Tokyo Electron

Annual Report 2011

PROFILETokyo Electron Limited (TEL) is a world-leading supplier of semiconductor production equipment (SPE) and flat panel display (FPD) production equipment. We provide a broad lineup of
products that offer superior process performance and high productivity and related services tosemiconductor and LCD panel manufacturers around the world. Additionally, photovoltaic cell(PV) production equipment has been in the product lineup since 2009.
An unwavering commitment to customer satisfaction that dates back to our founding in
1963 has cemented our position as a market leader. Our competitive strength lies in ourcapability to proactively and precisely identify real customer needs and respond to them with
cutting-edge technology and products.
With a global network that spans Japan, the U.S., Europe and Asia, we are opening up new
frontiers for digital networks by contributing to enhancing our customers’ production lines
through untiring dedication to technology innovation.

Contents
1 Consolidated Financial Highlights
2	To Our Stakeholders
4 Interview with the CEO
10 Feature		Aiming TO BE Global No. 1: The Challenge of the New Miyagi Plant

12	Tokyo Electron At a Glance
14 Review of Operations
16 Environmental, Health and Safety Activities
18 Corporate Governance23	Board of Directors, Statutory Auditorsand Executive Officers

24

Research and Development/Intellectual Property

27 Financial Section
56	Group Companies
57 Investor Information

Disclaimer Regarding Forward-looking Statements
Matters discussed in this annual report, including forecasts of future business performance of Tokyo Electron, management strategies, beliefs and other statements are based on ­­Tokyo­Electron’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/PV markets• Changes in the demand for products and services manufactured or offered by Tokyo Electron’s customers, such as semiconductor manufacturers, FPD manufacturers, photovoltaic cell 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 34.

Annual Report 2011

Tokyo Electron

CONSOLIDATED FINANCIAL HIGHLIGHTS

Thousands of
U.S. dollars

Millions of yen

2007

2008

2009

2010

2011

2011

¥851,975¥906,092¥508,082¥418,637¥668,722$8,042,357

Years ended March 31

For the year:
Net sales.......................................
Operating income (loss)................

143,979

168,498

14,711(2,181)

97,8701,177,029

Income (loss) before income taxes...

144,414169,220

9,637(7,768)99,5791,197,582

Net income (loss)..........................
Depreciation and amortization......
Capital expenditures.....................
R&D expenses...............................

91,263
18,82027,12956,962

106,271
21,41322,70366,073

7,543
23,068
18,10860,988(9,033)20,002
14,91954,07471,924
17,707
39,14070,568864,991
212,953
470,716
848,683

Operating margin.........................
ROE..............................................

16.9%
21.8%

18.6%
21.4%

2.9%
1.4%

14.6%
13.3%

(0.5)%(1.8)%

Thousands of
U.S. dollars

Millions of yen

At year-end:
Total assets...................................
Total net assets(Total shareholders’ equity)..........

¥770,514¥792,818¥668,998¥696,352¥809,205$9,731,870

469,811545,245529,265

523,370

584,802

7,033,097

Yen

Per share:
Net income (loss)—Basic...............
Cash dividends.............................

¥ 511.27
103.00¥ 594.01
125.00U.S. dollars¥   42.15
24.00¥ (50.47)
12.00¥ 401.73
114.00

$

4.83
1.37

Notes: 1. U.S. dollar amounts are translated from yen, solely for convenience, at the prevailing exchange rate on March 31, 2011 of ¥83.15=U.S.$1.
2. Depreciation and amortization does not include amortization and loss on impairment of goodwill.

Net Sales

Operating Income (Loss) andOperating Margin

Net Income (Loss) per Share

ROE(Millions of Yen)

(Millions of Yen) 

(Yen)

(%)

200,000

1,000,000

20

24

600

18.6

200,000

10

300

5

150

0

0

–5

–150

18

401.73450

511.27

14.6 15

21.8 21.4

13.3
12

97,870100,000

50,000

6

42.15

2.9

–2,1810

14,711

418,637

400,000

508,082

600,000

143,979

668,722150,000

168,498

906,092

800,000

851,97516.9

594.01

(%)

1.4
0

0

–50,000

07 08 09 10 11

07 08 09 10 11–50.47–0.5

07 08 09 10 11

–1.8
–6

07 08 09 10 11

Operating Income (Loss)
Operating Margin1

Tokyo Electron  Annual Report 2011

To Our Stakeholders

Tetsuro Higashi, Chairman of the Board

Hiroshi Takenaka, President & CEO

Following the Great East Japan Earthquake that struck on March 11, 2011, we received heartwarming
support and encouragement from many of our stakeholders. We thank you for expressing all your concerns to us. Tokyo Electron has three plants in the affected areas. As we have reported on our website,none of them suffered serious damage, and production capacity has almost returned to levels before thedisaster. At present, we are concentrating on working toward the future with our suppliers and preparing
for power restrictions anticipated for the summer.

2

Annual Report 2011

Tokyo Electron

In 2010, the semiconductor market recovered quickly from the unprecedented global downturn andachieved strong growth driven by new consumer electronics such as smartphones, tablets, and demand
for servers along with advances in cloud computing. In this favorable business environment, Tokyo Electron
finished fiscal 2011, the year ended March 31, 2011, with net sales of ¥668.7 billion, operating income of¥97.9 billion, and net income of ¥71.9 billion, marking substantial year-on year growth across the board.
During the fiscal year, management changed its dividend policy by raising the payout ratio from 20% to
35% of consolidated net income. As a result, the total dividend applicable to fiscal 2011 was ¥114 pershare, ¥102 higher than in the previous fiscal year. In this way, we would like to express our heartfelt
gratitude for the understanding and support you have shown toward Tokyo Electron’s business activities
during fiscal 2011.
We believe that the broadening of the range of products that require semiconductors along with thegeographic expansion of the markets will continue over the long term, driven by the continuing evolution of semiconductors. This evolution is made possible by advancement in semiconductor production
process technology. Crucial to this is technological innovation at semiconductor production equipment(SPE) suppliers like us. Similarly, flat panel displays (FPD) are seeing applications expand from television,mobile phones and other products to digital signage and so forth. FPD technology is expected to shift
from liquid crystal displays (LCD) to organic light-emitting diode (OLED) displays. The photovoltaic cell(PV) market is also tipped to develop further given recent developments in favor of renewable sources ofenergy. In this business environment, in fiscal 2012 we aim to refine our distinctive technologies in our
mainstay SPE, and develop production equipment for OLED displays. We will also pour more energy intothin-film production technology for PV, where we can take full advantage of our extensive production
equipment technology. In this manner, we aim to boost Tokyo Electron’s superiority in the production
equipment market into the future.
As a production equipment supplier, Tokyo Electron aspires to be an enterprise that helps to upgradeand enhance social infrastructure and contribute to the betterment of people’s lives. We want to share thismission among management and employees, as we strive to make Tokyo Electron a company brimmingwith aspirations and vitality that we can all be more proud of. That is why our most important basic policy
is to consistently and continuously conduct technological development and human resource development
through the economic cycles. We will drive business expansion through technological innovation andmaintain a highly motivated workforce, with the aim of delivering solid value as a leading global production equipment supplier. At the same time, we will continue to work tirelessly to make Tokyo Electron aneven more attractive company for all of our stakeholders.
We look forward to your continued understanding and support as we endeavor to reach these goals.

Tetsuro Higashi, Chairman of the Board

Hiroshi Takenaka, President & CEO

3

Tokyo Electron  Annual Report 2011

Interview With the CEO&

Questions
Answers

Hiroshi Takenaka,
President & CEO

Q What is Tokyo Electron’s medium- and long-term vision?
A

Semiconductors have long been called “the lifeblood of industry.” Today, semiconductors arebuilt into all manner of devices around us, and moreover are essential to social infrastructure
and the enrichment of our daily lives. Semiconductor production equipment (SPE) is used to
manufacture these “lifeblood” semiconductors. As a leading SPE supplier, Tokyo Electron aspires
to remain deeply involved in the work of realizing an inspiring future for all people. In addition,
SPE technology has an expansive scope and involves some profound innovations. It is used to
produce the liquid crystal displays (LCD) for almost all televisions today, and can be applied tothe production of organic light-emitting diode (OLED) displays. In addition, it is applied to the
production of photovoltaic cells (PV), which are attracting interest as a promising means ofharnessing renewable solar energy. Our production equipment technology is very much at theforefront of science and technology. Through these advances, we aim to make a broad contribution to the advancement of society at large.

4

Annual Report 2011

Tokyo Electron

Development of Semiconductor Production Equipment Technology
New Technology Fields
OLED Production Equipment
PV Production Equipment
FPD Production Equipment

Semiconductor Production
Equipment Technologies
Equipment
safety design

Testing

Coating/developing

Cleaning

Thermalprocessing

Automation

Material
processing

Design-to-cost

Sensing

Temperature
control

Clean
technology

Flow control

System design

Plasma control

Power control

CO2 reduction
technology

Mechatronics

Q What are your key strategies for expanding the SPE business?
A

The SPE market is expected to see continuing growth driven by technology innovation. First,
we intend to do our utmost to enhance our position in this market. To give you some clear
examples, let’s look at some of our specialized market shares within the SPE market. Tokyo
Electron commands a share of more than 80% of the coater/developer market and more than
60% of the thermal processing system market, but has less than a 30% share of the etchsystem market and less than 20% of the cleaning system market. Etch systems and cleaningsystems are both used in key semiconductor production processes and therefore their markets
offer strong growth prospects going forward. As a result, we intend to spend a relatively
large amount of development and capital expenditures on these two fields, and also on the
opening of our new Miyagi plant, in order to ensure that we produce solid results in eachfield. We will also implement efforts
directed at commercializing new technology fields, in addition to bolstering existing product fields.

Manufacturing base for coater/developer and cleaning system at Tokyo Electron Kyushu Limited.
­Cleanroom for process evaluation expanded to strengthen development of cleaning systems, a market
expected to grow going forward.

CELLESTA™ -i
Single Wafer Cleaning System

5Tokyo Electron  Annual Report 2011

new SPE-related technology fields are you focusing on?
Q WhichPlease go into more detail.

A

Last year, we launched a new plasma etch system Tactras™ RLSA™ Etch, featuring our proprietary revolutionary breakthrough plasma technology. Leveraging this technology, we are also
considering entry into new film formation and other fields.
Recently, while development aimed at pushing the limitations of scaling, or miniaturization,
has been vigorous, we have been making R&D efforts directed at realizing technologies fordramatically increasing device performance by means of

R&D Expenses in the Past 10 Years

stacking multiple silicon chips. Called 3DI, this chip stack(Billions of Yen)

technology also takes full advantage of various technolo-

80.0

70.6

technology expected to be used in mass production in 2-3
years, we are currently working to upgrade and extend

54.1

57.0
49.2

43.9

44.2

40.0

50.1

53.8

60.0

61.0

66.1

gies we have already developed over many years. With the

our product lineup.
Additionally, in traditional wafer-test related fields, wehave received strong calls for reducing test costs from

20.0

customers. In response, we are actively preparing to propose new solutions to address their needs.

0

02

03

04

05

06

07

08

09

10

11

Global R&D and Manufacturing Bases

Tokyo Electron Korea Solution(Hwaseong, Gyeonggi-do)

Process Technology Center*1(Hwaseong, Gyeonggi-do)

TEL Technology Center, America(Albany, New York)SEMATECH(Albany, New York)
Timbre Technologies(Fremont, California)

imec(Lueven, Belgium)

TEL Technology Center, Taiwan(Hsinchu, Taiwan)

Technology Development
Center
Leading Edge Process
Development Center(Nirasaki, Yamanashi)Tokyo Electron Technology
Development Institute(Sendai, Miyagi)

TEL Technology Center,
Tsukuba*2(Tsukuba, Ibaraki)*1: Operation is scheduled to begin in late 2011
*2: Operation is scheduled to begin in spring 2012

6

TEL Epion(Billerica, Massachusetts)

Annual Report 2011

Tokyo Electron

Q What kinds of OLED display solutions do you plan to offer?
A

Companies already offer OLED displays based on conventional technologies. However, Tokyo
Electron is currently developing new types of OLED film formation equipment for use in the
production of large OLED displays for TVs and lighting in the near future. The first type is ourown proprietary evaporation system that has a very unique technology that provides a highlevel of material efficiency. The second type is a film formation system using an inkjet printing
method under joint development with Seiko Epson Corporation, a company which has considerable expertise in industrial inkjet technology. OLED is a future display technology that is lighterand more energy efficient than liquid crystal display (LCD), and has a higher resolution of color.
The market for OLED displays is expected to come into its own in the near future. Based on our
wide range of equipment technology developed through LCD operations, we aim to propose
unique technologies for the next generation of OLED displays.

is intensifying due to the emergence of AsianQ Competition
equipment suppliers. What steps are you taking to expand businessand improve earnings?

A

In recent years, Asian equipment suppliers including those in South Korea have prominently
come to the forefront. We must continue to run ahead of them in terms of technology innovation. Fortunately, the industry as a whole has seen technological innovation continue to evolve
swiftly. We believe that with this foundation Tokyo Electron can continue to provide better value
with its proposals in the future, based on our possession and provision of distinctive technologies that stand out. Moreover, our customers also face relentless competition on a daily basis. If
we can provide our ­high-value-added technologies at the best possible timing, I am confident
that we will be chosen by our customers as a long-term partner.
That is also why we decided to set up an SPE process technology
center in Hwaseong, South Korea.
Accelerating cost reductions has also become an urgent priority
in this process. To this end, we are currently constructing a newplant for FPD production equipment in Kunshan, China.

Ground-breaking ceremony for the new plantat our new subsidiary Tokyo Electron (Kunshan)
Limited in Kunshan, Jiangsu Province, China(January 8, 2011)7

Tokyo Electron  Annual Report 2011

Q What is your policy on returning profits to shareholders?
A

We must constantly maintain and expand technological leadership and capabilities that havea competitive edge. This is Tokyo Electron’s primary source of growth. Therefore, no matter
what conditions we face, the most important factor for ensuring the Company’s growth is toretain the necessary funds for this, and to invest these funds in important development projects, intellectual property acquisitions and so forth. We also believe that doing so will lead toincreased shareholder value.
At the same time, we have carefully asked ourselves what would be the best possible profit
distribution policy—one that would reward shareholders for their support, while maintaining
our financial soundness in a fast-changing market environment. Consequently, we decided
that the total dividend applicable to fiscal 2011 should be raised to ¥114 per share, marking
a large increase from the previous year. This partly reflects our decision to raise the dividend
payout ratio target from 20% to 35%, as well as the improvement in net income, from which
dividends are paid out.
Looking ahead, we will continue striving to enhance shareholder value through soundbusiness expansion, while at the same time working to directly return a greater portion of
earnings to shareholders.

8Annual Report 2011

Tokyo Electron

Response to and Rebuilding After the Great East Japan Earthquake
We wish to express our deepest sympathies and condolences for the victims of the Great East Japan Earthquake. We sincerely hope that the affected areas can realize a quick recovery.

Safety of Employees

Post-earthquake Response

All employees were safe.

Suppliers

Status of Production Facilities
Three of our manufacturing bases in the Tohoku region suffered
minimal damage but have already resumed operation in the firstquarter of FY2012.

We worked quickly to ascertain the status of our 300 or so suppliers in
the affected regions and are taking measures to remedy the instability inthe supply of certain parts.
• We devised workarounds involving adjustments to production processes, temporary adoption of substitute parts, and design changes

Radiation
We are measuring the radiation levels of all equipment and parts
shipped overseas.
Tokyo Electron Tohoku (Oshu, Iwate)
Thermal processing system• Implemented in conformity with International Air Transport
Association (IATA)

Aomori• Operation restarted in late March

Power Supply
Akita

Tokyo Electron Miyagi (Matsushima, Miyagi)
Etch system

Iwate• Operation restarted in early May

Tokyo Electron Miyagi (Taiwa, Miyagi—new plant)• Buildings for R&D and administrative functions:
Construction completed in late May

Miyagi• Building for the production line:
Construction scheduled for completion in September

Tokyo Electron Technology Development Institute(Sendai, Miyagi)
RLSA™ plasma etch system• Operation restarted in late March

Yamagata

We intend to reduce power consumption for the coming summer
months by 15% compared to the same period last year. However, we
are also implementing steps to ensure that these cuts will not result in
stoppages in our R&D and production schedules.
• We will install solar power generation systems (2,000 kW), a turbo
chiller, and other equipment• An operation rotation plan will be implemented in the Yamanashi and
Sendai regions from July to September

Support for the Affected Regions
Fukushima

Monetary Donations
We donated a total of ¥500 million in aid to the recovery effort.

Tohoku region

Customer Support
We sent 100 to 200 field engineers to provide support to our customers
in their efforts to get their facilities back to normal.

Tokyo Electron Tohoku
President & CEO Hiroshi Takenaka visited the plant to provide encouragement to employees
March 25, 20119

Tokyo Electron  Annual Report 2011

FeatureAiming TO BE Global No. 1:
The Challenge of the New Miyagi Plant
Tokyo Electron has invested ¥25 billion in the constructionof a plant in Taiwa, a town close to Sendai City in Miyagi
Prefecture, that can conduct all the processes for plasmaetch systems from development to mass production. Etch
systems are a core product for the Company and also for theindustry. The Great East Japan Earthquake delayed construction, but the buildings for the R&D and administrative functions will become operational in July, and the building forthe production line will start operations in November.
Hirofumi Kitayama
Representative Director
Executive Vice President
General Manager, Manufacturing Division (Quality)
President, Tokyo Electron Miyagi Limited

The Goal of the Plant is to Become No. 1 in the WorldFirst, please tell us why you decided to build thisnew plant.

quality and manufacturing processes at the design and develop-

Simply stated, it is to “become the world’s top semiconductortion method will allow us to reduce manufacturing time andproduction equipment supplier.” More precisely, the major goal isintroduce more flexibility into production. In order to become theto enhance Tokyo Electron’s core technological strength in orderworld No.1, we will need to hire superior engineers. Miyagi is an

to enable the Company to continue to provide high-value, high-ideal location from the point of view of recruiting people. In terms

quality products to our customers. Since the new plant will con-of R&D, we are also thinking about the potential for various types

solidate the processes for etch systems from development to massof industry-academia partnerships, such as collaborations andproduction, it will enable us to thoroughly eliminate inefficiency inpersonnel exchanges with colleges of technology and universities

terms of time, communication, and costs and thereby reducein the Tohoku region, including Tohoku University. For Tokyo

product development time. We will also be able to incorporate­Electron, which can be described as a technology company par

ment phase, and achieve increases in productivity.
From the perspective of manufacturing, creating a new produc-

excellence, this will have enormous benefits.

