aremeasured using the enacted tax rates and laws which are
expected to be in effect when net operating loss carryforwards and temporary differences are expected to be realized.
(p) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)production equipment is principally recognized at the time of
the customer confirmation of set-up and testing of products.
Revenue from equipment not requiring substantial installation is recognized at the time of shipment. Service revenue
maintenance is recognized ratably over the term of themaintenance contract.
(q) Research and development expenses
Research and development expenses are charged to earnings as incurred and amounted to ¥113,980 million($1,026,946 thousand) and ¥97,103 million for the years
ended March 31, 2019 and 2018, respectively.
(r) Reclassifications
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, 2019.
Tokyo Electron adopted “Partial Amendments to AccountingStandard for Tax Effect Accounting” (ASBJ Statement No. 28,
February 16, 2018) from the beginning of the fiscal year ended
March 31, 2019, and deferred tax assets are classified as“Investments and other assets” and deferred tax liabilities areclassified as “Non-current liabilities”, respectively.
As a result, out of “Deferred tax assets” of ¥50,505 million
presented under “Current assets” as of March 31, 2018,¥44,596 million was reclassified to “Deferred tax assets”
under “Investments and other assets”, and ¥5,908 million

was offset by deferred tax liabilities, which are included in“Other liabilities” under “Non-current liabilities”. Accordingly,
total assets as of March 31, 2018 decreased by ¥5,908 million.

3. Additional Information
Stock delivering schemes linked to medium-term
performance
Tokyo Electron introduced stock delivering schemes(­hereinafter “the Schemes”) as a common global incentive
plan linked to medium-term performance from the fiscal
year ended March 31, 2019. The purpose of the Schemes is toencourage directors and employees to contribute to theGroup’s medium-term performance and enterprise value.
Tokyo Electron adopted the “Practical Solution on
Transactions of Delivering the Company’s Own Stock to
Employees, etc. through Trusts” (PITF No. 30, March 26, 2015)
for the accounting treatment of the Schemes.
1. Executive compensation BIP (Board Incentive Plan) Trust(1) Overview of the transactions
The Executive compensation BIP Trust which the Company
established acquires the Company’s shares, and delivers andprovides shares of the Company and monetary compensation corresponding to the cash conversion value of theCompany’s shares to the directors of the Company and its
subsidiaries (excluding outside directors) based on their position and attainment of performance ­targets in accordancewith the share delivery rules.
(2) The Company’s shares held by the trust
Tokyo Electron recorded the Company’s shares held by thetrust in “Treasury stock, at cost” under “Net assets” at thebook value in the trust (excluding ancillary expenses). The
book value and the number of such treasury shares as ofMarch 31, 2019 were ¥674 million ($6,074 thousand) and
34,038 shares, respectively.
2.Share-delivering ESOP (Employee Stock Ownership Plan)
Trust(1) Overview of the transactions
The Share-delivering ESOP Trust which the Company
established acquires the Company’s shares, and delivers andprovides shares of the Company and monetary compensation corresponding to the cash conversion value of theCompany’s shares to the general managers, senior employees
and mid-class employees of the Company and its subsidiaries
based on their position and attainment of performance­targets in accordance with the share delivery rules.

(2) The Company’s shares held by the trust
Tokyo Electron recorded the Company’s shares held by thetrust in “Treasury stock, at cost” under “Net assets” at thebook value in the trust (excluding ancillary expenses). The
book value and the number of such treasury shares as ofMarch 31, 2019 were ¥4,274 million ($38,508 thousand) and
215,663 shares, respectively.

5. Securities

4. Accounting Standards Issued but Not yet Adopted  Equity securities

“Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 30, 2018 (hereinafter, “Statement
No.29”))“Implementation Guidance on Accounting Standard for
Revenue Recognition” (ASBJ Guidance No. 30, March 30, 2018
(hereinafter, “Guidance No.30”))  Equity securities

(1) Overview
The International Accounting Standards Board (IASB) andthe U.S. Financial Accounting Standards Board (FASB) collaborated on a project to develop a single, comprehensive revenue recognition model and jointly issued new revenue
recognition standards “Revenue from Contracts with
Customers” (IFRS 15 published by IASB, Topic 606 publishedby FASB) in May 2014. IFRS 15 is effective for annual reporting
periods beginning on or after 1 January 2018 and Topic 606 is
effective for annual reporting periods beginning after
December 15, 2017.
Considering the above circumstances, the AccountingStandard Board of Japan (ASBJ) also developed a new­revenue recognition standard and issued Statement No.29
together with Guidance No.30.
ASBJ’s basic policy in developing the new revenue recognition standards is to first incorporate the core principle of IFRS
15 in the light of improving the international comparability offinancial statements and then add additional alternative
treatments to the extent that international comparability
would not be significantly impaired where any business practices operated in Japan need to be considered.
(2) Effective date
Effective from the beginning of the fiscal year ending
March 31, 2022.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these
new standards on the consolidated financial statements.

