TO OUR SHAREHOLDERSMESSAGE FROM THE CHAIRMAN

I am pleased to report a strong performance in fiscal 2005, the year ended March 31, 2005.

SEMICONDUCTOR MARKET – POISED FOR LONG-TERM GROWTH
The semiconductor industry continued to grow strongly in line with growth in the computer, personal computer (PC), mobile phone and other high-tech product markets. As a leading supplier of semiconductor production equipment (SPE), Tokyo Electron has been an integral part of this industry and has maintained aconsistent history of growth for more than 40 years.
In addition to PCs and mobile phones, semiconductors are finding an expanding application base. Alongside
DVD recorders, digital televisions and other digital consumer electronics, there is a booming market for nextgeneration digital mobile devices that integrate the functions of mobile phones, PDAs, digital cameras, digital
portable audio players and other devices. Semiconductors are also finding wider applications in automotive
electronics such as sensors, engines and power control systems, and navigation systems. Semiconductor
demand will also be boosted as analog broadcasting gradually gives way to digital television broadcastingaround the world.
Furthermore, semiconductor demand, in the past largely confined to the U.S., Europe and Japan, is
now growing rapidly around the world, from South Korea and Taiwan to the so-called BRICs countries.
The world is on the verge of a full-blown age of digital networks.

SEMICONDUCTORS AND SEMICONDUCTOR PRODUCTION EQUIPMENT SUPPORT NEW
VALUE PROPOSALS
Now that semiconductors are used en masse in digital consumer electronics products that havevirtually become commodities, there is a view in some quarters that the semiconductor industry itselfwill become commoditized, thus resulting in slower growth. However, I believe that the semiconductor market will continue to expand as the semiconductor, a product of the most sophisticated technologies, adds greater value to a range of electronic products. Furthermore, semiconductor
manufacturing technology should also continue to advance due to the fusion of various new technologies. While the semiconductor market is expected to experience a mild correction this year,
it is still one of the few $200 billion-plus industries with the potential of an average annual
growth rate of around 10% over the medium to long term. As the “crude oil” of industry, I expect the semiconductor to drive the global industry. One of the most important technologies
that supports the value of semiconductors is the SPE that Tokyo Electron supplies. Throughendless technological innovations, we have been supporting the evolution of semiconductors,
namely, growing multifunctionality and high-performance, a quantitative increase by lowcost production and expansion to a wide range of applications.

CUSTOMER TRUST AND TOKYO ELECTRON’S TECHNOLOGY
Our rock solid position as the market leader rests on the hybrid technologies that wehave accumulated over the years and, equally as important, close relations withour customers rooted in mutual trust and respect. Since our foundation, we haveconsistently pursued customer satisfaction as a core value. Our marketing, service, product development and other teams work closely with customers, making
possible the exchange of information on a broad range of issues. The development of SPE draws on a whole spectrum of technologies, from electronics,
mechatronics and optics to thermodynamics and chemicals. Advanced know-how
in the integration of all these technologies is essential for manufacturing SPE. Few
other industries, if any, require this advanced level of technology synthesis. This isa blessing, too, since it provides a high barrier to entry to the SPE industry. Furthermore, our customers arealso working on differentiating semiconductor manufacturing processes in various ways to enable them todistinguish their end products from the competition. In an industry like this, only a relationship of deep trust
allows us to fully access and understand the true needs of customers. Quickly developing new technologiesto respond to customer needs improves our position in the industry. By continuing to bolster our capabilities
across the technologies used in the development of SPE as well as the know-how required to synthesize
these technologies, we have been able to enhance our position as a manufacturer and to deepen our relationship with customers as the market leader.

CORPORATE DNA SENSITIVE TO CHANGE
Tokyo Electron has the character of both a manufacturer and a distributor. Supplying technology required bythe world is common to both these functions. As a distributor, we market other manufacturers’ products withthe same commitment that we bring to our own products. We do not reject superior technology and products
developed outside Tokyo Electron. Rather, we try to actively use such technologies, because it is in our“genes” to respond sensitively to technologies and changes in the world. At the same time, as a manufacturer
we have a strong mission to develop our own products. We continue to take on the challenge of developing
new technologies and products to meet the changing needs of our customers. We have also built up a
powerful technology base to provide advanced technical support to our customers.
Breakneck technological change in the semiconductor industry means that it is a rare case indeed for any
one manufacturer to hold on to the leadership position for a long time. However, Tokyo Electron has maintained its position as a top-class SPE firm for years. This is because our distributor “genes” enable us tosense customer needs ahead of others. And our instinctive ability to respond to changing customer needs
meshes seamlessly with our strengths as a manufacturer that continues to cultivate a wide technology
base. These two aspects have been the foundation of our growth.

EXPANDING DREAMS IN AN INNOVATIVE CORPORATE CULTURE
At Tokyo Electron, a corporate culture characterized by the pursuit of innovation has been passed down theyears as part of our heritage. By innovation I do not only mean technology development. I also mean manufacturing, marketing and business processes. In other words, innovation at Tokyo Electron means transforming
our businesses to superior ones through non-traditional approaches. We feel that superior human resources arethe key to achieving this goal. We therefore make every effort to attract the best people from around the world
and let them develop in an innovative culture. We are also promoting a business leader program and strengthening
cross-divisional activities in our company to foster the development of up-and-coming younger employees.
As in the past, Tokyo Electron will continue to be innovative in both technology and business as we continually strive to raise our corporate value. Tokyo Electron is committed to living up to the expectations ofour shareholders and other stakeholders throughout the world, as a company that can support making ideas
and dreams a reality.
July 2005

Tetsuro Higashi
Chairman & CEO

TOKYO ELECTRON LIMITEDANNUAL REPORT 05

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