Plasma etch system, Tactras™ – Strong
global reputation based on exceptional
productivity and high reliability.

Are you making this huge investment into the construction of this new plant because you project
there will be sufficient growth in the etch system
market to justify it?
The current scale of this market is approximately U.S.$5 billion.
Amid the ongoing advancement of semiconductor scaling10Annual Report 2011

Tokyo Electron

technology, the etch system market, which is very attractive in thea doubling of our sales within several years as a result. This is anwafer fab equipment industry, has substantial growth potential.

achievable goal if we enhance our efficiency, and continue toAt the same time, we must continue to supply top-quality

supply our customers in a timely manner with products based on

products to our customers in this attractive market. We anticipate

high-value technology.

Unwavering Conviction in Maintaining Production in JapanAt a time when many Japanese companies are relocating their production bases abroad, why do you
remain committed to keeping production in Japan?

Is it true that the new plant is also very advanced
in terms of being environmentally friendly?
We are committed to actively working on environmental issues

In order to win in a market that is characterized by keen competi-at the new plant. One of the environmental commitments wetion through technological innovation, what is most important ismade in May 2008 was “to reduce the impact of our businessto achieve differentiation in product development. To this end, weand transportation activities on the environment by 50%, byneed to differentiate ourselves through our technology and put

2015, compared to the 2007 levels.” In order to live up to that

products on the market more swiftly than before. In particular,

pledge, we will adopt a 1MW solar power generation system

we must be able to launch development projects early on, andand use LED lighting where possible. In addition, we will makesubsequently achieve commercialization rapidly. Further, we mustemissions from the new plant as clean as possible by recycling

start to consider quality and costs right from the development

nitrogen and by further cutting the amount of greenhouse gas

phase. We need to fully refine our core technologies, taking

emissions in the product development and evaluation processes.

advantage of the insistence on a level of quality that Japan can

Regarding the transportation of materials, the idea is to consoli-

provide. With these factors in mind, I believe our optimal choice isdate, to the fullest extent possible, the handling of materials by

to carry out production in Japan.

building relay depots that will work as hubs, working in coopera-

With regard to production, by fully implementing visualization

tion with our suppliers around the country. We are consideringand the elimination of inefficiency, and by establishing quality

how to restructure the supply chain in this way, taking advan-

assurance in our own processes (that is, by ensuring that notage of the opportunity of the establishment of the new plant.

defective products move on to the next process), we can reduce
costs and maximize profits. In an environment where manufacturing is shifting to Asia, we must achieve success in meeting Tokyo
Electron’s big challenge to “win in Asia.”Tokyo Electron Miyagi’s new manufacturing base forplasma etch systems. Targets further strengthening ofoperations through unification of R&D and manufacturingfunctions. As part of the Company’s environmental
commitments, a solar power generation system is to beinstalled on the roof of the facility.

11Tokyo Electron  Annual Report 2011

TOKYO ELECTRON At a Glance
Summary of Business

Net Sales

Semiconductor Production Equipment(Millions of Yen)

Semiconductor devices (IC chips) are the key components of PCs, mobile

700,000

phones and other digital products. Tokyo Electron offers a wide range ofequipment for producing these devices, along with superior technical support

668,722and service.
Tokyo Electron has a lineup of six product groups that includes coater/developer, plasma etch system, thermal processing system, single wafer deposition system and cleaning system used in wafer processes, as well as wafer

600,000

prober used in testing processes. Many of these products have captured top
shares in their worldwide markets.

500,000

418,637

FPD/PV Production Equipment

511,332

400,000

Tokyo Electron supplies flat-panel display (FPD) production equipment used to
manufacture displays for PCs, LCD TVs and other electronic devices, alongwith solid technical support and service.
The product lineup includes FPD coater/developer and plasma etch/ash
system. The size of substrates handled by such equipment is increasing eachyear with the growing popularity of large-screen LCD TVs.

300,000

262,392

Photovoltaic cells (PV) are in the spotlight these days as an environmentallyfriendly form of clean energy. In FY2009, Tokyo Electron added PV production
equipment as a new field of operations.

200,000

Electronic Components and Computer Networks
Tokyo Electron has developed a new type of dual model for this business: thetrading business handles sales, in which it acts as a distributor of a wide array

71,361

66,721of sophisticated electronic components and computer network equipment,
while the development business designs and develops products in response to100,000

customer needs, as well as our own in-house brand products. Business opera-

01284,47390,216

411

453

2010

2011

tions for this segment are handled by Tokyo Electron Device Limited.

Others
(0.1%)

Annual Report 2011

Main ProductsTokyo Electron

Share of Net Sales• Coater/Developer• Plasma Etch System
Dielectric Etch System, Silicon Etch System• Thermal Processing System• Single Wafer Deposition System

76.4%

CVD System, Plasma Processing System• Cleaning System
Auto Wet Station, Single Wafer Cleaning System,
Pre-clean System, Scrubber System• Wafer Prober

Coater/Developer
CLEAN TRACK™ LITHIUS Pro™ V-i

Plasma Etch System
Tactras™

Thermal Processing System
TELINDY PLUS™

Single Wafer CVD System
Trias™ e+• FPD Coater/Developer• FPD Plasma Etch/Ash System• Plasma CVD System for Thin-film Silicon PV Cells• End-to-end Thin-film Silicon PV Solutions (as Swisscompany Oerlikon Solar’s exclusive representative for
the Asia/Oceania region)

Single Wafer Cleaning System
CELLESTA™ -i

Wafer Prober
Precio™

10.0%
FPD Plasma Etch/Ash System
Impressio™

FPD Coater/Developer
Exceliner™

• Semiconductor Products• Other Electronic Components• Computer Networks• Software

13.5%

Xilinx, Inc.
FPGAF5 Networks, Inc.
Load Balancer

13

Tokyo Electron  Annual Report 2011

Review of Operations

Semiconductor Production Equipment
Semiconductor Production
Equipment Sales(Billions of Yen)

511.3

726.4

600

642.6

800

200

262.4

325.4

400

0

07

08

09

10

11

Overview of FY2011
In the fiscal year ended March 31, 2011, the global economy as a whole attained a trend of mild
recovery, supported by government stimulus measures in various countries. The semiconductor
market expanded rapidly as a result of robust demand for smartphones, tablets, and other mobile
electronics. Responding to this increased demand, semiconductor manufacturers made aggressive
capital investments, particularly in wafer fab equipment.
Net sales in the segment soared 94.9% year on year to ¥511.3 billion, driven upwards by semiconductor manufacturers’ robust investments in scaling, or miniaturization, and capacity expansion.
By region, sales rose sharply in all geographic markets, mainly bolstered by investments by NAND
flash memory and logic semiconductor manufacturers.
By product, sales of all product groups increased sharply as a result of the proactive promotionof new models of such products as the coater/developer CLEAN TRACK™ LITHIUS Pro™ V, plasmaetch system Tactras™ Vigus™, and the thermal processing system TELINDY PLUS™. New products,
such as the plasma etch system Tactras™ RLSA™ Etch, also contributed to the increased sales.

FPD/PV Production Equipment
Overview of FY2011

FPD/PV Production
Equipment Sales(Billions of Yen)

66.7

71.4

68.0

60

88.1

90

100.8

120

30

0

07

08

09

10

11

While the market for large liquid crystal display (LCD) panels used in flat-screen TVs entered aninventory adjustment phase, demand for small- and medium-sized panels was robust due tostrong demand for smartphones and tablets. In line with the growth in the mobile electronics
market, capital investments by LCD panel manufacturers were firm, especially in China and South
Korea. In the photovoltaic cell (PV) production equipment business, the single-crystal silicon cellmarket is expanding, but the thin-film silicon PV market that Tokyo Electron has entered has yet todemonstrate strong growth.
Net sales in the segment declined 6.5% year-on-year to ¥66.7 billion. FPD production equipment
sales were roughly on par with the previous year, supported by steady demand for sixth-generation
and above models, while sales of PV production equipment declined.
By region, sales in China surged by 171%, as the country continues to become the center oflarge LCD panel production. South Korea sales jumped 124% and Taiwan sales increased 29%.
Sales in Japan, however, fell 66% below the previous year to ¥14.6 billion.

Electronic Components and Computer Networks*
Electronic Components andComputer Networks Sales(Billions of Yen)

60

90.2

84.5

94.2

111.2

90

107.5

120

30

0

07

14

08

09

10

11

Overview of FY2011
About 90% of the sales in this segment are from Japan. In the domestic electronics market,
though demand was brisk in the first half of the fiscal year, sales stalled in the second half as somegovernment stimulus measures came to an end and consumers lost their appetite for personal
electronics upgrades.
Net sales in the segment rose 6.8% to ¥90.2 billion. Sales of semiconductor products used inconsumer electronics such as flat-screen TVs and digital household electronics entered a slump fromthe beginning of the year, but semiconductor products used in industrial equipment such as medical equipment, semiconductor production equipment, and factory automation (FA) equipment werebrisk. Sales of high added-value analog integrated circuits (IC) and custom ICs also increased. Dueto the slowness of the recovery in corporate IT investment, sales of computer network-related
products declined, though software and maintenance services posted sales growth.
* Tokyo Electron Device Limited operates this business.

Annual Report 2011

Business Outlook
The semiconductor market continues to expand, driven by brisk worldwide demand for smartphones, tablets and other mobile electronics that can now function as a result of the diffusion of
wireless broadband and mobile applications. The semiconductor production equipment market,
which is underpinning this expansion in semiconductors, is also expected to continue its highgrowth, despite periodic fluctuations in demand.
Tokyo Electron is taking advantage of this market environment to further expand its business.
Two management priorities are the comprehensive strengthening of existing product groups andthe establishment of new businesses. In existing product groups, Tokyo Electron will strive toenhance its position in etch systems and cleaning systems, two markets which are both large andalso have strong growth potential, by means of timely launching new products based on customer
needs. In the establishment of new businesses, the Company will expand products for manufacturing new 3D chip stacks for high-density semiconductors, expand the applications of a new plasma
source using radial-line slot antenna, and accelerate the development of systems to meet the customer need of reducing test costs.
Furthermore, Tokyo Electron is bolstering its field solutions business through the proactive promotion of used equipment business, equipment refurbishment and service contracts, aiming toestablish a stable earnings stream from the business.

Sales by Region
China &
Others

11%

Japan

17%

29%
20%
17%

TaiwanKorea

Business Outlook
The applications for displays are expanding. In addition to large LCD panels used in televisions,demand for small- and medium-sized touch-panels used in smartphones and tablets is surging.
Moreover, digital signage, electronic paper, and other applications using flat panels are expected to
become popular in the near future. Going forward, China is expected to be the center of growing
investment in large LCD panel manufacturing, while new rounds of investment in small- andmedium-sized panel manufacturing are also forecast.
Tokyo Electron will focus on launching differentiated products that address high-speed andhigh-definition technologies. As competition intensifies, the Company will also strive to further
reduce costs. In addition, Tokyo Electron will accelerate development of production equipment for
OLED displays, considered to be the next-generation display in the post-LCD era, in preparation formarket entry in the near future.
The thin-film silicon PV business Tokyo Electron is currently entering is still in its infancy. The
business potential over the medium- to long-term, however, is significant as the technology will
evolve in tandem with the global shift to renewable energy. Tokyo Electron has business allianceswith Sharp Corporation of Japan and the Swiss company Oerlikon Solar Ltd., while also developing
its own proprietary technologies. The Company plans on opening a new R&D center in Tsukuba,
Ibaraki Prefecture, Japan in spring 2012, where it will research technologies for efficiency improvements and aim for the early establishment of the thin-film silicon PV business.

Tokyo Electron

6%
North
America
EuropeSales by Region
China &
OthersBusiness Outlook
Though the Great East Japan Earthquake has introduced some opaque elements into the semiOverseas
conductor market in the first half of 2011, overall the market is expected to remain on a steady
growth track. In addition, though IT investment has been tepid, a recovery is still expected in thesecond half of the year. Amid this business environment, Tokyo Electron will reinforce both its
sales structure and support services as a semiconductor trading company, promote its businessoutside Japan, and invest more in proprietary technology development to expand sales of its own
brand “inreviumTM” across Asia. Through these measures, the Company aims to increase revenue
and profits.

Japan

22%

22%

28%

28%

Taiwan

Korea

Sales by Region
12%

Japan

88%

15

Tokyo Electron  Annual Report 2011

Environmental, Health and Safety Activities

Tokyo Electron’s corporate missions include placing the highest

cooperation with our customers and adjusting our approach topriority on people’s health and safety and taking the global environ-each ­product’s characteristics in a multi-faceted manner. We arement into account when conducting business activities.

actively implementing initiatives to achieve these goals. Furthermore, we are working to reduce the total environmental burden

Fundamental Policy

during product usage: not merely of our products, but also of theTokyo Electron positions environmental, health and safety activities

peripheral machinery owned by customers, as well as determining

as one of its most important management issues to achieve boththe optimal form of product usage.

sustained corporate growth and the continued development ofsociety. With that in mind, Tokyo Electron is committed to reducing

2. Initiatives Regarding Hazardous Substances in Products

the environmental impact of all its activities, and to ensuring abso-

As an environmental measure, Tokyo Electron promotes efforts tolute safety in the Company’s facilities and in those of its customers.

reduce hazardous chemical substances in its products. Chemical

In order to accelerate our environmental response activities, insubstances contained in the units and parts used in products are

May 2008 we codified Tokyo Electron’s environmental commitment,

managed in a dedicated database. Tokyo Electron has positioned

selecting “Technology for Eco Life” as a slogan to guide our envi-

those products in which at least 98.5% of the constituent partsronmental activities. One of the stipulated goals of this commitment

meet standards stipulated by the Europe RoHS directive* as “equip-

is to develop production equipment that will enable customers toment containing reduced amounts of chemicals.” Shipment of

cut the total environmental burden of their factories in half bythese products first began in October 1, 2008.

2015, and also to cut the Company’s own environmental burden
from business activities and logistics in half by the same date. Moreover, to develop these environmental, health and safety initiatives,
we believe that it is vital to promote communication with all stakeholders as well as to receive and give feedback. In line with this* Refers to the “Restriction of the use of certain Hazardous Substances in Electrical andElectronic Equipment” directive in Europe (2002/95/EC) and amendments thereto. With the
exception of certain applications excluded from its scope, this directive prohibits theinclusion of lead, mercury, cadmium, hexavalent chromium, PBB, and PBDE over a maximum
prescribed amount in products. (European Directive 2002/95/EC on the restriction of the useof certain hazardous substances in the manufacture of electrical and electronic equipment)

philosophy, we are also actively engaging in activities that contribute to society.

Health and Safety Activities
Tokyo Electron promotes health and safety in all of its operations. This

EHS Management

includes giving top priority to the health and safety of our employees

Since 1997, Tokyo Electron has developed and implemented envi-

and customers and designing products with safety in mind.

ronmental management systems based on ISO 14001 standards,

In fiscal 2011, the number of accidents and injuries, including

mainly for the plants conducting manufacturing operations, andthose requiring first-aid alone, rose year on year across the entire

obtained the relevant certification. Furthermore, to enhance theTokyo Electron Group, including overseas. The main reasons forworkability and effectiveness of the EHS Management System, we

this are judged to be increases in production and shortening ofare raising the level of the continuous audits that check the systemdelivery periods initiated in order to expedite the launch of prod-

and its results. These audits are performed from various viewpoints:

ucts to the market. Moving forward, all of Tokyo Electron willfrom within the workplace or the Group, or by a third party.

unite in promoting activities to prevent accidents across the board
and maintain a safe environment at the workplace. Such activities

Initiatives to Reduce the Environmental
Burden of Products

will include the further strengthening of provision of safety educa-

Proactive Environmentally Conscious Product Design

agement supervisors.

tion for workers, on-site safety measures, and site patrols by man-Tokyo Electron believes that the promotion of product designs
sensitive to the environment is vital. In particular, Tokyo Electron has

For further details, see “Environmental andpositioned promotion of energy conservation in its products, as wellSocial Report 2011” (to be published in Octo-

as the reduction and replacement of regulated hazardous chemi-ber 2011).

cals, as priority issues.

http://www.tel.com/eng/citizenship/ehsreport.htm

1. Initiatives to Reduce the Environmental Impact During
Equipment Usage

16

Based on our roadmap for reducing the environmental burden of all

Tokyo Electron’s Commitment

business departments, we developed our approach to such policies

The Tokyo Electron Group has assessed the impact of its products

as reducing our energy requirements, and the industrial gases andon the environment throughout their entire lifecycle—from thechemical substances used. Doing so required working inprocurement of major components, through manufacturing andAnnual Report 2011

Tokyo Electron

logistics to product use. Based on this assessment, we establishedtimelines to provide more time for shipping, and to reduce thean environmental goal for the year 2015 and are promoting mea-

number of parts to reduce weight, along with increasing local

sures to reduce environmental impact.

production. We will continue to work with customers in halving our■ We aim to develop equipment that enables a 50% reduction—

logistics burden per ton-kilometer. At our manufacturing sites, we

compared to the 2007 levels—of the total environmental impact of

have continued to make environmental investments with the goal

new customer factories scheduled for completion in 2015.

of reducing CO2 emissions. In addition, we have taken concrete■ We aim to reduce the impact of our business and transportation

measures to conserve power in response to power consumption

activities on the environment by 50%, by 2015, compared to therestrictions following the Great East Japan Earthquake. As part of2007 levels.

these measures, we are speeding up plans to install solar power■ We will strive to achieve these commitments in partnership with our
stakeholders.

generation systems at the Yamanashi plant and the new Miyagi plant.
We have also instituted carbon offset initiatives based on Domestic
CDM (Clean Development Mechanism) as part of the plan to halve
emissions per unit of sales.
In recent years, it has become imperative to make significant
reductions in the amount of power mobile electronics like smart-

Progress on Achieving Environmental Commitmentphones consume. We will continue to support the realization ofTokyo Electron has set a goal of achieving a 50% reduction of

more energy-efficient semiconductors and flat panel displays manu-

per-unit CO2 emissions by 2015 compared with 2007. Already, we

factured using our equipment as a way to contribute to the CO2

have the potential to achieve this target in our products per 300mm

reduction efforts of society at large.

wafer unit produced. In terms of logistics, we are endeavoring toswitch shipment from air to marine freight for deliveries to customers.
To facilitate this switch, we are striving to shorten manufacturing

Cleaning System Initiatives
In addition to the high controllability required for miniaturizing andenhancing the performance of devices, the CELLESTATM+ single
wafer cleaning system enables a smaller footprint (installation area)with 12 spinners*1 by reducing the size of the process chambers.
Wafer spin chambers require spatter control of process liquids andatmosphere control, but the input and output of large amounts of
air are necessary to control these during high-speed spin processing.
The CELLESTATM+ uses the “rotational cup” concept, in which thespin chambers rotate in synchronization with the wafers. This provides
not only a 50% reduction in exhaust air compared with conventional systems but also enables downsizing of process chambers
and enhancing of productivity per unit area and C.o.O*2.
*1 Spinner: a device that creates thin films through centrifugal force by rapidly rotating
flat and smooth base materials.
*2 C.o.O (cost of ownership): total expenses required for installing, operating, andmanaging facilities/equipment, etc.