Other securities as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019:

Cost

Carrying value¥8,063¥26,834

1,011

1,002

Non-current Securities with carrying value
exceeding acquisition cost
 Securities with carrying value
not exceeding acquisition cost
15

15

Total

¥9,090¥27,853

2018:

Cost

Carrying value¥7,620¥32,293  Equity securities

819

819

  Other

15

15

Total

¥8,455¥33,128

2019:

Cost

Carrying value$72,647$241,777

9,116

9,031

  Other

Millions of yen

Non-current Securities with carrying value
exceeding acquisition cost  Equity securities Securities with carrying value
not exceeding acquisition costThousands of U.S. dollars

Non-current Securities with carrying value
exceeding acquisition cost  Equity securities Securities with carrying value
not exceeding acquisition cost  Equity securities
  OtherTotal

141

141$81,904$250,950

Held-to-maturity securities classified as current assets are¥215,000 million ($1,937,111 thousand) and ¥286,500 million
as of March 31, 2019 and 2018, respectively.
Reconciliation of held-to-maturity securities as of March
31, 2019 and 2018 to the amounts of short-term investmentsin the consolidated balance sheets are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2019

2018

Held-to-maturity (current)

¥215,000 ¥286,500$1,937,111

Deposits and low-risk financial instruments with original
maturities of three months
or less(55,000) (170,500)(495,540)

Deposits with original maturities
of more than three months
Short-term investments——¥160,000 ¥116,000—$1,441,571

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

22

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Investor Information

Notes to Consolidated Financial Statements
Net loss on devaluation of investment securities was ¥55
million ($496 thousand) and ¥536 million for the years ended
March 31, 2019 and 2018, respectively.
For the year ended March 31, 2019, the Company soldavailable-for-sale securities and recognized the following
gain and loss on sale:
Millions of yen
Amount of sale

Gain on sale

Loss on sale

Equity securities¥1,087

¥768

¥—

Total

¥1,087¥768¥—

Thousands of U.S. dollars
Amount of sale

Gain on sale

Loss on sale

Equity securities$9,795$6,927$—

Total$9,795$6,927$—For the year ended March 31, 2018, the amounts of gain andloss on sale of available-for-sale securities was immaterial.

benefit plan as defined benefit plans, and provide a defined
contribution plan as defined contribution plans for theiremployees. Further, certain consolidated overseas subsidiaries provide defined benefit plans and defined contributionplans for their employees.
Effective April 1, 2018, Tokyo Electron and its domestic subsidiaries converted a part of their defined benefit plans toa defined contribution plan. The loss on revision of retirement
benefit plan of ¥3,154 million resulting from this change wasrecognized and presented in other income (expenses) for theyear ended March 31, 2018 in accordance with the “Accounting
Procedures for Conversion between Different Retirement
Benefit Schemes” (Corporate Accounting Standards
Implementation Guidelines No. 1) and the “Practical Treatment of
Accounting Procedures for Conversion between Different
Retirement Benefit Schemes” (Practical Issues Task Force No. 2).
Defined benefit plans(1) Movement of defined benefit obligations

6. Inventories
Inventories as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019

Finished products

2018¥234,102 ¥220,497

Thousands of
U.S. dollars

2019$2,109,221

2019¥112,992 ¥118,660(7,806)(73,922)¥(9,220)¥(9,161)$(83,073)

Funded status(2,472)

993(22,277)

Unfunded defined benefit
obligations

60,00858,315

540,662

Net defined benefit liabilities
at March 31, 2019 and 2018¥57,535¥59,309$518,385

Net defined benefit liabilities

60,60059,309546,004

Net defined benefit assets(3,065)—(27,618)

Net defined benefit liabilities
at March 31, 2019 and 2018¥57,535¥59,309$518,385

Note: The provision for accrued pension and severance costs for directors andaudit & supervisory board members of ¥374 million ($3,378 thousand)and ¥374 million as of March 31, 2019 and 2018 is not included.

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Service cost

¥5,853¥6,052$52,738

Interest cost

701

963

6,320
(10,380)

26,9052,537(1,237)22,858(35,467)

Prior service cost amortization

338

—

3,050

—

Other

287

388

2,592

—

Total defined benefit costs for the years ended
March 31, 2019 and 2018

¥8,566¥4,765$77,179(1,220)Loss on transfer to defined contribution plan (Note)

—

3,154

—

4,632

—

1,690

The Company and its domestic subsidiaries provide a cash
balance plan and a non-contributory retirement and severance(8,204)

Total(1,400)(3,029)9. Employee Benefits(548,930)(1,152)

2,986

There are no short-term borrowings classified as current
liabilities as of March 31, 2019 and 2018.
As of March 31, 2019 and 2018, Tokyo Electron had unusedlines of credit amounting to ¥126,947 million ($1,143,770
thousand) and ¥126,953 million, respectively.

(53,683)

Expected return on plan assets(3,936)

8. Short-term Borrowings(60,925)

Net actuarial gain (loss)
amortization

Benefits paid

Tokyo Electron did not hold any assets pledged as collateral as of March 31, 2019 and 2018.

Plan assets

Net actuarial loss that is yet tobe recognized (before tax)

6,320

Actuarial gain

7. Pledged Assets$526,653

52,7381,082,233

Prior service cost
Decrease by conversion of a part of defined benefit plans
to a defined contribution plan—

Foreign currency exchange
rate changes
Balance at March 31, 2019and 2018(15,946)

(135)

(30)

¥118,461 ¥112,992$1,067,316(2) Movement of plan assets

2019

2018

2019

¥53,683¥67,653$483,676

1,152

1,400

10,380

(6)

526

(61)

Employer contributions

7,403

3,577

66,701

Benefits paid

(1,164)(915)(10,493)—(18,523)—

Balance at April 1, 2018and 2017
Expected return on plan assets
Actuarial gain (loss)

Decrease by conversion of a part of defined benefit plans
to a defined contribution plan

(124)

(24)

(1,125)

Other

(16)

(12)

(147)

¥60,925¥53,683$548,930

Balance at March 31, 2019and 2018

2019

2018

Bonds

31%

38%

Life insurance company general account30

25

Equity securities

14

20

Alternative investments (Note)

