TOKYO ELECTRON ANNUAL REPORT 2015

PAGE

8CONTENTS
CONTENTS

Financial Highlights

Business Overview

To Our Stakeholders

Review of Operations
and Business Outlook

Corporate Governance

Financial Section

Corporate Data

Review of Operations and Business Outlook

Review of Operations and Business Outlook
SALES BY SEGMENT

SHARE OFNET SALES

BUSINESS ENVIRONMENT

BUSINESS OVERVIEW

BUSINESS OUTLOOK

Semiconductor Production Equipment(Billions of yen)
0150

300

450

11600

511.3

12Net Sales

477.9

13

¥ 576.2

392.0

14billion
478.8

1594.0%576.2

In 2014, global shipment volumes of smartphones and other mobile devices were robust,
up 23% year on year, and demand for data center servers was strong, due to expanding internet data transmission volumes. Supported bythese factors, sales in the global semiconductor
market grew 8% year on year to a record high of
US$340 billion. Accordingly, investment in additional production capacity for mobile DRAM andNAND flash memory picked up speed. Capital
investment in logic semiconductors was also
firm, supported by favorable server demand. Asa result, global capital investment in wafer fabequipment saw considerable year on year
growth, up 16%.

Segment net sales grew faster than the wafer fab
equipment market, up 20.3% year on year to¥576.2 billion.

Overall demand for flat panel displays (FPDs)
grew nearly 10% (area basis) in 2014, reflecting
shifts toward larger and higher definition smartphone screens and TVs. As a result, capital
investment in production equipment for largesized panels in China grew, and the worldwide
market for FPD production equipment saw solid
year-on-year growth of 20%.

Segment net sales rose 15.5% to ¥32.7 billion.

The number of photovoltaic panels (PV) installed
globally continues to increase each year, reflecting growing environmental awareness and energy supply problems worldwide. Nevertheless,production equipment remains in oversupply.

Segment net sales fell 4.9% year on year to¥3.6 billion.

Market share in all product categories improved,and overall share of the wafer fab equipment market rose from 10.5% to 13.6%.
Market share of cleaning systems reached 25%,
its highest level ever.
Net sales in the field solutions business (sales ofparts and used equipment, modification, maintenance services, etc.) rose more than 35% year onyear.

Demand for semiconductors is expected to continue to grow. This growth will be driven
by the increase of per-mobile and per-server memory, the arrival of the internet of things(IoT) and more sophisticated use of big data as well as the rapid development of the networks that support these technologies.
For these developments to progress, semiconductor devices must offer even higher performance at lower cost. The role of semiconductor production equipment is thus growing
ever more important. Tokyo Electron regards this technological inflection point as an opportunity for growth and is aggressively bringing to market new high performance, high productivity products. In the area of finer patterning, to expand sales, the Company is introducing
coater/developers with new defect-reducing features, single wafer cleaning systems that
reduce pattern collapse, as well as etch systems and deposition systems, for which demandis expected to grow alongside expansion in multiple patterning processes. Furthermore, in
response to the adoption of 3D structure devices and new semiconductor materials, Tokyo
Electron aims to increase its market position in such areas as ALD systems, etch systems anddry cleaning systems, which boast advanced thin-film control and processing technologies.
STT-MRAM (spin transfer torque-magnetoresistive random access memory) is a promising candidate for the next-generation of memory device. Tokyo Electron possesses all
the products necessary to form STT-MRAM’s core memory cells. Using this advantage,
the Company aims to establish high-volume manufacturing technology that will help
commercialize STT-MRAM for practical use through joint development with business
partners, universities and consortia.
In the advanced packaging field, we are working to reduce costs, the greatest obstacle to mass production, through joint research with Singapore’s Agency for Science,
Technology and Research.

FPD Production Equipment(Billions of yen)
02040

1160

80

5.3%

66.7

12Net Sales

69.9

13

¥ 32.720.1

14billion
28.3

15

32.7

Sales in China accounted for over 50% of totalsales.
Sales of inductively coupled plasma (ICP) etchsystems, which have a competitive edge amongproducts for high definition, large-sized panels,
were strong.
Tokyo Electron’s inkjet printing systems for manufacturing OLED panels were adopted in customers’ development lines.

Total FPD area demand is forecast to continue expanding, reflecting strong demand
for larger televisions and smartphones, the adoption of higher resolutions, including
4K, and expected market growth for displays used in automobiles and wearables.
Accordingly, in 2015, the FPD production equipment market is expected to grow
20% year on year due to continued capital investment in large-sized panels andincreasing investment for small- and medium-sized panels for mobile devices.
At the same time, in thin-film transistor (TFT) processes, the use of low-temperaturepolysilicon (LTPS) and such oxide semiconductors as indium gallium zinc oxide (IGZO)
in place of conventional amorphous silicon is growing alongside the shift toward higher
definition displays. Tokyo Electron will continue working to increase revenues by
expanding sales of technologically superior ICP etch systems that can handle these
new materials. The Company furthermore aims to expand the production equipment
market for OLED displays, which are hailed as the next generation of display technology, by increasing productivity and reducing costs for customers with inkjet printing systems for use in the manufacture of large-sized OLED panels.

PV Production Equipment(Billions of yen)
02468

0.6%

11Net Sales

1213¥ 3.6

0.1billion

14

3.815

3.6

From fiscal 2011 to fiscal 2012, PV production equipment
sales are included in FPD production equipment sales.

Business withdrawal proceeded as planned.

Aiming to break into the thin-film silicon PV production equipment market, Tokyo
Electron became the exclusive sales representative of Switzerland-based Oerlikon
Solar in 2009. In 2012, the Company acquired Oerlikon Solar with the aim of generating growth. However, having determined that it could not expect a reasonable returnon investment going forward, Tokyo Electron ended all research and development,
manufacturing and sales operations in the PV production equipment business at theend of March 31, 2014.
Going forward, the Company will continue only support operations for delivered
units, and expects to further reduce losses in this segment.