About 50% reduction in
exhaust volume using
rotational cup

Conventional equipment

CELLESTATM+

Features of CELLESTATM+
1. High throughput: maximum 333 wafers/hour
2. New spinner model: 12 process spin chamber
3. Enables built-in chemical supply circulation unit
4. TEL original IPA drying technology enables watermark-free drying
5. New atomized spray (AS3) for high particle removal efficiency(PRE) with fine patterns and non-damaging cleaning
6. Utilizes the highly reliable CLEAN TRACK™ LITHIUS Pro™ coater/developer handling technology

Status of Tokyo Electron Group’s Environmental Initiatives
Organization dedicated to the environment

Corporate Environment Promotion Dept.

Highest responsibility for the environment

Board of Directors and Board of Executive Officers

Environmental audits

Internal and external audits each conducted yearly; other irregular inter-Group audits

Introduction of environmental management systems

Acquired ISO 14001 at 8 plants and offices

Zero emissions of waste

Achieved at all domestic manufacturing bases; recycled products used in-house

Setting of energy conservation targets

Implementing energy-saving products and energy-saving targets at plants and offices

Environmental training for employees

Conducted for all employees

Punished for violating environmental regulations?

Tokyo Electron has never been punished for this17Tokyo Electron  Annual Report 2011

Corporate GovernanceTokyo Electron’s Growth and Corporate GovernanceTetsuro Higashi
Chairman of the Board

The Great East Japan Earthquake that occurred in March 2011

same time, the electronics industry harbors huge growth potential

caused us to induce great concern among our shareholders. With

as it expands to every region around the world. I believe thatyour support, however, as of June 2011 we have restored Tokyo

Tokyo Electron must remain a company that possesses “aspira-Electron’s development and production functions to largely thetions and vitality” and stay in the vanguard of the times by gener-

same condition as before the disaster. We are confident we will beating further technological innovation.

fully prepared to meet growing demand from our customers.

when considering corporate governance. First, as company man-of all stakeholders. In addition, all of the Company’s employees

agement is entrusted to us by the shareholders, it is extremely

and executive officers are strongly determined to rebuild from theimportant for us to maximize corporate value over the medium

disaster and harbor strong ambitions to make Tokyo Electron an

and long terms. On the other hand, the second point is that I

even stronger company. I myself once again feel proud of thebelieve a corporation is an organic living structure which is formed

strong resolve of the Company’s employees and their high level ofby the Company’s employees, and that it must therefore be a truly

awareness in these respects.

worthwhile, vibrant organization from the standpoint of the

The electronics industry in which the Company operates has

employees. In this sense, I believe that the essence of corporate

given birth to a steady stream of technological innovation forgovernance lies in management’s continuous efforts to develop

more than half a century. This technological innovation in turn has

systems and measures that ensure that the company remains

generated new demand, spurring significant growth in the indus-

attractive to both shareholders and employees.

try as a whole. Going forward, the electronics industry still offers

From these perspectives, I intend to actively provide timely

significant scope for technological innovation. The industry’s mar-advice in support of the current execution system and thekets are set to further permeate every aspect of daily life, from­Company overall.

advanced information and communications technology fields, tothe automobile, healthcare-related and energy sectors. At the18

As chairman, I put particular emphasis on the following points

I wish to extend my gratitude for the encouragement and support

Annual Report 2011

Tokyo Electron

Corporate Governance
Against a backdrop of ongoing business globalization, Tokyo

representative directors since 1999 in recognition of the impor-Electron maintains a management philosophy that puts emphasistance of managerial transparency for shareholders.

on maximizing corporate value and enhancing shareholder
The Board of Directors

satisfaction.
To this end, the Company is striving to strengthen corporate

The Board of Directors consists of 15 directors, two of whom aregovernance through a variety of measures. The Company is build-external directors. In principle, the Board of Directors meets once a

ing a highly effective corporate governance structure, and upgrad-

month, with additional meetings if necessary. (During fiscal 2011,

ing and strengthening its internal control systems and risk

the Board of Directors met on 11 occasions.) In order to ensure

management system. Efforts in this regard are founded on thethat the Company can respond quickly to changing businessfollowing three basic principles.

­conditions, and to more clearly define management accountability,
the term of office for directors is set at one year. Furthermore,

Tokyo Electron’s Basic Principles of Corporate Governancethere are two committees whose activities are intended to

1. Ensure the transparency and soundness of business operations

improve corporate governance: the Compensation Committee

2. Facilitate quick decision-making and the efficient execution ofand the Nomination Committee.

business operations

Compensation Committee: This committee proposes the remu-

3. Disclose information in a timely and suitable manner

neration to be paid to representative directors at the Board meeting for approval.

The Corporate Governance Framework

Nomination Committee: This committee nominates candidatesTokyo Electron uses the statutory auditor system based on thefor directors to be selected at the annual shareholders’ meeting,Company Law, and furthermore has established its own Nomina-

and nominates a candidate for CEO to be selected by the Board,tion Committee and Compensation Committee to increase thewhich it submits at the Board meeting for approval.

transparency and objectivity of management. Also, Tokyo Electron
has adopted the executive officer system to separate the business

Each of these committees is composed of members of theexecution function from the Board of Directors. Moreover, Tokyo

Board of Directors, excluding the representative directors, or statu-

Electron has been disclosing the individual remunerations of

tory auditors.

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Annual Shareholders’ Meeting
Board ofDirectors

Statutory Auditors

Compensation Committee
Nomination Committee
Chief Business Ethics Director
Chief Internal Control Director

Independent Auditors

Confirm the progress of improvements and give instructions
Request for improvement/Report

Representative Directors
Audit and improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer

Executive Officers

Internal Audit Dept.
(Global Audit Center)

Committees Ethics Committee
Information Security Committee
Export Trade Control Committee
Request for improvement/Report

Audit

Risk Management & Internal Control Department
Request for improvement/
ReportBusiness Depts.

Monitoring

Check and balance

Administrative Depts.

19Tokyo Electron  Annual Report 2011

The Board of Statutory Auditors
The Company has four statutory auditors, two of whom are

3. The earnings-linked compensation of external directors does
not include stock-based compensation.

­external auditors. The statutory auditors not only attend meetings

4. In order to ensure that statutory auditors maintain full indepen-of the Board of Directors, the Management Meeting and otherdence from management pressures, the compensation of statu-

important business meetings, but also conduct operations audits
and accounting audits, and evaluate risk management, in addition

tory auditors consists of a fixed monthly salary only.
5. Retirement allowances for corporate directors and statutory

to auditing the performance of duties by directors. During fiscal

auditors were abolished at the end of fiscal 2005, as part of the2011, the board of statutory auditors met six times.

revisions to Tokyo Electron’s compensation system for executives.

The Executive Officer System

Internal Control and Risk Management System

In order to further clarify the roles of the Board of Directors andIn order to enhance corporate value and ensure that all businessexecutives in charge of business operations, Tokyo Electron has

activities are carried out responsibly and in the interests of all

adopted the executive officer system. This system promotes faststakeholders, Tokyo Electron is taking steps to strengthen its inter-

decision-making and the quick establishment and execution ofnal control systems and make them more effective. The Company

business strategies.

is implementing practical measures in line with the basic policy forinternal control systems in the Tokyo Electron Group decided byCompensation for Corporate Directors and Statutory Auditors

the Board of Directors. The Company is also implementing inter-

The Company has introduced incentive systems, such as businessnal controls over financial reporting based on the Financial Instru-

results-based compensation and stock options linked to sharements and Exchange Law.

prices. As regards business results-based compensation, effectivefrom fiscal 2011, the Company revised its executive compensation

Internal Control Systems

system to link compensation more precisely to the elements of

To strengthen the internal control and risk management systems

maximizing corporate value and enhancing shareholder value. Toof the entire Tokyo Electron Group more effectively, Tokyo Electron

achieve this, Tokyo Electron has added ROE as an extra evaluation

appointed a Chief Internal Control Director and a Compliance &yardstick to the conventional one of net income.

Internal Control Executive Officer. Under them, the Company

1. The compensation for corporate directors is composed of two

established the Risk Management & Internal Control Department,elements: a fixed monthly salary, and performance-linked

which evaluates and analyzes the risks which could affect theannual compensation which is linked to earnings performance.

Group, and works to reduce risks by promoting the necessary

2. The total amount of performance-linked compensation formeasures. Tokyo Electron has also established the Information

corporate directors is calculated by assessing the degree of

Security Committee and the Export Trade Control Committee toachievement of ROE as well as net income, and is also adjusted

further strengthen the management of confidential information

to allow for any other important management targets desig-

and the export compliance system.

nated for the period under review, for any special losses that
occurred, and for any other special factors that should be con-Internal Audit Department (Global Audit Center)sidered. This compensation is split between cash bonuses and

The Global Audit Center oversees the internal auditing activities

stock-based compensation at a ratio of roughly one to oneof the entire Tokyo Electron Group. The Center is responsible forhaving been changed from the previous ratio of two to one.

auditing the business activities of the Group’s domestic andAs a result, the ratio of stock-based compensation increased.

overseas bases, as well as their compliance and systems, andThis change was made to allow corporate directors to share inevaluating the effectiveness of internal control systems. Whenboth the benefits and the risks experienced by shareholders.

necessary, the Global Audit Center also provides guidance to

The amount of performance-linked compensation is set at a

operating divisions.

maximum of a multiple of five times the annual fixed compensation. The stock-based compensation takes the form of new
stock warrant contracts with an exercise price of one yen per
share. The restricted period on exercising stock options is set atthree years.

20Annual Report 2011

Tokyo Electron

Coordination Between Statutory Auditors and InternalTokyo Electron Code of Ethics

Audit Department

Compliance/Internal Control Executive Officer

The statutory auditors coordinate with the department responsible

Since April 2009, Tokyo Electron has appointed a Compliance/

for internal auditing activities primarily by attending the Global

Internal Control Executive Officer from among the executive offi-

Audit Center’s report meetings, which were held 13 times during

cers to raise awareness of compliance across the Group, andfiscal 2011.

further improve its implementation.

Coordination Between Statutory Auditors and Indepen-

Framework for Thorough Implementation of Compliancedent Auditors

Tokyo Electron has drawn up compliance regulations setting out

The statutory auditors receive audit plans for the fiscal year frombasic compliance-related requirements in line with its code of

the independent auditors, as well as explanations regarding audit-

ethics. The compliance regulations are intended to ensure that all

ing methods and particular areas of focus, among other matters.

individuals who take part in business activities for the GroupThe independent auditors audit the year-end financial statements

clearly understand the pertinent laws, regulations, internationaland review the quarterly financial statements, and report thestandards and internal company rules, and continuously apply

results of their audits to the statutory auditors.

these rules in all of their activities. The Company also conducts

The Company provides KPMG AZSA LLC, its independent

web-based training programs for employees, makes information

auditor, with all necessary information and data to ensure that iton compliance issues available to employees via the Company

can conduct its audits during the fiscal year promptly and correctly.

intranet, and takes other steps to promote broad awareness ofcompliance throughout the Company.

Compliance
Trust is the cornerstone of Tokyo Electron’s business founda-

Internal Reporting System: Hotline

tion. The fundamental requirements for maintaining trust are

In the event that an employee becomes aware of any activity

rigorous conformity to ethical standards and compliance withwhich may violate laws, regulations or principles of businessthe law, by individual employees and by each of our organiza-

ethics, the Company operates an internal reporting systemtions. In line with the basic policy for internal control systems in(Hotline) that employees may use to report their concerns.

the Tokyo Electron Group, all Group employees are required to

Strict confidentiality is maintained to protect the whistle-

maintain high standards of ethics and to act with a clear

blower and ensure that they are not subject to any disadvan-

awareness of compliance.

tage or repercussions.

Ethical Standards, Chief Business Ethics Director and Ethics

Disclosure Policy

Committee

Tokyo Electron is committed to disclosing information about the

In 1998, the Company formulated the “Tokyo Electron Code ofCompany in a fair, prompt and accurate manner, to ensure that all

Ethics” (revised in April 2011) to establish uniform standards tostakeholders, including shareholders and other investors, cangovern all of its global business activities.

obtain an accurate, in-depth understanding of the Company andIn the same year, the Company appointed

its activities, and evaluate the Company’s corporate value appro-a Chief Business Ethics Director and estab-priately. The Company also solicits feedback from its stakeholders

lished the Ethics Committee, which isas part of its information disclosure activities, and uses the feed-

responsible for promoting business ethics

back as a point of reference to guide corporate management.

awareness throughout the Company. The

Tokyo Electron Codeof Ethics

Tokyo Electron Code of Ethics prescribes a

Information Disclosure Standards

common code of behavior for all employ-• Tokyo Electron complies fully with the Financial Instruments andees of Tokyo Electron and the Group, andExchange Law, and the Tokyo Stock Exchange’s listing regula-

the Company distributes it to all Grouptions pertaining to marketable securities.

employees, including those overseas.

21

Tokyo Electron  Annual Report 2011• Even when the information is not subject to the listing regulations pertaining to marketable securities, the Company discloses

time required for translation, there may be cases where theposting of English information to the website is delayed slightly.

the information proactively, in a fair, prompt and accurate
manner if the information is deemed useful in providing stake-

Shareholder Measures

holders with an accurate understanding of the Company.

Tokyo Electron mails a Notice of Annual General Meeting of
Shareholders to shareholders more than three weeks in advanceDisclosure Practicesof the meeting, as one of its measures to vitalize these meetings• If it is subject to the marketable securities listing regulations

and to promote smooth and efficient voting. It also sets the(material information), Tokyo Electron will release information

date of the Company’s meeting to avoid days on which many

simultaneously in a press release and via the Tokyo Stocksuch meetings are concentrated. In addition, shareholders are

Exchange’s “Timely Disclosure Network” (TDnet), and will post

free to cast their votes via the Internet. Moreover, Tokyo

the information on its website as soon as possible, following the­Electron participates in the web-based voting platform for insti-

official announcement.

tutional investors operated by Investor Communications Japan• Even when it does not fall into the category of “material infor-

Inc. (ICJ). To supplement the above shareholder meeting-related

mation,” the Company will voluntarily disclose information

initiatives, Tokyo Electron’s website carries notices, resolutions

which may be of interest to stakeholders in a fair, accurate, andand presentation materials of shareholders’ meetings. An Eng-

easy-to-understand manner, either on its website or in printed

lish version of the Notice of Annual General Meeting of Share-

form, through various means of communication.

holders is also provided.

• Tokyo Electron conducts meetings to discuss its financial resultswith securities analysts and investors; these meetings are also
open to members of the press. The Company makes audio
recordings of its fiscal year-end and mid-term financial results

Tokyo Electron is a constituentof the FTSE4Good Global Index.

meetings, and posts these recordings on the Company’s website. All of the documents distributed at its quarterly financial
results meetings are also posted on the website.
• To ensure that foreign investors have fair and equal access to theinformation, the Company strives to disclose all information
simultaneously in Japanese and English. However, due to the

Since September 2003, Tokyo Electron has been chosen for the FTSE4Good Global
Index, which is a CSR index provided by the FTSE Group. The FTSE Group is a world
leading index firm, a joint venture between the Financial Times newspaper and theLondon Stock Exchange.