13

9Cash and cash equivalents

1

1

Other

11

7

Total

100%

100%

Note: Alternative investments mainly consist of hedge funds, real estateand insurance-linked securities

2. Long-term expected rate of return
Current and target asset allocations, and historical andexpected returns on the various categories of plan assets
have been considered in determining the long-term
expected rate of return.
(8) Actuarial assumptions
The principal actuarial assumptions as of and for the years
ended March 31, 2019 and 2018 are as follows:
2019

2018

Discount rate

0.36%

0.46%

Long-term expected rate of return

2.00%

2.00%

(5) Remeasurements of defined benefit plans

The expected rates of salary increase for the years ended
March 31, 2019 and 2018 are also considered as one of theactuarial assumptions, and are set based on the salary
increase index by age group as of January 1, 2019 and January
1, 2018, respectively.

Millions of yen

Prior service cost

Foreign currency exchange
rate changes(7) Plan assets
1. Plan assets comprise:

Note: Loss on revision of retirement benefit plan was recognized in otherincome (expenses) for the year ended March 31, 2018.

Thousands of
U.S. dollars

Millions of yen$ (9,151)¥54,677963$3,191,455¥(1,354)¥58,453

6,052

123,573¥(1,015)

2019

701

120,117

2019

2018

5,853

¥354,219 ¥344,071

2018

2019

Service cost

Total

2019

Funded defined benefit
obligations

2019$1,018,040

Thousands of
U.S. dollars

Millions of yen

Prior service cost that is yet tobe recognized (before tax)

Interest cost

Work in process, raw materials
and supplies

The amounts of change in inventory provision included incost of sales in the consolidated statements of income forthe years ended March 31, 2019 and 2018 were an increase of¥4,031 million ($36,325 thousand) and an increase of ¥173
million, respectively.

Millions of yen

Thousands of
U.S. dollars

2018(6) Accumulated remeasurements of defined benefit plans

Thousands of
U.S. dollars(4) Defined benefit costs

Millions of yen

Balance at April 1, 2018and 2017(3) Reconciliation from defined benefit obligations and plan
assets to net defined benefit liabilities (assets)

Thousands of
U.S. dollars

2019

2018

2019

¥338

¥(1,354)$3,050

Actuarial gain (loss)(396)(5,093)(3,575)Total¥ (58)¥(6,448)$ (525)

Note: Prior service cost and actuarial loss for the year ended March 31, 2018
include the reclassification adjustments of ¥336 million and ¥240 million,
respectively, associated with the conversion of a part of defined benefit
plans to a defined contribution plan.

Defined contribution plans
The contributions of the Company and its subsidiaries tothe defined contribution plans are ¥2,498 million ($22,514
thousand) and ¥1,124 million for the years ended March 31,
2019 and 2018, respectively.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

23

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Financial Section
Investor Information

Investor Information

Notes to Consolidated Financial Statements
10. Income Taxes
Significant components of the deferred tax assets and­liabilities as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019

2018

Thousands of
U.S. dollars

2019

Deferred tax assets

Significant components of the difference between thestatutory and effective tax rates for the years ended March
31, 2019 and 2018 are as follows:
2019

2018

30.62%

30.86%Tax credits(6.52)(6.23)

Difference in statutory tax rates
of subsidiaries(1.11)(1.33)—

1.55

Statutory tax rate in Japan
Adjustments:

Elimination of unrealized profit
in inventories¥25,145¥27,718$226,558

Net defined benefit liabilities

18,751

18,129168,950

Effect of enacted changes in tax rates
on net deferred tax assets

Net operating loss carryforwards

11,132

10,969100,299

Others, net(0.20)

0.89

Effective tax rate

22.79%

25.74%

Accrued employees’ bonuses

7,766

8,185

69,974

Devaluation of inventories

7,038

4,148

63,412

Accrued warranty expenses

3,846

2,675

34,653

Depreciation

2,710

1,903

24,417

Other

12,664

14,819114,103
802,368

Total gross deferred tax assets

89,05488,550Less valuation allowance(8,535)(8,043)(76,903)

Total deferred tax assets

80,51980,506725,464(7,559)(6,143)(68,112)Deferred tax liabilities
Undistributed earnings ofsubsidiaries
Net unrealized gains on
investment securities(5,747)(7,554)(51,785)

Other(3,474)(4,384)(31,304)

Total deferred tax liabilities(16,781)(18,082)(151,201)

Net deferred tax assets¥63,737¥62,424$574,263

The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during theperiod in which temporary differences become deductible
and net operating loss carryforwards are available to be­utilized. For assessment of the realizability of deferred tax
assets, management considers the scheduled reversal ofdeferred tax liabilities, future estimated taxable income, tax
planning strategies and level of net operating loss carryforwards, if any, in accordance with accounting principles­generally 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 and net operating loss­
carryforwards are available to be utilized, management believes
Tokyo Electron will realize the benefits of deferred tax assets, netof valuation allowance, as of March 31, 2019 and 2018.
The Company and its wholly-owned domestic subsidiaries
apply a consolidated tax filing system for corporate tax purposes.

