TOKYO ELECTRON LIMITEDANNUAL REPORT 06

I N T E R V I E W

KIYOSHI SATO

Q&APresident & COO

Tokyo Electron’s share of the global market forsemiconductor wafer FAB equipment seems to berising. What is driving this growth?

Asia’s rising share of semiconductor capital investment in theglobal marketplace is one reason. Various semiconductor
manufacturers such as memory manufacturers, logic IC

manufacturers and foundries are making aggressive capital
investments, anticipating future demand growth. Last year saw
brisk capital investment in manufacturing equipment for DRAMand NAND flash memory that has high growth potential. Tokyo
Electron is well established and well known for the strong
support that it provides to customers in Asia. Its products havealso won high marks for the advanced solutions they offer for
leading-edge memory products and other high-end semiconductors. The combination of these factors is driving growth.
Looking back, surface preparation systems (cleaningsystems) is an area that showed outstanding growth last year.
The market share of our 300mm wet stations jumped from asingle-digit figure three years ago to nearly 35%; we captured
a growing share as design rules continued to shrink. Goingforward, the products that we launched in the fiscal year toMarch 2006 are now ready to start contributing to the bottomline. I am confident that Tokyo Electron will be able to further
raise its presence in the global market.

Worldwide Wafer FAB Equipment Market and TEL Market Share
(%)(Billions of U.S. Dollars)

80
60

20

10.9

11.8

23.7

Cash
Interest-bearing debt

02001

13.4

28.4

26.0

15

10.3

40
20

12.8

16.2

16.7

2002

2003

10520042005

0(Calendar Year)
Source: Gartner Dataquest (April 2006) GJ06250■marketWafer FAB Equipment Market■ WFEWorldwideTELTELMarket
share Share
Source: Gartner Dataquest (April, 2006) GJ06250

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TOKYO ELECTRON LIMITEDANNUAL REPORT 06

Many of Tokyo Electron’s products have leading

The new product lineup will meet the diversifying needs of ourmarket shares. How do you plan to increase thecustomers as design rules shrink.

share of products with lower market rankings?

This year we also introduced ExcelinerTM, an eighth-generation

Market share is important, but profit margins must be given equal

FPD coater/developer. It offers high levels of performance andattention. Tokyo Electron is not interested in a high-sales, low-reliability based on an entirely new concept.

margin strategy. That said, a certain volume of sales is needed toPlease comment on Tokyo Electron’s growth strategies.

boost profit margins to higher levels.
The key here is matching products with market needs.

The core concepts of our growth strategies are to nurture newCustomer needs are diversifying as semiconductor manufactur-technologies and develop new products. Enhancing process

ing processes become even more sophisticated. In this environ-performance is one of the most important requirements of ourment, if we don’t focus on particular market segments, thecustomers. They demand a response to shrinking design rules

product concept will suffer and will lead to poor execution of ourand new materials, even as memory size continues to in-differentiation policy. First, we must study the market and thencrease, processors become faster and demand for lower

introduce optimized models for each market segment—

power consumption grows even stronger. On top of all this,products that precisely reflect the real needs of our customers.

customers are strongly emphasizing improved productivity forTokyo Electron is a relative latecomer to the silicon etchproduction equipment. Needless to say, quickly and correctly

market, but this is a product area where there is room to expand

identifying customers’ technology needs and creating new

our market share. We achieved a market share of more than 10%

products to address them is extremely important. Growth isin the last year and there is a clear, underlying upward trend. In

driven by the ability to introduce products with such added

the surface preparation systems market, we expanded thevalue at the right time.
From a medium- to long-term perspective, we also aim to

product line, developing the CELLESTA (single wafer cleaningTMsystem) and Certas(pre-clean system) to the wet station line.

increase the size of our business. For this, we have to develop

New Products for the 65nm and 45nm Nodes Released in 2005

New Etch PlatformTactrasTM
New Etch Chamber
SCCMTM- JI

Coarter/Developer for
Volume Immersion Technology
CLEAN TRACKTM LITHIUSTM i+Pre-clean System
CertasTM

Plasma-enhanced
Batch Thermal CVD
TELFORMULATM IRadSingle Wafer Cleaning System
CELLESTA
New Thermal Processing System
TELINDYTM

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TOKYO ELECTRON LIMITEDANNUAL REPORT 06

new star products to supplement our existing product line.

take on new competition. Semiconductor production equipment

We are thus working in R&D on diversifying into new areas

with superior process performance and higher productivity iswhile giving full attention to existing technologies.

favored by customers since it helps them bring down costs.
Alliances and M&As are also options to cope with theWhat new trends do you see emerging in the SPEchanging situation. Forming alliances with or partnering withindustry? What is the key to success inuniversities and other firms is effective in accelerating productthe new environment?

development in cases where development periods tend to beFirst, a few players are increasingly dominating the semicon-long. In some cases, M&A will also be an effective alternative.

ductor and LCD sectors, and there are few customers in theworld capable of continuously making massive investments.

Finally, can you comment on what you see as

Competition for orders is likely to become intensified in such aTokyo Electron’s corporate DNA?

market. Our sales, service and manufacturing operations must

I would say that our “Emphasis on the Customer,” passed down

provide exhaustive support to our customers, thus building

throughout our history, our “Venture Spirit” and our “Readinessbusiness relationships rooted in trust. This can only beto Respond to Change” are the corporate genes that give Tokyo

achieved through further raising product quality and by offering

Electron its distinctive character. If you respond defensively tothe best possible customer support, in addition to quickchange, you end up retrenching, but if you adopt an aggressive

responses to customers’ real needs.

stance, you open up opportunities for growth. Tokyo ElectronSecond, there is a fierce battle for growth and survival inhas grown rapidly by responding positively to changing market

the SPE industry. Major SPE suppliers, and we are no excep-needs. This has allowed us to evolve from being an importtion, are looking to new areas to drive future growth, and thisagency and local supplier to a global player. We will further hone

could intensify competition in core product lines. We will have

our instinctive ability to respond to changing customer needs toto further hone our technology development capabilities tofind new opportunities for growth.

Accelerating R&D to Drive Growth
A High Level of R&D Expenses and a Global R&D Network

IMEC (Belgium)
Collaboration R&D with IMEC onimmersion lithography andextreme ultraviolet (EUV)
lithography

TEL Technology Center,America, LLC(New York)

Leading-edge Process
Development Center(Nirasaki City, Yamanashi)

R&D Expenses

Kansai Technology Center(Amagasaki City, Hyogo)(Billions of Yen)

80
60

53.8

50.1

49.2

44.2

43.9

2004

2005

40
About IMECIMEC is a world-leading independent research center in nanoelectronics andnanotechnology. Its research focuses on the next generations of chips and systems,
and on the enabling technologies for ambient intelligence.

20015

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