Does Tokyo Electron have these major components of corporate governance?
Compensation Committee

Yes Composed of directors, excluding representative directors, or statutory auditors

Nomination Committee

Yes Composed of directors, excluding representative directors, or statutory auditors

External directors

Yes Two of the 15 directors are external directors

External auditors

Yes Two of the four statutory auditors are external auditors

Executive officer system

Yes

Disclosure of individual remunerations of representative
directors

22

Yes Disclosed since 1999

Performance-linked compensation system

Yes

Stock options system

Yes Does not apply to external directors and auditors

Retirement benefits system for executives

NoAnti-takeover measures

NoAnnual Report 2011

Tokyo Electron

Board of Directors, Statutory Auditors and Executive Officers(As of July 1, 2011)

Board of Directors

Tetsuro Higashi

Tetsuo Tsuneishi 1

Hiroshi Takenaka

Vice Chairman of the Board

President & CEO
Representative Director

Haruo Iwatsu

Kenji Washino 2
Corporate Director

Hikaru Ito

Takashi Nakamura 2,3,4

Takaaki Matsuoka

Corporate Director

Masami Akimoto

Yoshiteru Harada1

Hideyuki Tsutsumi

Hiroshi Inoue *Masahiro Sakane 1 *Chairman of the Board

Corporate Director

Hirofumi Kitayama
Representative Director

Corporate Director

Corporate Director

Corporate Director

Corporate Director

Corporate Director/
Chairman of the Board,
Tokyo Broadcasting System
Holdings, Inc.

Statutory Auditors

Mitsutaka Yoshida 2
Statutory Auditor

Kiyoshi Sato 1

Corporate Director

Corporate Director

Corporate Director/
Chairman of the Board,
Komatsu Ltd.

Notes:
1. Member of Compensation Committee
2. Member of Nomination Committee
3. Chief Business Ethics Director
4. Chief Internal Control Director* External Director, External Statutory Auditor

Mamoru Hara
Statutory Auditor

Togo Tajika *Statutory Auditor

Hiroshi Maeda *Statutory Auditor/
Attorney-at-Law,
Nishimura & Asahi

Executive Officers
President & CEO

Hiroshi Takenaka
Executive Vice Presidents

Hirofumi Kitayama

General Manager,
Manufacturing Division (Quality)

Kenji Washino

General Manager,
Corporate Business Strategy

Hikaru Ito

General Manager, SPE
Senior General Manager,
SPE Sales Division

Senior Vice Presidents

Takashi Nakamura

General Manager,
Corporate Administration Division
Compliance/Internal Control

Masami Akimoto

General Manager,
System Development Division

Vice Presidents

Yoshiteru Harada

Deputy General Manager,
Corporate Administration Division

Hideyuki Tsutsumi

General Manager, Etch Systems BU

Tatsuya Nagakubo

Seisu Ikeda (Yoh)General Manager,
Surface Preparation Systems BU

Toshiki Kawai

General Manager,
Thermal Processing Systems BU
General Manager,
Single Wafer Deposition BU

Takashi Ito

Yuichi Abe

General Manager, PVE

General Manager,
HR/Human Resources Development Center/
Corporate Branding Promotion

Chiaki Yamaguchi

Yutaka Nanasawa

General Manager, Field Solutions BU

General Manager, SPE Sales Division

Gishi Chung

General Manager, Accounting/Finance/
Export and Logistics Control

General Manager,
SPE Process Development Division

Tetsuro Hori

Shigetoshi Hosaka

Keisuke Koizumi

General Manager,
Corporate Development Division

General Manager, Legal/Intellectual Property
General Manager, Corporate Procurement
General Manager, IT

Toshihiko Nishigaki

General Manager, Clean Track BU

General Manager, Test Systems BU

Kiyoshi Sunohara
Takeshi Okubo

General Manager, RLSA

Masaaki Hata

General Manager, Taiwan &Asia Sales, SPE Sales Division

Tsuguhiko Matsuura
General Manager, FPD BU

Shinichi Sasahara

General Manager, FPD Sales
General Manager, PV Project*BU stands for “business unit”

23Tokyo Electron  Annual Report 2011

Research and Development/Intellectual Property

Research and Development
The Semiconductor Industry will Continue
to Expandlevels of scaling is lowered yield caused by “variability” in transis-

Electronics loaded with semiconductors currently pervade every

tor performance. One of the many causes of variability is thecorner of the globe and semiconductors will play an ever more

excess energy generated by the plasma and heat used in the

instrumental part in people’s lives in the future. Semiconductor

manufacturing process.

One technical issue that has threatened to impede higher

applications are also expanding. About 60% of semiconductors

Tokyo Electron is addressing this issue by developing low-­

are currently used for computing and telecommunications, but astemperature, low-energy plasma manufacturing technologies.

cloud computing and other types of network infrastructure

One technology commercialized by Tokyo Electron is a novel dry

become integrated into the energy, healthcare, agriculture, andetch system, Tactras™ RLSA™ Etch, which enables damage-freeother industries, it is clear there will be an increasing demand for

etching with low energy and high electron density.

semiconductors to support the new applications.

New functional materials are indispensable to enable further

Technology is supporting this expansion. An important role ofscaling of semiconductors. Tokyo Electron develops CVD systems

research and development is to create sophisticated technology

for making High-k/metal gates for logic devices, novel dielectric

in a timely manner. Tokyo Electron is improving the efficiency offilm and electrodes for DRAM capacitors, and phase change andits fundamental research activities by teaming up with universities

resistive materials for the emerging memory devices.

and research consortia like SEMATECH and imec. As part of thisScaling is not the only hot topic in the industry. Three-­approach, Tokyo Electron has decided to establish a new

dimensional (3D) memory cell stack and 3D chip stack technolo-

research facility in Tsukuba, Ibaraki Prefecture in the spring ofgies have also attracted significant attention in recent years.

2012—TEL Technology Center Tsukuba—with the aim of leverag-In 3D memory cell stacks, flash memory cells are stacked

ing the R&D-focused environment of Tsukuba to accelerate thevertically to increase density. Tokyo Electron has contributed topace of Tokyo Electron’s research activities. The Company builds

the development of this groundbreaking integration processdevelopment facilities close to customers at the application stage

with high aspect ratio contact hole (HARC) etching and metalin order to facilitate strong collaborative ties with customers andfilling technologies.

to accelerate commercialization of products.
From 2010, the corporate R&D division began to widen its

In 3D chip stacks, a multitude of complete chips are stacked toprovide higher functionality. Tokyo Electron aims to be a top

research scope to include not only silicon (Si) integrated circuits,

equipment supplier in this field as well, and has commercialized a

but also a range of new semiconductor materials, including com-high rate through-silicon via (TSV) etch system. Additionally,

pound semiconductors and organic semiconductors, along with

Tokyo Electron is also developing a dielectric polyimide deposition

new manufacturing technologies. Tokyo Electron is aiming tosystem for through holes.

make a leap into a new semiconductor world through this combination of nanometer-level scaling technology and new materials.

Successfully Pushing the Boundaries of
SPE Technology
The value of semiconductors is rooted in scaling, or miniaturization. Two technologies are pushing the boundaries of successful
scaling: double patterning technology and extreme ultraviolet(EUV) lithography.
Tokyo Electron possesses a proprietary double patterning technology that uses the deposition of silicon oxide films at room
temperature, enabling half pitch 13nm line and space patterns. The
development of further improvements this year have successfully

Tsukuba in Ibaraki Prefecture, the self-styled city of science and nature, isthe ideal location for Tokyo Electron’s new center. We shall pursue tie-ups

enabled scaling to 11nm patterns as Tokyo Electron continues towith local research institutes and academic institutions to accelerate R&D

rewrite scaling records using current exposure tools.

for new base technologies and core technologies for semiconductor pro-

EUV is regarded as the next-generation lithography technology.
Tokyo Electron has not only developed an innovative coater/developer for EUV, but is enhancing process technology to minimize line edge roughness.

24

TEL Technology Center Tsukuba to be opened in spring 2012duction eguipment as well as for photovoltaic cell production equipment.

Annual Report 2011

Tokyo Electron

Tackling Environment and Energy-related Issues

Exploring New Fields

The Tokyo Electron Group is leveraging all of its resources to tackle

Tokyo Electron is exploring medicine, energy, and other fields

the global issues of the environment and energy.

where there is potential to apply its accumulated semiconducor

The first major contribution is through the development of

production equipment (SPE) technology. Digital cameras andenergy-saving technology. In the area of power devices, which

portable digital music players paved the way for NAND flash

have the potential to greatly contribute to energy-saving, siliconmemory and are an example of how new products can drive thecarbide (SiC) semiconductors are regarded as a once-in-several-development of new manufacturing technologies. For this reason,

decades breakthrough. In 2010, Tokyo Electron began sales of aTokyo Electron’s business units collaborate closely with the R&D

SiC epitaxial CVD system the Company had developed that isdivision to study the possibility of entering new fields from bothcritical for the manufacture of SiC semiconductors. Lighting is

the market and technological perspectives.

another area where energy-saving technology is needed. Tokyo

To enhance new technology development, Tokyo Electron has

Electron is developing proprietary production equipment forformed collaborations with universities, business consortia, andorganic electro-luminescence devices, which are regarded as theventure companies that possess complementary technology. These

next generation of power-saving technology.

collaborations are not limited to Japanese universities but include

The second major contribution is through the development ofresearch programs in foreign countries as part of the Company’s

photovoltaic cell (PV) production equipment. For the Si thin film

quest to achieve excellent research activities and pursue promisingPV, which has high growth potential, Tokyo Electron is leveraging

technologies through active collaborations worldwide.

its semiconductor and FPD production equipment technology todevelop equipment with high productivity. Moreover, the Company is conducting R&D on high-efficiency, low-cost PV production equipment which uses materials other than Si thin films.

hp 45nmhp 23nm

hp 11nmTokyo Electron achieved an extremely fine pattern with a half pitch of 11nm by applying its proprietary “double patterning” technology twice.

25

Tokyo Electron  Annual Report 2011

Intellectual Property
Policy for Intellectual Property Activities

cooperate closely with sales and marketing departments and to

Tokyo Electron understands that the significance of intellectual

grasp the market and technological trends, patent engineers inproperty activities at manufacturing companies is its contribution

charge of surveys and external affairs related to intellectual prop-

to increasing corporate revenues by supporting business activities.

erties are assigned to headquarters, which has sales and market-

In order to make our intellectual property strategy effective, it ising functions. In addition, patent engineers assigned to the plant

important to integrate this strategy with our technological andand headquarters, a sales or marketing division manager, and an

product strategies.

R&D division manager have meetings periodically so that ourThus, in building and implementing our intellectual property
strategy, our primary goal is to differentiate our own products andintellectual property activities are conducted along with themarket and technological trends.

bolstering our competitive advantages with our intellectual property rights, rather than generating income from licensing them to

Status of Intellectual Property Rights

other companies.

In addition to filing applications for core technologies vital to ourTechnologies are becoming increasingly advanced and compli-

strategies in each business division, Tokyo Electron vigorously

cated in our business fields; the risk in developing new productsbuilds a patent portfolio that also encompasses the technologies

increases significantly unless we fully respect the intellectual property

adjacent to core ones.

rights of other companies. From this viewpoint, Tokyo Electron

In each country, we always optimize the numbers of ourappropriately monitors intellectual property held by other companies.

patent applications and patents held, reflecting market andTo minimize the risks of disputes, we take appropriate approaches,competitor trends in our business fields. The graph in this sec-

including obtaining licenses from others if necessary.

tion shows the numbers of patent applications and patents heldby Tokyo Electron in each country. In recent years, we have filed

Management of Intellectual Property Activities

about 70%*1 of our applications globally, reflecting the impor-Tokyo Electron continues to conduct aggressive R&D activities totance of overseas markets for our business. In particular, we

respond to the advanced needs of device manufacturers, whohave been increasing the numbers of patent applications andare our customers. In order to maintain our competitivenesspatents held in South Korea and China. These numbers are

based on the outcome of R&D activities, it is necessary that webased on our patent strategies reflecting the recent growing

steadily protect these achievements through our intellectual

importance of the South Korean and Chinese markets for our

property rights. To cooperate closely with our R&D operations,business, as well as the rise of semiconductor and FPD produc-

patent engineers in charge of patent prosecutions are assignedtion equipment manufacturers in South Korea.

to every plant that has R&D functions.

*1 This figure is the percentage of patents filed overseas out of all our patents filed with theJapan Patent Office. The average among Japanese companies is about 25%.

At the same time, Tokyo Electron must respond flexibly todramatically changing markets and various technological trends inorder to effectively conduct intellectual property activities. To

Number of Tokyo Electron Patent Applications

Number of Patents Held by Tokyo Electron(Fiscal year)(As of March 31)

1,000

4,000

800

3,000

600
2,000
400
1,000

200
0

0

07

08
Japan

26

U.S.

09

10

EuropeSouth Korea

11
Taiwan

07
China

08
Japan

U.S.

09

10

EuropeSouth Korea

11
TaiwanChina

Annual Report 2011

Tokyo Electron

Financial Section

28 Financial Review
36	Consolidated Eleven-year Summary
38	Consolidated Balance Sheets
40	Consolidated Statements of INCOME
41	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
42	Consolidated Statements of Changes in Net Assets
43	Consolidated Statements of Cash Flows
44	Notes to Consolidated Financial Statements
55	Independent Auditors’ Report27

Tokyo Electron

Annual Report 2011

FINANCIAL REVIEWSales and Income
Operating Environment
During fiscal 2011, the global economy, notwithstanding regional differences, continued on a gradual recovery track. This was in partdue to economic stimulus packages implemented by various governments. In Europe and the U.S., while growth in certain regions washampered by deteriorating public finances, the region overall began to show signs of returning strength in the second half of the year.
The emerging economies of Asia, China and India in particular grew strongly as some governments in the region boosted internal
demand with stimulatory measures. The Japanese economy on the other hand remained at a standstill, despite signs of a rebound, heldback by such factors as the continuing strength of the yen and high unemployment.
In the electronics industry, in which Tokyo Electron serves, the surge in demand for smartphones and tablets was reflected in increased
capital investment by device manufacturers, our customers. Under these conditions, the Group posted a substantial increase in sales in our
mainstay semiconductor production equipment division, paving the way for a sharp recovery in operating results for the Group as a whole.
The Great East Japan Earthquake caused minor damage to some of the Group’s buildings and equipment, resulting in the temporary
suspension of production and shipments, but there was almost no impact on consolidated sales and inventories during the fiscal year.

Sales
Net sales bounced back dramatically in fiscal 2011, increasing 59.7% year on year to ¥668.7 billion. Sales in Japan were up 12.0% year
on year, to ¥182.2 billion, and overseas sales jumped 90.0% to ¥486.6 billion. Overseas sales as a share of total consolidated sales
increased from 61.2% in fiscal 2010 to 72.8% in fiscal 2011.
Orders received during the fiscal year rose by 53.6%, to ¥734.9 billion, and the order backlog at the end of March 2011 increased
27.3% year on year, to ¥308.8 billion. Behind these increases was a new wave of aggressive investment in capital by device manufacturers, our customers, in response to increased demand for smartphones, tablets, and other mobile devices.

Gross Profit, SG&A Expenses and Operating Income
Cost of sales for the period was up 39.8% year on year, to ¥434.0 billion, and the cost of sales ratio was 64.9%, 9.2 percentage points
better than in fiscal 2010. Contributing factors were the increase in the sales ratio of our more profitable semiconductor production
equipment, the improvement in profit margins for all our semiconductor production equipment, and the successful curb on fixed-costs in
response to rising sales. As a result, gross profit increased by 116.7% year on year, to ¥234.8 billion, and the gross profit margin jumped
to 35.1%, from 25.9% in fiscal 2010.
SG&A expenses increased by 23.9% year on year, to ¥136.9 billion as a result of aggressive spending in research and development. As
a percentage of consolidated net sales, however, the SG&A ratio fell to 20.5%, from 26.4% in the previous year. Consequently, an operating income of ¥97.9 billion and an operating margin of 14.6% were recorded in fiscal 2011, compared with the operating loss of ¥2.2
billion in fiscal 2010.
Millions of Yen

Sales and Income

28

2007

2008

2009

2010

2011

Net sales��������������������������������������������������������������������������������������

¥851,975¥906,092¥508,082¥418,637¥668,722
234,758

Gross profit����������������������������������������������������������������������������������

272,649

311,298

137,408

108,316Gross profit margin����������������������������������������������������������������������

32.0%

34.4%

27.0%

25.9%

35.1%

Selling, general and administrative expenses���������������������������������

128,670

142,800

122,697

110,497

136,888
97,870Operating income (loss) ���������������������������������������������������������������

143,979

168,498

14,711(2,181)

Operating margin�������������������������������������������������������������������������

16.9%

18.6%

2.9%

(0.5)%

14.6%

Income (loss) before income taxes and minority interests���������������

144,414169,220

9,637(7,768)99,579Net income (loss) �������������������������������������������������������������������������

91,263106,271

7,543(9,033)71,924

Annual Report 2011

Tokyo Electron

Research & Development
R&D expenses are included in SG&A expenses. The Company views these expenses as the source of future growth and as such incurred¥70.6 billion in R&D expenses in fiscal 2011, up 30.5% year on year.
Breaking down these costs by division, R&D investment in the semiconductor production equipment business focused on the development of next-generation models in various equipment fields, and on the development of original double-patterning technology thathelps to promote further chip miniaturization, of film deposition technologies for new materials, and of extreme ultraviolet (EUV) lithography which is a promising next-generation lithography process. Tokyo Electron’s R&D investments focused not only on existing businesssegments, but also on the development of production equipment for 3D chip stacking technology, OLED displays, photovoltaic (solar
power) cells and other new product segments.

Other Income (Expenses) and Net Income (Loss)
During fiscal 2011, Tokyo Electron posted ¥3.0 billion in revenue from development grants, ¥1.9 billion in reversals of allowance for
doubtful accounts, ¥1.8 billion in expenses for Miyagi plant relocation, and ¥1.1 billion loss from natural disasters. As a result, otherincome (expenses) amounted to a net income of ¥1.7 billion.
This contributed to ¥99.6 billion in income before income taxes and minority interests, compared with a loss before income taxes andminority interests of ¥7.8 billion in fiscal 2010.
A net income for fiscal 2011 of ¥71.9 billion was recorded, compared to a net loss for fiscal 2010 of ¥9.0 billion. Net income pershare was ¥401.73 in fiscal 2011, compared with a net loss per share of ¥50.47 in fiscal 2010.