Year ended March 31, 2019
The Company received notification from the National Tax
Agency, Japan (NTA) dated January 24, 2019, that agreement
had been reached through the Mutual Agreement Procedure(MAP) between the NTA and Korean income tax authorities
concerning the transfer pricing adjustments assessed during
prior historical periods relating to the transactions between
the Company and its Korean subsidiary. As a result, ¥862 million ($7,770 thousand) of tax benefit is included in current
income tax expense as the difference between the actual tax
refunds and the estimated amount recorded in prior fiscal
year.
Year ended March 31, 2018
The U.S. federal income tax rate applied to the consolidated
subsidiaries in the U.S. was reduced from 35% to 21% associated with the U.S. tax reform legislation signed into law on
December 22, 2017.
Net deferred tax assets were reduced by ¥3,029 million andincome taxes were increased by ¥3,211 million as of and for theyear ended March 31, 2018 resulting from this tax rate reduction.

11. Other Income (Expenses)

12. Net Assets

Loss on impairment of property, plant and equipment,
goodwill and other assets
For the year ended March 31, 2018, the following loss on
impairment was recognized:

Net assets comprises four subsections, which are shareholders’ equity, accumulated other comprehensive income,share subscription rights and non-controlling interests.
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 boardof directors, designate an amount not exceeding one half ofthe price of the new shares as additional paid-in capitalwhich is included in capital surplus.
In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or theexcess, if any, 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 requirea 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 andretained earnings, respectively, which are potentially available
for dividends.
The Company is subject to restriction of dividends basedon the Japanese Corporate Act, which restricts the amount ofdividends to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings to shareholders on dates other than the mid-term andyear-end, by a resolution of the board of directors in accordance with Japanese laws and regulations.
At the board of directors’ meeting held on May 10, 2019, thedistribution of cash dividends amounting to ¥56,651 million($510,422 thousand) was resolved. Such appropriations havenot been accrued in the consolidated financial statements asof March 31, 2019 since they are recognized in the period inwhich they are resolved at the board of directors’ meeting.
The dividends of ¥56,651 million include ¥86 million($776 thousand) related to treasury stock held by the BIP/
ESOP Trusts.

Goodwill of TEL NEXX, Inc.
Loss onimpairment
Location

Purposeof useAsset
Type

Millionsof yenBillerica, Massachusetts, U.S.A.

Business assets

Goodwill¥925

Tokyo Electron performed an impairment test and recognized loss on impairment of goodwill of TEL NEXX, Inc.,a subsidiary manufacturing semiconductor production­equipment, due to TEL NEXX, Inc.’s reconsideration of its
business plan. Tokyo Electron recognized the difference
between the book value and the recoverable amount of
goodwill as loss on impairment. The recoverable amount wasmeasured as value in use, and was calculated by discounting
future cash flows at a discount rate of 14.0%.
Loss on revision of retirement benefit plan
Effective April 1, 2018, Tokyo Electron and its domestic­subsidiaries converted a part of their defined benefit plans toa defined contribution plan. The loss on revision of retirement
benefit plan of ¥3,154 million resulting from this change wasrecognized and presented in other income (expenses) for theyear ended March 31, 2018 in accordance with the“Accounting Procedures for Conversion between Different
Retirement Benefit Schemes” (Corporate AccountingStandards Implementation Guidelines No. 1) and the“Practical Treatment of Accounting Procedures forConversion between Different Retirement Benefit Schemes”(Practical Issues Task Force No. 2).

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

24

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Investor Information

Notes to Consolidated Financial Statements
13. Other Comprehensive Income

A summary of stock options outstanding and exercisable as of March 31, 2019 and 2018 is as follows:
2019

2018

Other comprehensive income for the years ended March 31, 2019 and 2018 is as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Net unrealized gains (losses) on investment securities¥(5,910)¥9,134$(53,255)———(5,910)9,134(53,255)

Tax expense

1,808(2,796)

16,293Sub-total, net of tax(4,102)

6,337(36,962)

Net unrealized gains (losses) arising during the year
Reclassification adjustments
Sub-total, before tax

Net deferred gains (losses) on hedging instruments
Net deferred gains (losses) arising during the year
Reclassification adjustments
Sub-total, before tax

(392)

286

(3,532)

—

—

—

(392)

286

(3,532)

Tax expense

120

(87)

1,081

Sub-total, net of tax

(272)

198

(2,450)(1,170)Reclassification adjustments
Sub-total, before tax
Tax expense
Sub-total, net of tax

(297)

Yen

U.S. dollars

Outstanding at the beginning of year

563,600¥1$0.01

457,500

Granted

219,900

1

0.01

144,700

1

Exercised

94,8001

0.01

38,600

1
—

—

54

—

(242)

(10,548)———(1,170)(242)(10,548)

Remeasurements of defined benefit plans

—

—

—

—

1

0.01

563,600

1

Exercisable at the end of year

129,700

1

0.01

88,800

1

Amounts expensed related to stock options
The amounts expensed related to stock options for theyears ended March 31, 2019 and 2018, are as follows:
Millions of yen

Selling, general andadministrative expenses

Thousands of
U.S. dollars

2019

2018

2019

¥3,618¥1,903$32,601

Valuation method of fair value per unit of stock options
Fair value as of the grant date for stock options granted forthe year ended March 31, 2019 was ¥16,455 ($148.26) per unit,
which was evaluated as follows:(1) Valuation method used: Black-Scholes model(2) Major underlying assumptions and estimates:(2,933)(5,787)(26,434)

2,875

(660)

25,908Sub-total, before tax(58)(6,448)(525)

Tax expense

(48)

1,953

(432)

Volatility (Note 1)

35.31%

Sub-total, net of tax(106)(4,494)(957)

Expected residual period (Note 2)

5.55 years

Expected dividends (Note 3)¥488 ($4.40) per share

Risk-free interest rate (Note 4)(0.09)%

119

(46)

1,077

Total other comprehensive income¥(5,531)¥1,752$(49,841)

14. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock
option plans for directors and selected employees since theyear ended March 31, 1999. The options under the plans vest
immediately or over three-year period with restriction on
exercise up to three years after the date of grant, and havean exercise period of seventeen years from the date on
which the options become exercisable.
Options to purchase 219,900 shares of the Company wereauthorized and granted at an exercise price of ¥1 ($0.01) for
the year ended March 31, 2019.