Comprehensive Income
From the fiscal year ended March 31, 2011, Tokyo Electron began applying the Accounting Standards for Presentation of Comprehensive
Income (Accounting Standards Board of Japan Statement No. 25). As a result comprehensive income is included in the financial statements for the fiscal year under review. Tokyo Electron posted comprehensive income of ¥69.6 billion. This reflected mainly a loss of ¥3.6
billion due to foreign currency translation adjustments.

Dividend Policy and Dividends
It is the policy of Tokyo Electron to pay dividends on the basis of business performance and earnings results. Previously the dividend
payout ratio was set at 20% of consolidated net income. However, we raised the ratio from the year-end dividend to 35% to reflect theimportance we place on returning profits to shareholders. As a result, the Company paid an interim dividend of ¥38 (at the previous
ratio of 20.3%), and set the year-end dividend at ¥76 (at the new ratio of 35.4%). Thus, the total dividend applicable to fiscal 2011 was¥114 (a combined ratio of 28.4%).
Meanwhile, the Company will continue its policy of actively funding research and development, capital investment, and humanresources aimed at stimulating future earnings growth.

Domestic and Overseas Sales

Operating Income (Loss) andOperating Margin(Billions of Yen)

(Billions of Yen)
200

668.7

60

50

5

30

0

0

–5

–30

106.3

7.5

–2.2

14.7

256.0

0

–9.0

486.6

■ Domestic■	Overseas

–0.5

182.2

09

10

2.9

162.6

299.2

08

90

97.9

100

208.9

323.9

07

0

15
14.6

71.9

144.0

582.1

538.2
313.8

300

120

91.3

16.9

150
900

600

(Billions of Yen)

20
18.6

168.5

418.6

508.1

906.1

852.0

1,200

Net Income (Loss)
(%)

10

11

–50

07

08

09

10

11

07

08

09

10

11

■	Operating Income (Loss)
Operating Margin29

Tokyo Electron

Annual Report 2011

Performance by Segment
From this consolidated fiscal year, the reportable segment information is provided in conformity with the “Accounting Standard forDisclosures about Segments of an Enterprise and Related Information” (ASBJ Statement No. 17), and “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Guidance No. 20). These reportable segments are
semiconductor production equipment, FPD/PV production equipment, and electronic components and computer networks. As this is thefirst fiscal year for which this information has been provided, no data is presented for previous fiscal years and comparisons thereto.

■ Semiconductor Production Equipment
Net sales (including intersegment sales or transfers) for fiscal 2011 expanded to ¥511.3 billion due to robust levels of capital investment
such as in the establishment of new operations by major customers. The segment profit and the segment profit margin stood at ¥120.8
billion and 23.6%, respectively.
The segment’s net sales to external customers increased 94.9% year on year, to ¥511.3 billion. Orders in this segment rose 57.4% to¥568.0 billion. The orders backlog rose 32.9% to ¥228.9 billion as of March 31, 2011.
For a business overview of this segment, please see pages 14 and 15.

■ FPD/PV (Flat-Panel Display and Photovoltaic Cell) Production Equipment
Net sales (including intersegment sales or transfers) in the segment stood at ¥66.7 billion. The segment profit and the segment profit margin
were ¥6.6 billion and 10.0%, respectively. FPD production equipment sales were roughly on par with the previous year, supported by demand
for sixth-generation and above mid-sized and large models, while sales of PV production equipment declined.
The segment’s net sales to external customers decreased 6.5% to ¥66.7 billion. Orders in this segment rose 164.0% to ¥75.4 billion.
The fiscal year-end orders backlog rose 15.3% to ¥65.5 billion.
For a business overview of this segment, please see pages 14 and 15.

■ Electronic Components and Computer Networks
Net sales (including intersegment sales or transfers) in the segment stood at ¥91.3 billion as high-value-added products used in industrial
equipment compensated for the slowdown in sales of consumer electronic products. Meanwhile the segment profit and the segment
profit margin were ¥2.9 billion and 3.2%, respectively.
The segment’s net sales to external customers increased 6.8% to ¥90.2 billion.
For a business overview of this segment, please see pages 14 and 15.

(Yen)

80

15.8

100

114

125

60
20.5 20

70.6

150

103

110.5

122.7

100

Cash Dividends per Share

(Billions of Yen)

57.0

128.7

26.4
24.1

136.9

30

142.8

150

R&D Expenses

54.1

(%)

61.0

(Billions of Yen)

66.1

Selling, General and
Administrative Expenses andRatio to Net Sales

40

15.1
50

10

50

0

0

07

08

09

10

11

■ Selling, General and Administrative Expenses
Ratio to Net Sales

30

0

12

24

20

0

07

08

09

10

11

07

08

09

10

11

Annual Report 2011

Tokyo Electron■ Others
Sales in the “Others” segment mainly include non-life insurance operations, travel services and other in-house services.
Net sales to external customers in the segment amounted to ¥0.5 billion, almost the same level as in fiscal 2010.

Reference: Comparison Based on Segments Used Until Fiscal 2010
■ Industrial Electronic Equipment Segment
Sales in the industrial electronic equipment segment (including intersegment sales or transfers) were up 72.9% compared to fiscal 2010,
to ¥579.0 billion. On the earnings front, an operating income of ¥95.1 billion was posted, compared with an operating loss of ¥4.3
billion in fiscal 2010. Sales to external customers were up 73.1% year on year, to ¥578.5 billion■ Electronic Components and Computer Networks
Net sales in this segment (including intersegment sales or transfers) increased 7.2% year on year, to ¥91.3 billion. As a result of the
improved gross profit margin due to the product mix, operating income rose 32.0%, to ¥2.7 billion, and the operating margin improved
to 3.0%, compared with 2.4% in fiscal 2010. Sales to external customers were up 6.8% year on year, to ¥90.2 billion.

Millions of yen
Reportable Segment

Segment Information
2011:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Eliminations
and Corporate

Consolidated¥668,722

Net sales
Sales to external customers�������������������������������������������������

¥511,332¥66,721¥90,216¥    453¥668,722¥        –Intersegment sales or transfers��������������������������������������������

0

–

1,100

14,90816,008(16,008)–

Total�����������������������������������������������������������������������������������

511,332

66,721

91,316

15,361

684,730(16,008)

668,722

Segment profit��������������������������������������������������������������������

120,846

6,641

2,907

1,916

132,310(32,731)

99,579Segment assets�������������������������������������������������������������������

239,70742,81250,255

2,094

334,868

474,337

809,205

OthersDepreciation and amortization��������������������������������������������

7,369

543

456

354

8,722

8,985

17,707

Capital expenditures, including intangible and other assets���

13,182

553

774

28

14,537

26,723

41,260Total Assets

Working Capital and Current Ratio

Receivable Turnover andInventory Turnover(Billions of Yen)

(Billions of Yen)

(Days)(Times)

600

1,000

6.0

150

5.7
121

476.2

433.8

400

416.4

441.4

809.2

4.6

384.5

600

696.4

669.0

792.8

770.5

800
4.0

100

96

98
90

3.8

3.2

92
109

86

83
2.7

400

74

200

2.0

50

0

0

65

200

0

0

07

08

09

10

11

07

08

■ Working Capital
Current Ratio

09

10

11

07

08

09

10

11

Receivable Turnover
Inventory Turnover

31Tokyo Electron

Annual Report 2011

Financial Position and Cash Flows
Assets, Liabilities and Net Assets■ Assets
Current assets increased by ¥91.3 billion from the end of the previous fiscal year, to ¥644.2 billion, reflecting increases of ¥41.1 billion inliquidity on hand (cash and cash equivalents + short-term investments) and ¥30.5 billion in inventories. The turnover period for tradenotes and accounts receivable decreased from 109 days in fiscal 2010 to 74 days in fiscal 2011, and the inventory turnover period
decreased from 121 days in fiscal 2010, to 92 days in fiscal 2011.
Net property, plant and equipment increased by ¥20.4 billion year on year, to ¥112.6 billion, as ¥17.7 billion in depreciation and amortization was outweighed by ¥39.1 billion in fixed asset acquisitions.
Investments and other assets increased by ¥1.1 billion year on year, to ¥52.4 billion.
As a result, as of March 31, 2011, total assets stood at ¥809.2 billion, an increase of ¥112.9 billion year on year.

■ Liabilities and Net Assets
Current liabilities increased by ¥48.9 billion, from the end of fiscal 2010, to ¥168.0 billion. This reflected a ¥21.0 billion rise in income taxes
payable, and a ¥9.8 billion increase in customer advances. The balance of interest-bearing debt, which consists only of short-term borrowings, stood at ¥8.0 billion as of March 31, 2011. The debt/equity ratio rose to 1.4%, 0.4 points higher than the end of March 2010.
Non-current liabilities increased by ¥2.5 billion, to ¥56.4 billion.
Net assets increased by ¥61.4 billion year on year, to ¥584.8 billion. This reflected an increase in retained earnings of ¥63.7 billion
resulting from a net income of ¥71.9 billion and ¥8.2 billion in dividends paid, as well as other factors including a drop of ¥3.6 billion inforeign currency translation adjustments. As a result, the equity ratio fell from 73.5% at the end of March 2010 to 70.8% as of March
31, 2011, and ROE rose to 13.3%, from negative 1.8% in fiscal 2010.

Millions of Yen

Financial Position
Total current assets�����������������������������������������������������������������������
Net property, plant and equipment�����������������������������������������������
Total investments and other assets������������������������������������������������
Total assets����������������������������������������������������������������������������������
Total current liabilities�������������������������������������������������������������������
Total liabilities������������������������������������������������������������������������������
Total net assets (Total shareholders’ equity)�����������������������������������

2007

2008

2009

2010

2011

¥610,363
104,930
55,221
770,514
225,855
300,703469,811¥640,234
104,106
48,478792,818
198,821247,573545,245¥505,687
99,906
63,405668,998
89,272
139,733
529,265¥552,939
92,12851,285696,352
119,162
172,982
523,370¥644,231
112,552
52,422809,205
168,038
224,403584,802

Interest-Bearing Debt, D/E Ratio

Equity and Equity Ratio(Billions of Yen)

(Billions of Yen)

(%)

50

10

ROE
(%)

800

77.5

(%)

80

30

60

20

40

10

20

0

73.5

400

20

4

10

2

460.2

36.1
0

07

08

■ Interest-Bearing Debt
D/E Ratio

32

09

1.4
–1.8

1.4
1.0

0

10

13.3

8.0

3.8

5.1

200

0.7

21.4

572.7

6

511.8

6.7

21.8

59.7

535.0

40.2

600

30

70.8

67.5

8

518.4

8.7

40

11

0

0

07
■ Equity
Equity Ratio

08

09

10

11

–10

07

08

09

10

11

Annual Report 2011

Tokyo Electron

Capital Expenditures*1 and Depreciation and Amortization*2
Total capital expenditures climbed by 162.4% year on year in fiscal 2011, to ¥39.1 billion. Spending focused on the acquisition of factory
facilities for a plant under construction in a suburb of Sendai City in Miyagi Prefecture, and on evaluation and measuring equipmentused for product development. Depreciation and amortization fell by 11.5% year on year, to ¥17.7 billion.
*1 Capital expenditures represent only the gross increase in property, plant and equipment.
*2 Depreciation does not include amortization and losses on impairment of goodwill.

Cash Flows
Cash flows from operating activities showed a net inflow of ¥83.2 billion, ¥35.0 billion more than in fiscal 2010. The main contributors
were ¥99.6 billion in income before income taxes and minority interests, ¥17.7 billion in depreciation and amortization, and a ¥9.6
billion increase in customer advances. Major negative factors included a ¥36.5 billion increase in inventories, a ¥13.3 billion increase intrade notes and accounts receivable, and ¥7.6 billion in income taxes paid.
Investing activities used net cash of ¥35.9 billion, compared to net cash of ¥9.6 billion provided in fiscal 2010. This mainly reflected a¥33.5 billion outflow to purchase property, plant and equipment.
Financing activities used net cash of ¥5.2 billion, compared with ¥0.3 billion in fiscal 2010. The main outflow was ¥8.2 billion in dividends paid.
As a result, the balance of cash and cash equivalents at the end of March 2011 stood at ¥165.0 billion, an increase of ¥41.1 billion
from the ¥123.9 billion balance at the end of fiscal 2010.
Total liquidity on hand, which includes short-term investments as well as cash and cash equivalents, increased by ¥41.1 billion year on
year, from ¥243.9 billion at the end of March 2010 to ¥285.1 billion at the end of March 2011

Millions of Yen

Cash Flows

2007

2008

2009

2010

2011

Cash flows from operating activities���������������������������������������������

¥ 54,297¥116,939¥ 81,030¥ 48,285¥ 83,239

Cash flows from investing activities����������������������������������������������

(25,293)(30,186)(160,622)

9,613(35,882)

Cash flows from financing activities����������������������������������������������

(34,719)(27,033)(46,016)(288)(5,237)

Cash and cash equivalents at end of year��������������������������������������

134,390

193,493

65,883

123,940

165,051

ROA

Capital Expenditures andDepreciation and Amortization

Total Liquidity on Hand(%)

(Billions of Yen)

(Billions of Yen)

30

300

285.1

39.1

40

21.7
20

10

0

203.6
100

134.4

17.7

20.0

23.1
14.9

18.1

18.8

2.3

22.7
21.4

20

10

210.2

200

27.1

13.1

243.9

30
20.2

–0.2

0

0

–10

07

08

09

10

11

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

07

08

09

10

■	Capital Expenditures■ Depreciation and Amortization

11

07

08

09

10

11

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

33

Tokyo Electron

Annual Report 2011

Business-related and Other Risks
The following are possible risks that may have an impact on Tokyo Electron’s business performance, stock price, or financial position.

(1) Impact From Changes in the Semiconductor Market
Tokyo Electron has achieved a high profit margin by concentrating resources in high-tech fields, including semiconductor production
equipment, where technological innovation is rapid but Tokyo Electron can effectively use its strengths. Although technological change 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 and demand. However, order cancellations, excess capacity and personnel and increased inventories resulting from an unexpectedly large market
contraction, losses from bad debts resulting from the worsening of a customer’s financial position, and supply shortages resulting fromthe worsening of a supplier’s management situation, could adversely affect Tokyo Electron’s business performance.

(2) Impact From Concentration of Transactions on Particular Customers
Tokyo Electron has been successful at increasing transactions with the leading semiconductor manufacturers worldwide, including thosein 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 may from time to time be temporarily concentrated on particular customers due tothe 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 and activities 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 ahigh market share in 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 in mind safety and health in the execution of business activities, 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 to eliminate any harmful impact on health. However, harm to customers, ordercancellations or other circumstances resulting from safety or other problems related to Tokyo Electron’s products could adversely affect
Tokyo Electron’s business performance.

34

Annual Report 2011

Tokyo Electron(5) Impact From Quality Issues
Tokyo Electron actively develops outstanding, cutting-edge technologies for incorporation in new products that are brought quickly tomarket. 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 of customers adopting Tokyo
Electron’s products. However, because Tokyo Electron’s products are based on cutting-edge technologies, and due to other factors, manyof the technologies developed are in unfamiliar fields. The occurrence of unforeseen defects or other issues could adversely affect Tokyo
Electron’s business performance.

(6) Impact of Intellectual Property Rights
In order to distinguish its products and make them more competitive, Tokyo Electron has promoted its R&D strategy for the early development of cutting-edge technologies together with its business and intellectual property strategies. This approach has enabled Tokyo
Electron to obtain sole possession of many proprietary technologies that have been instrumental to the Company’s ability to capture ahigh market share and generate high profit margins in each of its product fields. Tokyo Electron’s products incorporate and optimize
many of these proprietary cutting-edge technologies. There may be cases in which, by avoiding the use of third-party technologies andintellectual 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 a rule, 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 isreceived or by other means. However, foreign exchange rate risks can arise from fluctuations in prices due to sudden foreign exchange
movements, which could have an indirect adverse effect on Tokyo Electron’s business performance.

(8) Other Risks
Tokyo Electron is actively engaged in reforming its corporate structure so that it can generate profits even when 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 to restructure its compliance and risk
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, unavoidable occurrences (such as infectious diseases), financial or stock markets, government or other regulations,
supply systems of suppliers, market conditions for products and real estate, the ability to recruit personnel in Japan and overseas, competition over standardization, and loss of key personnel. Any of these factors could adversely affect Tokyo Electron’s business performance.