15. Leases
Future minimum lease payments on non-cancelable operating leases are as follows:
Millions of yen

Due within one year
Due over one year

Adjustments during the year

Adjustments during the year¥1

688,700

Expired (forfeited)

Reclassification adjustments

Share of other comprehensive income of associates accounted for using the equity method

Yen

Outstanding at the end of year

(10,548)(1,170)Weighted-average
exercise price

Number ofsharesForeign currency translation adjustments
Adjustments during the year

Weighted-average exercise price

Number ofshares14th Stock Acquisition Rights

Notes: 1. Calculated based on the stock price performance for the period­corresponding to the expected residual period (from November 2012
to June 2018).
2. Calculated based on past actual results and forecast of the exerciseof stock options.
3. Based on the dividends paid for the years ended March 31, 2018and 2017.
4. Based on Japanese government bond yield corresponding to the
expected residual period.

(3) Method of estimating the number of vested stock options
It is not necessary to estimate the number of vested stock
options as the rights to exercise stock options are vested
immediately when granted.

Total

Thousands of
U.S. dollars

2019

2018

2019

¥ 3,694¥ 3,772$ 33,284

8,577

7,039

77,284¥12,272¥10,811$110,568

16. Fair Value of Financial Instruments
Policy for financial instruments
Tokyo Electron limits its fund management to short-termbank deposits and low-risk financial instruments.
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 areconducted pursuant to the internal management rules for
credit control. Credit risk of major customers is assessed on aregular basis.
Short-term investments consist of short term deposits andlow-risk financial instruments and Tokyo Electron trade withhighly-rated financial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests inlisted companies exposed to equity market risks. Conditions,
including market prices, for these investment securities aremonitored on a regular basis.
Trade payables, which consist of notes and accounts­payable, mainly mature within one year. Trade payables are
exposed to liquidity risks which are managed through­activities such as implementing cash management plans.
See note 17 for detailed discussion on derivative financial
instruments.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

25

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Investor Information

Notes to Consolidated Financial Statements
Fair value of financial instruments
Carrying amount and estimated fair value of financial
instruments as of March 31, 2019 and 2018 are set out below.
Fair value of financial instruments which is practically difficult
to estimate are excluded.
Millions of yen

2019:

Carrying
amountEstimated
fair value1

AssetsCash and cash equivalents¥232,634¥232,634

Short-term investments

160,000

159,921	  The carrying amounts approximate fair value because of the shortmaturity of these instruments.
		 Investment securities
	  The fair values of marketable securities are based on quoted
market prices.
		  See note 5 for further information by classification of investment
securities.
		Derivatives		  See note 17 for detailed discussion on derivative financial­instruments.
2. The following financial instruments are not included in the above as
they do not have quoted market prices and therefore it is consideredextremely difficult to measure their fair value.
Thousands of
U.S. dollars

Millions of yen Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥84 million)
Investment securities

2019

146,886

146,886

26,866

26,866

Liabilities
Trade notes and accounts payable

75,44875,448Derivatives (see note 17)
Hedge accounting not applied
Hedge accounting applied

74

74

(56)

2018:

Carrying
amountEstimated
fair value1

AssetsCash and cash equivalents¥257,877¥257,877

Short-term investments

116,000

115,966 Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥59 million)
Investment securities

¥971

¥882

$8,749

Other

15

15

141

Total

¥986

¥897

$8,890Unlisted stocks

3. Maturities of financial assets and securities are as follows:

159,510

159,510

32,23032,2302019:

Within 1 year

After 1 through5 years

Cash and cash equivalents¥232,634¥—

Short-term investments

160,000—

Trade notes and accounts receivable

146,971—

108,607108,607

Derivatives (see note 17)
Hedge accounting not applied
Hedge accounting applied

(7)

(7)

335

335

2018:

Within 1 year

After 1 through5 years

Cash and cash equivalents¥257,877¥—

Short-term investments

116,000—

Trade notes and accounts receivable

159,570—

Carrying
amountEstimated
fair value1$2,095,997$2,095,997

AssetsCash and cash equivalents
Short-term investments Trade notes and accounts receivable, net of allowance for
doubtful accounts ($765 thousand)
Investment securities

1,441,571

1,323,420
242,060

1,440,864

1,323,420
242,060

Liabilities
679,780

679,780

Hedge accounting not applied

670

670

Hedge accounting applied

(513)

(513)

Trade notes and accounts payable
Derivatives (see note 17)

Notes: 1. Fair value calculation of financial instruments
Cash and cash equivalents, short-term investments, trade notes andaccounts receivable and trade notes and accounts payable.

2018:

Fair value

Gains(losses)

Sell U.S. dollars

¥ 703

¥18

¥18

Buy U.S. dollars

3,639

(19)

(19)

Buy Chinese yuan

1,515

(0)

(0)

Buy Taiwan dollars

912

0

0

Buy GBP

820

(2)

(2)

Buy EURO

785

(1)

(1)

Buy Singapore dollars

706

(2)

(2)

Total

¥9,084

¥ (7)

¥ (7)

2019:

Contract
amountFair value

Gains(losses)Millions of yen

2019:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars¥ 1,201¥14¥14

Buy U.S. dollars

11,96753

53

Thousands of U.S. dollars

Buy Chinese yuan

2,720

9

9

Sell U.S. dollars$ 10,823

$127

$127

Buy Taiwan dollars

1,213

(3)

(3)

Buy U.S. dollars

107,828484

484

Buy GBP593

00

Buy Chinese yuan

24,50885

85

Buy EURO

360

0

0

Buy Taiwan dollars

10,932

(27)

(27)

Total

326

(0)

(0)

Buy GBP

5,344

1

1

¥18,383¥74¥74

Buy EURO

3,250

0

0

Buy Singapore dollars
Total

2,944

(0)

(0)

$165,632

$670

$670

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

2. Derivative financial instruments designated as hedging instruments
The contract amounts of forward foreign exchange contracts, entered into to hedge future transactions and receivables andpayables denominated in foreign currencies that have been translated by the corresponding contracted rates, are as follows:

Thousands of U.S. dollars

Millions of yen

2019:Within 1 year

After 1 through5 years

Cash and cash equivalents$2,095,997$—

Short-term investments

1,441,571—

Sell U.S. dollars

Trade notes and accounts receivable

1,324,185—

Monetary assets and liabilities in foreign currency (Note)

Thousands of U.S. dollars

2019:

Millions of yen
Contract
amountMillions of yen

Liabilities
Trade notes and accounts payable

1. Derivative financial instruments not designated as hedging
instruments

Buy Singapore dollars

Millions of yen(56)

Millions of yen

2019

2018

Reported amount in balance sheet

could conclude that changes in fair value or cash flows are
expected to completely offset. Execution and managementof all derivative transactions are conducted pursuant to theinternal management rule.
The estimated fair values of the derivative financial instruments as of March 31, 2019 and 2018 are as follows:

17. Derivative Financial Instruments
Tokyo Electron is subject to risk from adverse fluctuations
in foreign currency exchange rates in its operating andfinancing activities. The Company and certain subsidiaries
enter into forward foreign exchange contracts in order tohedge such risks, but do not enter into such transactions for
speculative purposes. The Company implements a ratio analysis of the total cumulative cash flow fluctuations to assess
effectiveness of hedging for all derivative transactions,
except for transactions where the critical terms of the hedging instrument and hedged item match and the Company

2019:

Contract amountContract amount due after 1 year

Thousands of U.S. dollars
Fair value

Contract amountContract amountdue after 1 year

Fair value¥(56)$53,624$—$(513)

Future transactions denominated in a foreign currency¥5,951¥—

Sell U.S. dollars

898

—

—

8,097

—

—

Buy U.S. dollars

61

—

—

550

—

—

¥6,911¥—¥(56)$62,272$—$(513)

Total

Millions of yen

2018:

Contract amountContract amount due after 1 year

Fair value

Future transactions denominated in a foreign currency
Sell U.S. dollars¥11,853¥71¥335

Buy U.S. dollars

156

—

(0)

Monetary assets and liabilities in foreign currency (Note)
Sell U.S. dollars
Total

555

—

—

¥12,566¥71¥335

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.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

26

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Investor Information

Notes to Consolidated Financial Statements
18. Segment Information

Millions of yen
Reportable Segment

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 to be 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)” and “flat panel display (FPD) production equipment”.
Products of the SPE segment consist of coater/developers, etch systems, deposition systems, cleaning systems used in wafer
processing, wafer probers used in the wafer testing process and other semiconductor production equipment. The SPE segmentprincipally develops, manufactures, sells such products and provide services on them.
Products of the FPD production equipment segment consist of coater/developers and etch/ash systems used in the manufacture of flat panel displays. The FPD production equipment segment principally develops, manufactures, sells such products andprovide services on them.

2018:

Semiconductor
production
equipment

FPD
production
equipment¥1,055,234¥75,068425¥1,130,728——

19,46919,469(19,469)—

1,055,234

75,06819,894

1,150,197(19,469)

1,130,728

Other

Total

Adjustments

Consolidated¥¥1,130,728

Net sales
Sales to external customers
Intersegment sales or transfers
Total

¥

—

Segment profit (loss)

314,602

13,299(57)

327,844(52,601)

275,242

Segment assets

494,964

43,9633,014

541,943

660,853

1,202,796

Depreciation and amortization

20,61911,402701

81

12,185

8,434

Amortization of goodwill

600

—

—

600

—

600

Loss on impairment

925

—

—

925

—

925

16,392935

247

17,57533,722

51,297

Adjustments

Consolidated—$11,516,718

Capital expenditures, including intangible assets

Thousands of U.S. dollars
Reportable Segment

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
the consolidated financial statements. Intersegment sales or transfers are determined by negotiation between the Tokyo
Electron group companies considering current market prices. Assets in common use have not been allocated to each reportablesegment, while costs associated with those assets have been allocated to reportable segments on a systematic basis.
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, 2019 and 2018 is as follows:
Reportable Segment¥1,166,781¥111,261

197¥1,278,240——

18,914

18,914(18,914)—

1,166,781

111,261

19,112

1,297,155(18,914)

1,278,240

Other

Total

Adjustments

Consolidated¥¥1,278,240

Net sales
Sales to external customers
Intersegment sales or transfers
Total

¥

—

Segment profit

326,716

24,241

1,035

351,993(30,484)