35

Tokyo Electron

Annual Report 2011

CONSOLIDATED Eleven-YEAR SUMMARYTokyo Electron Limited and Subsidiaries
As of and for the years ended March 31

Thousands of
U.S. dollars
2011

2011

2010

2009

Net sales1 ����������������������������������������������������������������������������������
Semiconductor production equipment �����������������������������������
FPD/PV production equipment2 ����������������������������������������������
Computer networks ��������������������������������������������������������������
Electronic components and computer networks ��������������������
Other ������������������������������������������������������������������������������������
Operating income (loss) ������������������������������������������������������������
Income (loss) before income taxes ���������������������������������������������
Net income (loss) ����������������������������������������������������������������������
Comprehensive income (loss)3 ���������������������������������������������������

$8,042,357
6,149,513
802,417–
1,084,979
5,448
1,177,029
1,197,582
864,991
837,017¥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 ���������������������������������������������������������������������������

2,190,800
5,851,557

182,165
486,557

162,609
256,028

208,871299,211

Depreciation and amortization4 �������������������������������������������������
Capital expenditures5 ����������������������������������������������������������������
R&D expenses ���������������������������������������������������������������������������

212,953
470,716
848,683

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

Total assets �������������������������������������������������������������������������������
Total net assets (Total shareholders’ equity) �������������������������������

9,731,870
7,033,097

809,205
584,802696,352
523,370668,998529,265

10,343

10,068

10,391¥ 401.73
401.06
3,198.66
114.00180,61144,896¥ (50.47)–
2,859.37
12.00
180,61139,285

13.3
14.6
70.8
0.89

(1.8)
(0.5)
73.5
0.61

1.4
2.9
77.5
0.70

¥ 64,655¥ 41,581¥ 48,896

Number of employees ���������������������������������������������������������������
U.S. dollars

Net income (loss) per share of common stock:6
Basic �������������������������������������������������������������������������������������
Diluted7 ��������������������������������������������������������������������������������
Net assets per share of common stock ��������������������������������������Cash dividends per share of common stock �������������������������������
Number of shares outstanding (thousands) �������������������������������
Number of shareholders ������������������������������������������������������������

$

4.83
4.82
38.47
1.37

ROE ������������������������������������������������������������������������������������������
Operating margin ���������������������������������������������������������������������
Equity ratio �������������������������������������������������������������������������������
Asset turnover (times) ���������������������������������������������������������������

¥

42.15
42.07
2,896.55
24.00
180,61142,509U.S. dollars

Net sales per employee �������������������������������������������������������������

$ 777,571

1 Until fiscal 2004, the FPD (Flat Panel Display) division was included in Semiconductor production equipment. From fiscal 2008, Computer networks is included in Electronic
components and computer networks.
2 From fiscal 2009, the FPD division was changed to the FPD/PV production equipment division. The Photovoltaic Cell (PV) production equipment is included in FPD/PV
production equipment.
3 From fiscal 2011, the Company applied “Accounting Standards for Presentation of Comprehensive Income”(Statement No. 25) released by the Accounting Standards Board ofJapan (ASBJ). Accordingly, comprehensive income (loss) have been disclosed from fiscal 2010.
4 Depreciation and amortization does not include amortization and loss on impairment of goodwill.
5 Capital expenditures only represent the gross increase in property, plant and equipment.
6 From fiscal 2003, the Company applied “Accounting Standards Regarding Net Income per Share (Business Accounting Standards No. 2)” and “Practical Guidelines for Applying
Accounting Standards Regarding Net Income per Share (Practical Guidelines for Applying Accounting Standards No. 4)” released by the Accounting Standards Board of Japan (ASBJ).
7 Dilution is not assumed for the years ended March 31, 2010, 2003 and 2002.
8 Effective from fiscal 2005, Tokyo Electron changed its method of revenue recognition upon receiving customer confirmation of product set-up and testing of products for
Semiconductor and FPD production equipment. The effect of this change decreased net sales, operating income and income before income taxes by ¥80,956 million, ¥20,541
million and ¥20,563 million, respectively, for the year ended March 31, 2005, compared with the corresponding amounts which would have been recorded if the previous
method had been applied.
9 Effective from fiscal 2005, Tokyo Electron changed its method to account for after-sale repair expenses by recording accrued warranty expenses for Semiconductor and FPD
production equipment. The effect of this change decreased operating income and income before income taxes by ¥635 million and ¥13,106 million, respectively, for the year
ended March 31, 2005, compared with the corresponding amounts which would have been recorded if the previous method had been applied.

36

Annual Report 2011

Tokyo Electron

Millions of yen
2008

2007

2006

2005

2004

2003

2002

2001

¥906,092
726,440
68,016–111,181455
168,498
169,220
106,271–¥851,975
642,625
100,766
19,16988,294
1,121
143,979
144,414
91,263–¥673,686
486,883
81,176
17,49786,881
1,249
75,70375,32848,006–¥635,710
457,191
75,03815,96686,2491,266
63,98355,77561,601–¥529,654
425,747–
18,44884,2291,230
22,28014,9368,297–¥460,580
364,689–
17,19377,3801,318
1,119(23,010)(41,554)–¥417,825
325,715–
17,03173,658
1,421(18,310)(22,919)(19,938)–¥723,880
619,001–
14,054
89,211
1,614
121,086
99,13262,012–323,946
582,146

313,816
538,159

262,532
411,154

232,678
403,032

242,318
287,336

190,513
270,067

186,516
231,309299,272
424,608

21,41322,70366,073

18,82027,12956,962

19,17013,33549,182

21,4639,876
43,88924,963
11,00744,15027,374
12,35950,123

26,29430,94653,827

21,67949,403
52,911

792,818
545,245

770,514469,811663,243
376,900

644,320
332,165

561,632
275,800

524,901
252,904

556,915
307,579

729,511333,281

10,429

9,528

8,901

8,864

8,870

10,053

10,171

10,236¥ 267.61
267.32
2,112.30
55.00
180,611
46,272¥ 343.63
343.54
1,863.28
45.00
180,61160,85746.37
45.78
1,543.73
10.00
180,61160,873¥ (238.57)–
1,456.23
8.00
175,698
49,259¥ (113.85)–
1,756.73
8.00
175,691
37,116¥ 353.76
344.75
1,901.38
38.00
175,691
42,781

13.5
11.2
56.8
1.03

20.3
10.1
51.6
1.05

3.1
4.2
49.1
0.97

(14.8)
0.2
48.2
0.85

(6.2)
(4.4)
55.2
0.65

20.4
16.7
45.7
1.18

¥ 75,687¥ 71,718¥ 59,713¥ 45,815¥ 41,080¥ 70,719

Yen¥ 594.01
592.71
2,989.70
125.00180,611
43,324¥ 511.27
509.84
2,573.72
103.00180,61141,289

21.4
18.6
67.5
1.16

21.8
16.9
59.7
1.19

¥ 86,882¥ 89,418¥Percent

Thousands of yen

37Tokyo Electron

Annual Report 2011

CONSOLIDATED BALANCE SHEETSTokyo Electron Limited and Subsidiaries
As of March 31, 2011 and 2010ASSETS
2011

2010

2011

Current assets:
Cash and cash equivalents������������������������������������������������������������������������
Short-term investments����������������������������������������������������������������������������
Trade notes and accounts receivable���������������������������������������������������������
Allowance for doubtful accounts��������������������������������������������������������������
Inventories�����������������������������������������������������������������������������������������������
Deferred income taxes������������������������������������������������������������������������������
Prepaid expenses and other current assets������������������������������������������������
Total current assets�������������������������������������������������������������������������������

¥165,051
120,000
136,385(1,154)
168,925
27,61027,414644,231¥123,940
120,000
124,462(176)
138,450
26,625
19,638552,939$1,984,979
1,443,175
1,640,229(13,879)
2,031,569
332,051
329,693
7,747,817

Property, plant and equipment:Land���������������������������������������������������������������������������������������������������������
Buildings��������������������������������������������������������������������������������������������������
Machinery and equipment������������������������������������������������������������������������
Construction in progress��������������������������������������������������������������������������
Total property, plant and equipment�����������������������������������������������������
Less: Accumulated depreciation����������������������������������������������������������������
Net property, plant and equipment�������������������������������������������������������

25,773
121,598
104,699
19,509271,579
159,027
112,552

26,356
120,430
98,943
3,739
249,468
157,340
92,128309,958
1,462,393
1,259,158
234,624
3,266,133
1,912,531
1,353,602

Investments and other assets:
Investment securities��������������������������������������������������������������������������������
Deferred income taxes������������������������������������������������������������������������������
Intangible assets���������������������������������������������������������������������������������������
Other assets���������������������������������������������������������������������������������������������
Allowance for doubtful accounts��������������������������������������������������������������
Total investments and other assets��������������������������������������������������������
Total assets������������������������������������������������������������������������������������������������

15,726
20,728
4,212
13,787(2,031)
52,422¥809,205

14,721
20,506
5,586
17,925(7,453)51,285¥696,352

189,128
249,285
50,655
165,809(24,426)
630,451$9,731,870

See accompanying Notes to Consolidated Financial Statements.

38

Thousands of
U.S. dollars

Millions of yen

Annual Report 2011

LIABILITIES AND NET ASSETSTokyo Electron

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

Current liabilities:
Short-term borrowings�����������������������������������������������������������������������������
Trade notes and accounts payable������������������������������������������������������������
Customer advances����������������������������������������������������������������������������������
Income taxes payable�������������������������������������������������������������������������������
Accrued employees’ bonuses��������������������������������������������������������������������
Accrued warranty expenses����������������������������������������������������������������������
Accrued expenses and other current liabilities�������������������������������������������
Total current liabilities���������������������������������������������������������������������������

¥   7,996
63,76631,92525,328
11,131
7,594
20,298168,038¥   5,106
61,58522,077
4,356
6,044
5,268
14,726
119,162$    96,164
766,878
383,945
304,606
133,867
91,329244,1132,020,902

Accrued pension and severance costs�����������������������������������������������������
Other liabilities������������������������������������������������������������������������������������������
Total liabilities���������������������������������������������������������������������������������������

52,826
3,539
224,403

50,528
3,292
172,982

635,30942,562
2,698,773

54,961

54,961

660,986

78,046457,658(10,484)

78,034393,970(10,900)

938,617
5,504,005(126,085)

2,807
(12)
(10,234)
1,499
10,561
584,802¥809,205

2,504
(68)
(6,683)
1,578
9,974
523,370¥696,352

33,758(144)(123,079)
18,028127,011
7,033,097$9,731,870

Contingent liabilities
Net assets:
Shareholders’ equity�����������������������������������������������������������������������������
Common stock
Authorized: 300,000,000 shares
Issued: 180,610,911 shares as of March 31, 2011 and 2010
Capital surplus��������������������������������������������������������������������������������������
Retained earnings���������������������������������������������������������������������������������
Treasury stock, at cost���������������������������������������������������������������������������
1,554,231 and 1,614,225 shares
as of March 31, 2011 and 2010, respectively
Accumulated other comprehensive income
Unrealized gains on investment securities���������������������������������������������
Deferred losses on hedging instruments������������������������������������������������
Foreign currency translation adjustments����������������������������������������������
Share subscription rights����������������������������������������������������������������������
Minority interests����������������������������������������������������������������������������������
Total net assets�������������������������������������������������������������������������������������
Total liabilities and net assets������������������������������������������������������������������

39

Tokyo Electron

Annual Report 2011

CONSOLIDATED STATEMENTS OF OPERATIONSTokyo Electron Limited and Subsidiaries
Years ended March 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

Net sales ���������������������������������������������������������������������������������������������������
Cost of sales ��������������������������������������������������������������������������������������������
Gross profit �����������������������������������������������������������������������������������������������
Selling, general and administrative expenses ��������������������������������������������
Operating income (loss)���������������������������������������������������������������������������

¥668,722
433,964
234,758
136,888
97,870¥418,637
310,321
108,316
110,497(2,181)$8,042,357
5,219,050
2,823,307
1,646,278
1,177,029

Other income (expenses):
Interest and dividend income �������������������������������������������������������������������
Interest expenses �������������������������������������������������������������������������������������
Revenue from development grants ����������������������������������������������������������
Reversal of allowance for doubtful accounts���������������������������������������������
Foreign exchange gain (loss)���������������������������������������������������������������������
Gain on sale of property, plant and equipment�����������������������������������������
Loss on disposal of property, plant and equipment�����������������������������������
Loss on impairment of property, plant and equipment and intangible assets����
Cost for building demolition���������������������������������������������������������������������
Maintenance cost for closed domestic facilities�����������������������������������������
Loss from natural disasters�����������������������������������������������������������������������
Expenses for plant relocation��������������������������������������������������������������������
Expenses for integration of domestic facilities�������������������������������������������
Other, net������������������������������������������������������������������������������������������������
Income (loss) before income taxes and minority interests �������������������

696
(44)
3,027
1,892
(143)
34
(625)
(811)
(227)
(186)
(1,114)(1,839)–1,049
99,579

1,055
(47)
1,842
17
153
283
(978)
(7,553)––––(1,909)1,550(7,768)

8,370
(529)
36,40422,754(1,720)409(7,517)(9,753)(2,730)(2,237)(13,397)(22,117)–
12,616
1,197,582

Income taxes:
Current ���������������������������������������������������������������������������������������������������
Deferred ��������������������������������������������������������������������������������������������������
Income (loss) before minority interests��������������������������������������������������

29,483(2,712)72,8085,747(5,021)(8,494)

354,576(32,616)
875,622

Minority interests ����������������������������������������������������������������������������������������
Net income (loss)���������������������������������������������������������������������������������������

884¥ 71,924539¥ (9,033)

10,631$ 864,991

Per share of common stock:
Net income (loss) — basic ������������������������������������������������������������������������
Net income — diluted �����������������������������������������������������������������������������
Net assets ������������������������������������������������������������������������������������������������Cash dividends ����������������������������������������������������������������������������������������

¥ 401.73
401.06
3,198.66
114.00¥ (50.47)–
2,859.37
12.00$

See accompanying Notes to Consolidated Financial Statements.

40

Yen

U.S. dollars

4.83
4.82
38.47
1.37

Annual Report 2011

Tokyo Electron

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

Income (loss) before minority interests �������������������������������������������������
Other comprehensive income (loss):
Changes in fair value of investment securities�������������������������������������������
Changes in deferred gains or losses on hedging instruments��������������������
Foreign currency translation adjustments��������������������������������������������������
Total other comprehensive income (loss)���������������������������������������������������
Comprehensive income (loss)������������������������������������������������������������������
Total comprehensive income attributable to:
Owners of the Company��������������������������������������������������������������������������
Owners of minority interests���������������������������������������������������������������������

2011

2010

2011

¥72,808¥(8,494)$875,622

303
72(3,585)(3,210)69,598

3,349
(151)
545
3,743
(4,751)

3,644
866(43,115)(38,605)
837,01768,732866(5,269)518

826,602
10,415

See accompanying Notes to Consolidated Financial Statements.

41

Tokyo Electron

Annual Report 2011

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSTokyo Electron Limited and Subsidiaries
Years ended March 31, 2011 and 2010

Millions of yen
Accumulated
other comprehensive income

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Unrealized
gains(losses) on
investment
securities

Deferred
gains(losses) on
hedging
instruments

Foreigncurrencytranslation
adjustments

Sharesubscription
rightsMinority
interests

Total
net assets

Balance as of March 31, 2009��

¥54,961¥78,114¥404,435¥(11,112)¥ (842)¥ 67¥ (7,236)¥1,149¥ 9,729

Cash dividends�������������������������

––(1,432)

–

–

–

–

–

–

¥529,265(1,432)Net loss������������������������������������

––(9,033)

–

–

–

–

–

–

(9,033)

Repurchase of treasury stocks��

–

–

–

(58)

–

–

–

–

–

(58)

Disposal of treasury stocks�������

–

(80)

–

270

–

–

–

–

–

190

Other, net��������������������������������

–

–

–

–

3,346

(135)

553

429

245

4,438

Balance as of March 31, 2010��

¥54,961¥78,034¥393,970¥(10,900)¥2,504¥ (68)¥ (6,683)¥1,578¥ 9,974¥523,370

Cash dividends�������������������������

––(8,236)

–

–

–

–

–

–

(8,236)

Net income������������������������������

––71,924

–

–

–

–

–

–

71,924

Repurchase of treasury stocks��

–

–

–

(37)

–

–

–

–

–

(37)

Disposal of treasury stocks�������

–

12

–

453

–

–

–

–

–

465

Other, net��������������������������������

–

–

–

–

303

56

(3,551)(79)

587(2,684)

Balance as of March 31, 2011��

¥54,961¥78,046¥457,658¥(10,484)¥2,807¥ (12)¥(10,234)¥1,499¥10,561¥584,802

Share
subscription
rightsMinority
interests

Total
net assets

Thousands of U.S. dollars
Accumulated
other comprehensive income

Shareholders‘ equity

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Balance as of March 31, 2010�� $660,986 $938,473 $4,738,064

Deferred
losses on
hedging
instruments

Foreigncurrencytranslation
adjustments$(131,088)$30,114

Cash dividends�������������������������

––(99,050)

–

–

–

–

–

–

(99,050)

Net income������������������������������

––864,991

–

–

–

–

–

–

864,991$(818) $ (80,373) $18,978 $119,951 $6,294,287

Repurchase of treasury stocks���

–

–

–

(445)

–

–

–

–

–

(445)

Disposal of treasury stocks�������

–

144

–

5,448

–

–

–

–

–

5,592

Other, net��������������������������������

–

–

–

–

3,644

674

(42,706)

(950)

7,060

(32,278)

Balance as of March 31, 2011�� $660,986 $938,617 $5,504,005 $(126,085)$33,758

See accompanying Notes to Consolidated Financial Statements.