321,508

Segment assets

506,92935,722

2,474

545,126

712,501

1,257,627

Depreciation and amortization

14,003873

126

15,002

9,321

24,323

354

—

—

354

—

354

22,633

1,507

198

24,34029,08253,422

Amortization of goodwill
Capital expenditures, including intangible assets

Total

1,780

$11,516,718——

170,420

170,420(170,420)

—

Total

10,512,487

1,002,449

172,200

11,687,138(170,420)

11,516,718

Segment profit

2,943,661

218,408

9,327

3,171,397(274,661)

2,896,735

Segment assets

4,567,342

321,852

22,293

4,911,488

6,419,510

11,330,999

126,166

7,867

1,136

135,169

83,981

219,151

3,197

—

—

3,197

—

3,197

203,925

13,586

1,788

219,300

262,029

481,330

Intersegment sales or transfers

Capital expenditures, including intangible assets

FPD
production
equipment

Other$10,512,487 $1,002,449

Sales to external customers

Amortization of goodwill

Semiconductor
production
equipment

FPD
production
equipment

Net sales

Depreciation and amortization

Millions of yen

2019:

Semiconductor
production
equipment

2019:

$

$

Notes: 1.	“Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services, facility maintenanceand insurance.
2. (1 )	“Adjustments” for segment profit (loss) totaling ¥(30,484) million ($(274,661) thousand) and ¥(52,601) million for the years ended March 31, 2019 and2018, respectively, mainly consists of research and development costs of ¥(15,999) million ($(144,148) thousand) and ¥(22,263) million for the years
ended March 31, 2019 and 2018, respectively, pertaining to the Company’s fundamental research and element research, the loss on revision of retirement
benefit plan of ¥(3,154) million for the year ended March 31, 2018 and other general and administrative costs that do not belong to the reportable segments.
		 (2)	“Adjustments” for segment assets totaling ¥712,501 million ($6,419,510 thousand) and ¥660,853 million as of March 31, 2019 and 2018, respectively,
mainly consist of cash and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
		 (3)	“Adjustments” for capital expenditures totaling ¥29,082 million ($262,029 thousand) and ¥33,722 million for the years ended March 31, 2019 and 2018,
respectively, mainly consist of capital expenditures for buildings not allocated to any of the reportable segments.

Other information(1) Domestic and overseas net sales by destination for the years ended March 31, 2019 and 2018 are as follows:
Millions of yen

2019:

Net sales

Japan

North America

EuropeSouth Korea

Taiwan

China

Other

Total

¥208,796¥131,954¥93,113¥311,081¥164,912¥307,879¥60,502¥1,278,240

Notes: 1. Sales are classified in countries or regions based on location of customers.
2. Net sales of North America include sales in the U.S.A. of ¥131,914 million.
Millions of yen

2018:

Net sales

Japan

North America

EuropeSouth Korea

Taiwan

China

Other

Total

¥148,760¥119,257¥96,948¥378,496¥174,636¥164,344¥48,283¥1,130,728

Notes: 1. Sales are classified in countries or regions based on location of customers.
2. Net sales of North America include sales in the U.S.A. of ¥119,047 million.
Thousands of U.S. dollars

2019:

Net sales

Japan

North America$1,881,220 $1,188,887

Europe$838,939

Note: Net sales of North America include sales in the U.S.A. of $1,188,526 thousand.

South Korea

TaiwanChina$2,802,784 $1,485,830 $2,773,941

Other

Total

$545,113$11,516,718

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

27

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Investor Information

Notes to Consolidated Financial Statements
19. Per-Share Information(2) Net property, plant and equipment by location as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019:

Property, plant and equipment

Japan

Other

Total

¥120,177¥29,891¥150,069

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. Net income-diluted per share is computed based on the weighted-average number ofshares of common stock outstanding during each year after incorporating the dilutive potential effect of shares of common
stock to be issued upon the exercise of stock options.
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 the year then ended.

Millions of yen

2018:

Property, plant and equipment

Japan

Other

Total

¥97,610¥28,342¥125,952

Thousands of U.S. dollars

2019:

Property, plant and equipment

Japan

Other

Total

$1,082,779$269,315$1,352,094

The basis for the calculation of net income per share for the fiscal years ended March 31, 2019 and 2018 is as follows:(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:

Name of customer

Related reportable segment

Thousands of
U.S. dollars

Millions of yen

2019

2019

2018

Net income per share of common stock — Basic
Millions of yen

Thousands of
U.S. dollars

2019

2019

¥248,228¥204,371———

Net income pertaining to holders of common stock¥248,228¥204,371$2,236,489

164,000

164,090

Net income attributable to owners of parent
Less components not pertaining to holders of common stockIntel Corporation

Semiconductor production equipment¥199,594$1,798,306

Weighted-average number of shares of common stock outstanding (thousands)

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

175,315

1,579,563

Net income per share of common stock — Diluted

SK hynix Inc.

Semiconductor production equipment

174,468

1,571,930

Adjustment of net income attributable to owners of parent——

Micron Technology, Inc.

Semiconductor production equipment

131,821

1,187,687

Increase in number of common stock (Thousands of share)

692

562

692

562

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

Increase in number of share subscription rights (Thousands of share)

Related reportable segment

2018

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment¥261,544

Intel Corporation

Semiconductor production equipment

181,053

SK hynix Inc.

Semiconductor production equipment

132,146—

Notes:The shares of the Company held by “Executive compensation BIP Trust” and “Share-delivering ESOP Trust”, which are recorded in “Treasury stock, at cost”
under shareholders’ equity, are included in the treasury stock which is deducted in calculating the per-share information.
The number of treasury shares deducted in the calculation of net assets per share was 249 thousand shares as of March 31, 2019, and the average number oftreasury shares deducted in the calculation of net income per share and fully diluted net income per share was 167 thousand shares in the fiscal year ended
March 31, 2019.