42

Unrealized
gains oninvestment
securities$(144) $(123,079) $18,028 $127,011 $7,033,097

Annual Report 2011

Tokyo Electron

CONSOLIDATED STATEMENTS OF CASH FLOWSTokyo Electron Limited and Subsidiaries
Years ended March 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

Cash flows from operating activities:
Income (loss) before income taxes and minority interests��������������������������
Depreciation and amortization�����������������������������������������������������������������
Amortization of goodwill��������������������������������������������������������������������������
Loss on impairment of property, plant and equipment and intangible assets��
Increase in accrued pension and severance costs��������������������������������������
Decrease in prepaid pension expenses������������������������������������������������������
Increase (decrease) in allowance for doubtful accounts�����������������������������
Increase in accrued employees’ bonuses���������������������������������������������������
Increase (decrease) in accrued warranty expenses�������������������������������������
Interest and dividend income��������������������������������������������������������������������
Interest expenses��������������������������������������������������������������������������������������
Gain on sale of property, plant and equipment�����������������������������������������
Loss on disposal of property, plant and equipment�����������������������������������
Increase in trade notes and accounts receivable����������������������������������������
Increase in inventories������������������������������������������������������������������������������
(Increase) decrease in prepaid consumption tax����������������������������������������
Increase in accrued consumption tax��������������������������������������������������������
Increase in trade notes and accounts payable�������������������������������������������
Increase (decrease) in customer advances�������������������������������������������������
(Increase) decrease in specific doubtful receivables������������������������������������
Other, net������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������
Receipts from interest and dividends��������������������������������������������������������
Interest paid���������������������������������������������������������������������������������������������
Income taxes (paid) refunded�������������������������������������������������������������������
Net cash provided by operating activities�������������������������������������������Cash flows from investing activities:
Payment for purchases of short-term investments�������������������������������������
Proceeds from sale of short-term investments�������������������������������������������
Payment for purchase of property, plant and equipment���������������������������
Proceeds from sale of property, plant and equipment�������������������������������
Payment for acquisition of intangible assets����������������������������������������������
Payment for purchase of investment securities������������������������������������������
Other, net������������������������������������������������������������������������������������������������
Net cash provided by (used in) investing activities����������������������������Cash flows from financing activities:
Increase in short-term borrowings������������������������������������������������������������
Decrease in treasury stock, net�����������������������������������������������������������������
Dividends paid������������������������������������������������������������������������������������������
Other, net������������������������������������������������������������������������������������������������
Net cash used in financing activities����������������������������������������������������
Effect of exchange rate changes on cash and cash equivalents���������������������
Net increase in cash and cash equivalents����������������������������������������������Cash and cash equivalents at beginning of year�������������������������������������������Cash and cash equivalents at end of year����������������������������������������������

2011

2010

2011

¥ 99,579
17,707
242
811
2,317
282
(4,341)
5,087
2,352
(696)
44
34
625
(13,319)(36,533)(8,025)
2,305
1,667
9,575
5,303
5,106
90,122746(46)(7,583)
83,239¥   (7,768)
20,002
242
7,553
2,810
570
121
1,079
(837)
(1,055)47283
978(4,890)(4,869)568
1,127
27,975(6,380)(140)
4,065
41,481
1,171
(46)
5,679
48,285$1,197,582
212,953
2,910
9,753
27,865
3,391(52,207)61,17928,286(8,370)
529
409
7,517
(160,180)(439,363)(96,512)27,721
20,048115,153
63,776
61,4081,083,848
8,972
(553)
(91,197)
1,001,070(360,000)
360,000(33,542)
509
(926)
(643)
(1,280)(35,882)(449,000)
473,347(14,195)
488
(786)
(18)
(223)
9,613

(4,329,525)
4,329,525(403,391)
6,121(11,137)(7,733)(15,393)(431,533)

2,891
428
(8,236)(320)(5,237)(1,009)41,111
123,940¥165,051

1,299
132
(1,432)
(286)
(287)
446
58,05765,883¥123,940

34,7685,147(99,050)(3,848)(62,983)(12,134)
494,420
1,490,559$1,984,979

See accompanying Notes to Consolidated Financial Statements.

43

Tokyo Electron

Annual Report 2011

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tokyo Electron Limited and Subsidiaries

1. Basis of Presentation of Consolidated Financial
Statements
The accompanying consolidated financial statements of Tokyo Electron
Limited (hereinafter “the Company”) and its subsidiaries (hereinaftercollectively referred to as “Tokyo Electron”) have been prepared in accordance with the provisions set forth in the Financial Instruments andExchange Law of Japan and its related accounting regulations, and in
conformity with accounting principles generally accepted in Japan, which
are different in certain respects as to application and disclosure requirementsof 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 have been 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, which is not required for fair presentation, is not presented in theaccompanying consolidated financial statements.
U.S. dollar amounts included herein are solely for the convenience ofreaders and are presented at the rate of ¥83.15 to $1.00, the approximate
rate as of March 31, 2011. The translation should not be construed as arepresentation 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 the accounts of theCompany and its 32 and 30 subsidiaries for the years ended March 31,
2011 and 2010, respectively.
Investments in affiliates in which the Company’s ownership is 20% to
50% are accounted for by the equity method.
All significant inter-company accounts, transactions and unrealized
profits or losses have been eliminated in consolidation.
The fiscal year-end of all entities is March 31, except for three consolidated foreign subsidiaries, which use a December 31 year-end, and adjustment is made for any significant transactions between the different fiscal
year-ends.
(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 are translated 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 that approximate
those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries are translated into
Japanese yen at the rates of exchange in effect at the balance sheet date,
except for shareholders’ equity accounts, which are translated at thehistorical rates. Revenue and expense accounts of foreign subsidiaries aretranslated at average rates of exchange in effect during the year. Resulting
translation adjustments are presented in net assets as a component ofaccumulated other comprehensive income and minority interests in the
consolidated financial statements.

44(c) Investment securities
Tokyo Electron examines the intent of holding each security and classifies
those securities as trading securities, held-to-maturity debt securities orother securities. Tokyo Electron has no trading or held-to-maturity debt
securities. Other securities with market prices are valued at fair market value
prevailing at the balance sheet date. The differences between the book andmarket prices of other securities, net of applicable income taxes, are presented in net assets as a component of accumulated other comprehensive
income. Other securities without market value are valued at cost using theweighted-average method.
The cost of sold securities is calculated using the weighted-average method.
(d) Inventories
Inventories other than raw materials are stated at the lower of cost,
determined by the specific identification method, or net realizable value,
which is defined as selling price less estimated additional manufacturingcosts and estimated direct selling expenses. Raw materials are stated at thelower of cost, determined principally by the moving-average method, or net
realizable value, which is defined as selling price less estimated additional
manufacturing costs and estimated direct selling expenses.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation of buildings,
machinery and equipment of the Company and its domestic subsidiaries iscomputed using the declining balance method, except for buildings acquired
subsequent to March 31, 1998 which are depreciated using the straight-line
method, based on the estimated useful lives of assets. Foreign subsidiaries
mainly apply the straight-line method over the estimated useful lives of assets.
Estimated useful lives of property, plant and equipment are as follows:		 Buildings
2 to 60 years
		 Machinery and equipment
2 to 17 years(f) Intangible assets
Intangible assets, which primarily comprise of capitalized costs forcomputer software and goodwill, are amortized by the straight-line
method over their estimated useful lives. Capitalized costs for computer
software for internal use are amortized over a period of 2 to 5 years.
Goodwill is evaluated on an individual basis and amortized over a period
not exceeding 20 years.
(g) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of fixed assets held for use in
the business.
If the carrying value of a fixed asset is impaired, a loss is recognizedbased 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 theassets. Net selling price is determined using the fair value less disposal costs
and value 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.
(h) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount determinedbased on the historical experience of bad debts with respect to ordinary
receivables, and an estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers which are experiencing
financial difficulties.

Annual Report 2011(i) Accrued pension and severance costs
The Company and its domestic subsidiaries provide an accrual for defined
benefit employees’ pension and severance costs based on the projected
benefit obligation and fair value of pension assets on the account settlement
date. Prior service costs are charged to earnings on a straight-line basis,beginning from the fiscal year in which they are incurred, over a fixed
number of years (four 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 fiscal year after they arerecognized, over a fixed number of years (four years) within the averageremaining years of service of employees when the differences occur.
The provision for accrued pension and severance costs for directors andstatutory auditors of the Company 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 and statutory auditors after
April 1, 2005, and at the general shareholders’ meeting in June 2005, it
was resolved that the severance pay for directors and statutory auditors
until March 31, 2005 would be paid at the termination of their service andthe decision regarding the payment amount for each director and statutory
auditor was delegated to the board of directors and statutory auditors. As
discussed in note 9, the accruals for severance costs for directors andstatutory auditors are included in accrued pension and severance costs inthe consolidated balance sheets.
(j) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty, and Tokyo
Electron accrues such estimated costs when product revenue is recognized.
To prepare for future repairs during warranty periods, estimated after-salerepair expenses over warranty periods are accrued based on the historicalratio of actual repair expenses to corresponding sales.
(k) Leases
Until the year ended March 31, 2008, non-cancelable leases of theCompany and its domestic subsidiaries had been primarily accounted for as
operating leases (whether such leases were classified as operating or
finance leases), except for leases that transfer ownership to the lessee atthe end of the lease, which had been accounted for as finance leases.
Effective from the year ended March 31, 2009, the Company and its
domestic subsidiaries adopted “Accounting Standard for Lease Transactions” and “Guidance on Accounting Standard for Lease Transactions.” Asa result, the Company and its domestic subsidiaries capitalized leased
assets under finance leases commencing after March 31, 2008 and suchleased assets are depreciated using the straight-line method over theperiod of the lease contract with zero residual value.
(l) Derivatives and hedge accounting
The Company and a domestic subsidiary make use of derivatives in orderto manage certain risks arising from adverse fluctuations in foreign currency
exchange rates. The amount of derivatives is limited to the extent of foreign
currency assets, liabilities and actual orders, and the Company and thedomestic subsidiary do not trade in derivatives for speculative purposes.
Derivatives are carried at fair value in the consolidated balance sheet withchanges in unrealized gain or loss charged or credited to earnings, except
for those which meet the criteria for hedge accounting. Unrealized gains orlosses on hedging derivatives, net of taxes, are reported in net assets as acomponent of accumulated other comprehensive income. Receivables andpayables hedged by qualified forward foreign exchange contracts aretranslated at the corresponding foreign exchange contract rates.

Tokyo Electron(m) Income taxes
Tokyo Electron records deferred tax assets and liabilities on temporary
differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes, which are measured using the enacted tax rates and laws which are
expected to be in effect when the differences are expected to reverse.
(n) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)/PV (Photovoltaic cell) production equipment is principally recognized at the time of thecustomer confirmation of set-up and testing of products. Revenue fromsuch equipment not requiring substantial installation is recognized at thetime of shipment. Revenue from other products, such as electronic components, is recognized at the time of shipment. Service revenue from maintenance is recognized ratably over the term of the maintenance contract.
(o) Per share information
	Net income (loss) per share and net assets per share are computed basedon the weighted-average number of shares of common stock outstanding
during each year.
Dividends per share has been presented on an accruals basis andinclude, in each fiscal year ended March 31, dividends approved or to beapproved after March 31 but applicable to the year then ended.
(p) Research and development expenses
Research and development expenses are charged to earnings as incurredand amounted to ¥70,568 million ($848,683 thousand) and ¥54,074
million for the years ended March 31, 2011 and 2010, respectively.
(q) Cash equivalents
For purposes of the consolidated statements of cash flows, Tokyo
Electron considers all highly-liquid instruments purchased with original
maturities of three months or less to be cash equivalents.
(r) Short-term investments
Short-term investments consist of time deposits and certificates ofdeposit with original maturities of more than three months.
(s) 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, 2011.
As described in note 3(c), the consolidated balance sheet and consolidated statement of changes in net assets for the year ended March 31,
2010 has been modified to conform with the new presentation rules forthe year ended March 31, 2011. Also, the Company prepared a consolidated statement of comprehensive income for the year ended March 31,
2010 as well as that for the year ended March 31, 2011.

3. Change in Accounting Policies and Adoption of New
Accounting Standards(a) Accounting standards for asset retirement obligations
Effective from April 1, 2010, the Company and its domestic subsidiaries
adopted “Accounting Standards for Asset Retirement Obligations” (Statement No. 18 issued by the Accounting Standards Board of Japan) and“Guidance on Accounting Standards for Assets Retirement Obligations”(Guidance No. 21 issued by the Accounting Standards Board of Japan). The
adoption of this standard had no significant impact on the consolidated
financial statements.
(b) Accounting standard for disclosures about segments of anenterprise and related information
As mentioned in note 17, effective from the year ended March 31,

45

Tokyo Electron

Annual Report 20112011, the Company adopted “Accounting Standard for Disclosures about
Segments of an Enterprise and Related Information” (Statement No. 17
issued by the Accounting Standards Board of Japan) and “Guidance on
Accounting Standard for Disclosures about Segments of an Enterprise andRelated Information” (Guidance No. 20 issued by the Accounting Standards Board of Japan). The accounting standards require the Company toadopt a management approach as the segment reporting method. As aresult of the adoption of this standards, the Company changed the basis ofsegmentation and segment measures.
(c) Accounting standard for presentation of comprehensive income
Effective from the year ended March 31, 2011, the Company adopted
the new accounting standard, “Accounting Standard for Presentation ofComprehensive Income” (Statement No. 25 issued by the AccountingStandards Board of Japan). As a result of the adoption of this standards,
the Company prepared the consolidated statement of comprehensive
income for the year ended March 31, 2011.
(d) Accounting standard for consolidated financial statement
Effective from the year ended March 31, 2011, the Company adopted“Partial amendments to the accounting standards of financial statements”(Cabinet office ordinance No. 5) in accordance with “Accounting Standard
for Consolidation Financial Statement” (Statement No. 22 issued by
Accounting Standards Board of Japan). As a result of the adoption of thisstandard, the Company added a subtotal of “Income (loss) before minority
interests” in the consolidated statements of operations for the years ended
March 31, 2011 and 2010.

4. Investment Securities
Investment securities, which solely comprise of other securities, as ofMarch 31, 2011 and 2010 are as follows:
Millions of yen
2011:

Cost

Carrying value¥ 9,763¥ 14,445
370

Securities with market prices
Equity securities����������������������������������������������
Securities without market prices
Unlisted stock�������������������������������������������������

365 Other�������������������������������������������������������������

911

911

Total������������������������������������������������������������������

¥ 11,039¥ 15,726

Millions of yen
2010:

Cost

Carrying value¥ 9,277¥ 13,615
194

Securities with market prices
Equity securities����������������������������������������������
Securities without market prices
Unlisted stock�������������������������������������������������

194 Other�������������������������������������������������������������

912

912

Total������������������������������������������������������������������

¥ 10,383¥ 14,721

Thousands of U.S. dollars
2011:

Cost

Carrying value$117,414$173,722

Unlisted stock�������������������������������������������������

4,390

4,450

 Other�������������������������������������������������������������

10,956

10,956

Total������������������������������������������������������������������

$132,760$189,128

Securities with market prices
Equity securities����������������������������������������������
Securities without market prices

	Losses on devaluation of investment securities were ¥34 million ($409
thousand) and ¥72 million for the years ended March 31, 2011 and2010, respectively.

46

	Net gain on sale of investment securities was ¥91 million ($1,094
thousand) for the year ended March 31, 2011.
	No gain on sale of investment securities was recognized for the year
ended March 31, 2010.

5. Inventories
Inventories as of March 31, 2011 and 2010 are as follows:
Millions of yen

Finished products���������������������������

Thousands of
U.S. dollars

2011

2010

2011

¥111,918¥ 87,202$1,345,977

Work in process, raw materials
and supplies���������������������������������

57,00751,248685,592

Total����������������������������������������������

¥168,925¥138,450$2,031,569

The amounts of change in inventory provision included in cost of sales in
the consolidated statements of operations for the years ended March 31,
2011 and 2010 were an increase of ¥1,202 million ($14,456 thousand)and a decrease of ¥3,581 million, respectively.

6. Impairment of Property, Plant and Equipment andIntangible Assets
For assessing fixed asset impairment, the Company generally groups fixed
assets used for normal operations at a business unit level for which profits
are reasonably controllable. Also, the Company assesses the recoverability of
individual assets not used in normal operations or that are idle.
The Company and its domestic subsidiaries recognized losses on impairment of property, plant and equipment of ¥811 million ($9,753 thousand),
which is included in the consolidated statement of operations for the year
ended March 31, 2011. The losses on impairment of property, plant andequipment were attributed to buildings, machinery and equipment in Japan
primarily of the Yokohama warehouse in Kanagawa, which was determined
to be sold.
The Company and its domestic subsidiaries recognized losses on impairment of property, plant and equipment of ¥4,786 million, which is includedin the consolidated statement of operations for the year ended March 31,
2010. The loss on impairment of property, plant and equipment was attributed to land, buildings and equipment in Japan primarily of the Sagami Plant
in Kanagawa, the Saga Plant in Saga and the Kansai Technology Center in
Hyogo, all of which are not expected to be used after integration of domestic production and development centers.
Since TEL Epion Inc. (“Epion”) determined to adversely change its futurebusiness plan made upon acquisition of Epion due to change of the industry
business environment in the year ended March 31, 2010, Epion recognized
loss on impairment of intangible assets of ¥2,767 million, which is also
included in the consolidated statement of operations for the year ended
March 31, 2010.

7. Pledged Assets
Tokyo Electron did not hold any assets pledged as collateral as of March
31, 2011 and 2010.

8. Short-term Borrowings
Short-term borrowings represent 365-day notes issued by Tokyo Electron
to banks and bore interest at an average annual rate of 0.39 % and 0.49%
as of March 31, 2011 and 2010, respectively.
As of March 31, 2011, Tokyo Electron has unused lines of credit
amounting to ¥142,184 million ($1,709,970 thousand).