Millions of yen
Name of customer$2,236,489

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

20. Subsequent Events

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the years ended March 31, 2019 and 2018, and unamortizedbalances as of March 31, 2019 and 2018 are as follows:

Share repurchase
At the Board of Directors meeting held on May 27, 2019, the Company resolved to acquire its own shares under the provisionsof its Articles of Incorporation pursuant to paragraph 1, Article 459 of the Companies Act, as follows:

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 354

¥—

¥ 354

Goodwill

1,124

—

1,124

2019:

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 600

¥—

¥ 600

Goodwill

1,699

—

1,699

2018:

Thousands of U.S. dollars
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill$ 3,197$—$ 3,197

Goodwill

10,135—

10,1352019:

1. Reason for acquisition of own shares
The Company intends to acquire its own shares in accordance with its capital policy while taking into account its current cash
position, its base for medium- to long-term revenue growth and growth investment capital.
2. Details of acquisition(1) Type of shares to be acquired: Shares of common stock(2) Total number of shares to be acquired: Up to 14 million shares (Equivalent to 8.5% of outstanding shares excluding treasury stock)(3) Total cost of acquisition: Up to ¥150 billion(4) Period of acquisition: From May 28, 2019 to December 31, 2019(5) Method of acquisition: Acquisition through market transactions on the Tokyo Stock Exchange

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

28

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Independent Auditor’s Report
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Section
Investor Information

Investor Information

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

29

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Notes to Consolidated Financial Statements

Consolidated Subsidiaries (As of March 31, 2019)
JAPANInvestor Information (As of March 31, 2019)
Corporate Name and Head Office:		 • Tokyo Electron Miyagi Limited

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

Established:		 • Tokyo Electron Technology Solutions Limited		 • Tokyo Electron Kyushu Limited		 • Tokyo Electron BP Limited

November 11, 1963		 • Tokyo Electron Agency Limited

Annual General Meeting of
Shareholders:U.S.
		 • Tokyo Electron U.S. Holdings, Inc.
		 • Tokyo Electron America, Inc.
		 • TEL Technology Center, America, LLC		 • TEL Venture Capital, Inc.
		 • TEL Epion Inc.
		 • TEL FSI, Inc.

EUROPE		 • Tokyo Electron Europe Limited		 • Tokyo Electron Israel Limited		 • TEL Magnetic Solutions Limited

ASIA		 • Tokyo Electron Korea Limited		 • Tokyo Electron Taiwan Limited		 • Tokyo Electron (Shanghai) Limited		 • Tokyo Electron (Kunshan) Limited		 • Tokyo Electron Singapore Pte. Limited

Investor Information

Common Stock Listed on:

Stock trading unit
Authorized
IssuedNumber of shareholders

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

Independent Auditor:
KPMG AZSA LLC

Administrator of Shareholders’Register:June

Common Stock:

For Further Information, Contact:

Tokyo Stock Exchange 1st Section(Stock code: 8035)

100 shares
300,000,000 shares
165,210,911 shares
50,843

Website:Sumitomo Mitsui Trust Bank, Limited
4-1 Marunouchi 1-chome, Chiyoda-ku,
Tokyo, Japan
Direct mail and inquiries to:
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)

Major Shareholders:
The Master Trust Bank of Japan Limited (trust account)
Japan Trustee Services Bank Limited (trust account)
JP Morgan Chase Bank 380055
Tokyo Broadcasting System Holdings, Inc.
Trust & Custody Services Bank, Limited(securities investment trust account)
JP Morgan Chase Bank 385151
Japan Trustee Services Bank Limited (trust account 4)
Japan Trustee Services Bank Limited (trust account 5)
State Street Bank West Client Treaty 505234
Japan Trustee Services Bank Limited (trust account 7)

Number ofshares held
(thousands)

Votingshare ratio(%)

30,791
17,573
9,627
7,077

18.75
10.70
5.86
4.31

3,672

2.23

3,108
2,801
2,616
2,538
2,442

1.89
1.70
1.59
1.54
1.48

Notes: 1. Shares of less than one thousand have been rounded down in the “Number of shares held.”
2. Voting share ratios are calculated excluding treasury stock (1,002,816 shares). Figures are truncated after
the second decimal place. Treasury stock excludes the 249,701 Company shares owned by the executive
compensation Board Incentive Plan (BIP) trust account and the share-delivering Employee Stock
Ownership Plan (ESOP).

www.tel.com

Distribution of Ownership among
Shareholders:
Treasury stock
0.61%

Japanese financial institutions
and securities companies
51.61%

Other Japanese
corporations
5.50%

Japanese individuals
and others
9.59%

Foreign institutions
and others
32.69%

Stock Price and Trading Volume
33 consolidated subsidiaries in total, including the above 20 companies(Thousands of shares)(Yen)
25,00020,00015,00010,0005,000

Stock price

100,000
50,0000

Trading volume
0

CY2014

CY2015

CY2016

CY2017

CY2018CY2019Years ended March 31

2015

2016

2017

2018

2019

High (yen)

9,451

8,450

12,28523,87521,935Low (yen)

5,751

5,519

6,603

11,455

11,595

Total shareholder
return (%)

134.8

122.0

203.7

337.9

286.4

(TOPIX, dividends
reinvested)(130.7)(116.5)(133.7)(154.9)(147.1)