Annual Report 2011

9. Accrued Pension and Severance Costs
The Company and its domestic subsidiaries have defined benefit plans(cash balance plan and noncontributory retirement and severance benefit
plans) covering substantially all their employees who meet eligibility
requirements. The benefits under the plans are based on length of service
and certain other factors.
The cash balance plan provides for pension or lump-sum payment
benefits to employees who retire or terminate their employment forreasons other than dismissal for cause. Under the cash balance plan, eachparticipant has an account which is credited yearly based on the current
rate of pay and market-related interest rate. The noncontributory plansprovide for lump-sum payment benefits to employees who retire or terminate their employment for reasons other than dismissal for cause. Certain
foreign subsidiaries have noncontributory retirement and severance benefit
plans that provide for pension or lump-sum payment benefits to employees
who retire or terminate their employment for reasons other than dismissal
for cause.
The funded status of the defined benefit plans, a substantial portion ofwhich consists of domestic benefit plans, as of March 31, 2011 and 2010is as follows:
Thousands of
U.S. dollars

Tokyo Electron

Significant assumptions of domestic pension plans used to determine
the above amounts are as follows:2011 and 2010

Allocation method of benefit obligation��������������������

Straight-line method

Discount rate������������������������������������������������������������

2.00%

Expected rate of return on plan assets�����������������������

2.00%

Amortization period of actuarial difference���������������

4 years

Amortization period of prior service cost�������������������

4 years

10. Income Taxes
Significant components of the deferred tax assets and liabilities of Tokyo
Electron as of March 31, 2011 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen
2011

2010

2011

Accrued pension andseverance costs����������������������������

¥21,172¥20,099$254,624

Elimination of unrealized profit
in inventories�������������������������������

Deferred tax assets

10,309

1,836

123,981

Tax credit for research anddevelopment��������������������������������

5,910

5,499

71,076

2011

2010

2011

Devaluation of inventories��������������

4,716

4,282

56,717

Benefit obligation�������������������������

¥(89,350)¥(84,097)$(1,074,564)

Accrued employees’ bonuses���������

4,471

2,425

53,770Fair value of plan assets����������������

41,282

38,732496,476

Accrued warranty expenses������������

2,795

1,907

33,614

Funded status�������������������������������

(48,068)(45,365)(578,088)

Unrecognized actuarial difference��

(90)

(288)

(1,082)

Unrecognized prior service cost�����

25

125

300

Loss on impairment of property,
plant and equipment andintangible assets���������������������������

2,258

2,114

27,156

Net amount recognized����������������

(48,133)(45,528)(578,870)

Accrued business taxes������������������

1,581

–

19,014

Net operating loss carryforwards����

1,475

14,717

17,739Other���������������������������������������������

8,619

9,100

103,656

Total gross deferred tax assets��������

63,306

61,979761,347

Less valuation allowance����������������

(9,031)(10,458)(108,611)

Total deferred tax assets������������������

54,27551,521

652,736

Undistributed earnings offoreign subsidiaries����������������������

(3,087)(2,957)(37,125)

Net unrealized gains on
investment securities��������������������

(1,916)(1,705)(23,043)

Prepaid pension andseverance costs����������������������������

(1,635)(1,773)(19,663)

Other���������������������������������������������

(1,532)(1,161)(18,425)

Total gross deferred tax liabilities����

(8,170)(7,596)(98,256)

Net deferred tax assets�������������������

¥46,105¥43,925$554,480

Millions of yen

Amounts recognized in
the consolidated balance sheets
consist of:Prepaid pension and   severance costs (Note 1)����������

4,097

4,379

49,272

Accrued pension and   severance costs (Note 2)����������

(52,230)(49,907)(628,142)

Net amount recognized����������������

¥(48,133)¥(45,528)$ (578,870)

Notes: 1.	The prepaid pension and severance costs as of March 31, 2011 and 2010 isincluded in other assets in the consolidated balance sheets.
2.	The provision for accrued pension and severance costs for directors and statutory
auditors (¥596 million ($7,167 thousand) as of March 31, 2011 and ¥621 million asof March 31, 2010) is not included.

	Net pension cost of the plans is as follows:
Thousands of
U.S. dollars

Millions of yen
2011

2010

2011

Service cost������������������������������������

¥5,474¥5,358$65,833

Deferred tax liabilities

	Net deferred tax assets are included in the consolidated balance sheets
as of March 31, 2011 and 2010 as follows:

Interest cost�����������������������������������

1,666

1,572

20,036

Expected return on plan assets�������

(767)

(676)

(9,224)

Amortization of actuarial
difference������������������������������������

2011

2010

2011

286

697

3,439

Current assets��������������������������������

¥27,610¥26,625$332,051
249,285

Millions of yen

Thousands of
U.S. dollars

Amortization of prior service cost���

100

101

1,203

Investments and other assets���������

20,72820,506

Net pension cost����������������������������

¥6,759¥7,052$81,287

Other current liabilities�������������������

(1)(1,062)(12)

Other liabilities�������������������������������

(2,232)(2,144)(26,844)

The Company and its wholly-owned domestic subsidiaries apply aconsolidated tax filing system for corporate tax purposes.

47

Tokyo Electron

Annual Report 2011

The ultimate realization of deferred tax assets is dependent upon thegeneration of future taxable income during the period in which those
temporary differences become deductible. For assessment of the realizabilityof 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 accordancewith accounting principles generally accepted in Japan.
Based on the level of historical taxable income and future estimatedtaxable income over the periods which the deferred tax assets are
deductible, management believes Tokyo Electron will realize the benefitsof these deferred tax assets, net of valuation allowance, as of March 31,
2011 and 2010.
The Company is subject to corporate tax, inhabitants’ tax and a deductible
enterprise tax, which in the aggregate resulted in a statutory income tax rateof approximately 40.69% for the years ended March 31, 2011 and 2010.
Significant components of the difference between the statutory andeffective tax rates for the years ended March 31, 2011 and 2010 are
as follows:
Statutory tax rate in Japan����������������������������������������

2011

2010

40.69 %

40.69 %

Adjustments:
Tax credit of research and development���������������������

(7.22)–

Effect of elimination of unrealized profit
in inventories����������������������������������������������������������

(4.15)(27.86)

Difference in statutory tax rates of subsidiaries����������

(2.26)

6.54

Change in valuation allowance���������������������������������

(1.89)(18.14)

Expenses not deductible for tax purposes������������������

0.86(5.28)

Change in deferred tax liabilities on
undistributed earnings of foreign subsidiaries����������

(0.13)(4.28)

Others, net���������������������������������������������������������������

0.98

1.02

Effective tax rate�������������������������������������������������������

26.88 %

(9.35)%

11. Net Assets
	Net assets comprises four subsections, which are shareholders’ equity,
accumulated other comprehensive income, share subscription rights andminority 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 board of directors, designate an amount notexceeding one-half of the price of the new shares as additional paid-in
capital which is included in capital surplus.
In cases where dividend distribution of surplus is made, the lesser of anamount equal to 10% of the dividend or the excess, if any, of 25% ofcommon 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 consolidatedbalance sheets.
Both appropriations of legal reserve and additional paid-in capital used
to eliminate or reduce a deficit generally require a resolution of theshareholders’ 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 and retained earnings, respectively, which arepotentially available for dividends.
The maximum amount that the Company can distribute as dividends is
calculated based on the non-consolidated financial statements of theCompany in accordance with Japanese laws and regulations.
At the general shareholders’ meeting on June 23, 2006, in accordancewith Japanese laws and regulations, the Company altered its articles toallow for the distribution of earnings to shareholders on dates, other thanthe mid-term and year-end, by a resolution of the board of directors.
At the board of directors’ meeting held on May 13, 2011, the distributionof cash dividends amounting to ¥13,608 million ($163,656 thousand) was
resolved. Such appropriations have not been accrued in the consolidated
financial statements as of March 31, 2011 since they are recognized in the
period in which they are resolved at the board of directors’ meeting.

12. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock option plansfor directors and selected employees since the year ended March 31, 1999.
The options under the plans vest immediately with restriction on exercise up
to two or three years after the date of grant, and have an exercise period ofeight to twenty years from the date of grant.

	No options to purchase shares of the Company were authorized andgranted for the year ended March 31, 2011 and 2010.
Shareholders of Tokyo Electron Device Limited, a domestic listed subsidiary, have approved annual stock option plans for directors and selected
employees since the year ended March 31, 2005.

A summary of stock options outstanding and exercisable as of March 31, 2011 and 2010 is as follows:
Tokyo Electron Limited

2011

Number ofsharesOutstanding at the beginning of year������������������������������������������������������������������

48

1,779,100

2010

Weighted-average exercise
price
Yen

¥5,720U.S. dollars

Number ofshares$ 68.79

2,052,300

Weightedaverage
exercise priceYen¥5,927

Granted��������������������������������������������������������������������������������������������������������������

–

–

–

–

–

Exercised�������������������������������������������������������������������������������������������������������������

67,1001

0.01

40,000

1

Expired (forfeited)�����������������������������������������������������������������������������������������������

415,200

8,625

103.73

233,200

8,520

Outstanding at the end of year���������������������������������������������������������������������������

1,296,800

5,086

61.17

1,779,100

5,720

Exercisable at the end of year������������������������������������������������������������������������������

1,120,500

5,886

70.79

1,504,200

6,765

Annual Report 2011

Tokyo Electron Device Limited

Tokyo Electron

2011

Number ofshares2010

Weighted-average exercise
price
Yen

U.S. dollars

Number ofshares

Weightedaverage
exercise price
Yen

Outstanding at the beginning of year������������������������������������������������������������������

650¥308,698$3,712.54

650¥308,698

Granted��������������������������������������������������������������������������������������������������������������

–

–

–

–

–

Exercised�������������������������������������������������������������������������������������������������������������

–

–

–

–

–

Expired (forfeited)�����������������������������������������������������������������������������������������������

–

–

–

–

–

Outstanding at the end of year���������������������������������������������������������������������������

650

308,698

3,712.54650

308,698

Exercisable at the end of year������������������������������������������������������������������������������

650

308,698

3,712.54650

308,698

13. Leases
As mentioned in note 2 (k), effective from the year ended March 31,
2009, the Company and its domestic subsidiaries adopted “AccountingStandard for Lease Transactions” and “Guidance on Accounting Standard
for Lease Transactions”. As permitted under the standards, finance leases
which commenced on or before March 31, 2008 continue to be accounted
for as operating leases. Pro forma information of leased property acquiredon or before March 31, 2008 including acquisition cost, accumulated
depreciation, obligation under finance leases, and depreciation expense offinance leases that do not transfer ownership of leased property to thelessee on an “as if capitalized” basis for the years ended March 31, 2011
and 2010, are as follows:	Leased assets not recorded in the consolidated balance sheets:
Thousands of
U.S. dollars

Millions of yen
2011

Acquisition cost�����������������������������

2010

¥947

¥955

2011

$11,389

Accumulated depreciation�������������

690

540

8,298

Net leased property������������������������

¥257

¥415

$ 3,091

balance are conducted pursuant to the internal management rules for
credit control. Credit risk of major customers is assessed on a regular basis.
Short-term investments consist of time deposits and certificates ofdeposit and the Company and its listed subsidiary trade with highly-rated
financial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests in listed companies exposed to equity market risks. Conditions, including market prices,
for these investment securities are monitored on a regular basis.
Trade payables, which consist of notes and accounts payable andincome taxes payable, mainly mature within one year. Trade payables are
exposed to liquidity risks which are managed through activities such as
implementing cash management plans.
See note 15 for detailed discussion on derivative financial instruments.
Fair Value of Financial Instruments
	Carrying amount and estimated fair value of financial instruments as ofMarch 31, 2011 and 2010, respectively are set out below. Fair value offinancial instruments which is practically difficult to estimate are excluded(see note 4).
Millions of yen

Future minimum lease payments:
Thousands of
U.S. dollars

Millions of yen
2011

Due within one year�����������������������

2010

¥139

¥159

2011

$1,672Due over one year��������������������������

118

256

1,419

Total����������������������������������������������

¥257

¥415

$3,091

	Lease payments relating to finance leases accounted for as operatingleases amounted to ¥158 million ($1,900 thousand) and ¥167 million,
which approximated the corresponding depreciation on the respective
leased property computed by the straight-line method over the lease terms,
for the years ended March 31, 2011 and 2010, respectively.
Future minimum lease payments on non-cancelable operating leases:
Millions of yen

Thousands of
U.S. dollars

2011

2010

2011

Carrying
amountEstimated
fair value 1 Cash and cash equivalents�������������������������������

¥165,051¥165,051

Trade notes and accounts receivable, net of   allowance for doubtful accounts   (¥1,154 million)���������������������������������������������

135,231

135,231

Short-term investments�����������������������������������

120,000

120,000

Investment securities���������������������������������������

14,445

14,445Trade notes and accounts payable�������������������

53,61253,612

Income taxes payable��������������������������������������

25,32825,328Hedge accounting not applied�������������������������

327

327

Hedge accounting applied�������������������������������

(44)

(44)

2011:

AssetsLiabilities

Derivatives (see note 15)

Millions of yen

Due within one year�����������������������

¥1,984¥1,744$23,861

Due over one year��������������������������

4,361

1,052

52,4472010:

Total����������������������������������������������

¥6,345¥2,796$76,308

Assets14. Fair Value of Financial Instruments
Policy for Financial Instruments
Tokyo Electron limits its fund management to short-term bank deposits
and certificates of deposit, and obtains funds by utilizing bank-loans or
liquidating trade-receivables.
Trade receivables, which consist of notes and accounts receivable, areexposed to credit risk in the event of non-performance by the counterparties. Execution and management of credit risk, maturity and receivable

Carrying
amountEstimated
fair value 1 Cash and cash equivalents�������������������������������

¥123,940¥123,940

Trade notes and accounts receivable, net of   allowance for doubtful accounts   (¥176 million)������������������������������������������������

124,286

124,286

Short-term investments�����������������������������������

120,000

120,000

Investment securities���������������������������������������

13,615

13,61552,35952,359Liabilities
Trade notes and accounts payable�������������������
Derivatives (see note 15)
Hedge accounting not applied�������������������������

124

124

Hedge accounting applied�������������������������������

(165)

(165)

49

Tokyo Electron

Annual Report 2011

Thousands of U.S. dollars

15. Derivative Financial Instruments

Carrying
amountEstimated
fair value 1 Cash and cash equivalents�������������������������������

$1,984,979$1,984,979

Trade notes and accounts receivable, net of   allowance for doubtful accounts   ($13,879 thousand)���������������������������������������

1,626,350

1,626,350

Short-term investments�����������������������������������

1,443,175

1,443,175

Investment securities���������������������������������������

173,722

173,722

Trade notes and accounts payable�������������������

644,762

644,762

Income taxes payable��������������������������������������

304,606

304,606

Hedge accounting not applied�������������������������

3,933

3,933

Tokyo Electron is subject to risk from adverse fluctuations in foreign
currency exchange rates in its operating and financing activities. The
Company and its listed domestic subsidiary enter into forward foreignexchange contracts in order to hedge such risks, but do not enter intosuch transactions for speculative purposes. The Company and its domestic
subsidiary implement a ratio analysis of the total cumulative cash flow
fluctuations to assess effectiveness of hedging. Execution and management of all derivative transactions are conducted pursuant to the internalmanagement rule for derivatives and the assessment of effectiveness ofhedging activities is reported on a semiannual basis to the Corporate
Director in charge of Finance.
The estimated fair values of the derivative financial instruments as ofMarch 31, 2011 and 2010 are as follows:

Hedge accounting applied�������������������������������

(529)

(529)

2011:

AssetsLiabilities

Derivatives (see note 15)

Note: 1. Fair value calculation of financial instruments		Cash and cash equivalents, trade notes and accounts receivable, short-term
investments and trade notes, accounts payable and income taxes payable		 The carrying amounts approximate fair value because of the short maturity ofthese instruments.
		 Investment securities
		  The fair values of marketable securities are based on quoted market prices.
		  See note 4 for further information by classification of investment securities.
		 Derivatives
		  See note 15 for detailed discussion on derivative financial instruments.

1. Derivative financial instruments not designated as hedging instruments
Millions of yen
2011:

Contract
amountSell U.S. dollars���������������������������

¥ 7,405¥(72)¥(72)

Sell Korean won��������������������������

1,235

350

350

Buy U.S. dollars���������������������������

4,763

49

49

Total�������������������������������������������

¥13,403

¥327

¥327

2010:

Contract
amountSell U.S. dollars���������������������������

¥ 7,268¥(240)¥(240)

Sell Korean won��������������������������

1,235

290

290

Buy U.S. dollars���������������������������

5,211

74

74

Total�������������������������������������������

¥13,714

¥ 124

¥ 124

2011:

Contract
amountSell U.S. dollars���������������������������

$ 89,056$    (865)$    (865)Sell Korean won��������������������������

14,853

4,209

4,209

Buy U.S. dollars���������������������������

57,282589

589

Total�������������������������������������������

$161,191$3,933$3,933

Millions of yen

2. Maturities of financial assets and securities are as follows:
Millions of yen
After 1 throughWithin 1 year
5 years

2011:

Cash and cash equivalents��������������������������������������
Trade notes and accounts receivable�����������������������
Short-term investments�������������������������������������������

¥165,051
136,385
120,000¥ –––Millions of yen
After 1 throughWithin 1 year
5 years

2010:

Cash and cash equivalents��������������������������������������
Trade notes and accounts receivable�����������������������
Short-term investments�������������������������������������������

¥123,940
124,462
120,000

¥ –
–
–

2011:

Thousands of U.S. dollars
After 1 throughWithin 1 year
5 years

Cash and cash equivalents��������������������������������������
Trade notes and accounts receivable�����������������������
Short-term investments�������������������������������������������

$1,984,979
1,640,229
1,443,175

$ –
–
–

3. Repayment schedule of short-term borrowings and capital lease obligations is as follows:

Within 1 year

Millions of yen
After 1 through2 years

Short-term borrowings�������������������

¥7,996¥ –¥–Capital lease obligations�����������������

127

103

64

Within 1 year

Millions of yen
After 1 through2 years

After 2 through5 years¥5,106
26

¥ –
24

¥–
1

2011:

2010:

Short-term borrowings�������������������
Capital lease obligations�����������������

2011:

Short-term borrowings�������������������
Capital lease obligations�����������������

After 2 through5 years

Thousands of U.S. dollars
After 1 throughAfter 2 throughWithin 1 year
2 years
5 years$96,164
1,527

$
–
1,239

$ –
770

(Supplementary information)
Effective from the year ended March 31, 2010, the Company and its
domestic subsidiaries adopted “Accounting Standard for Financial Instruments” (Statement No. 10 (revised 2008) issued by the Accounting Standards Board of Japan) and “Guidance on Disclosures about Fair Value of
Financial Instruments” (Guidance No. 19 issued by the Accounting Standards Board of Japan).

50

Unrealized
gains (losses)

Fair value

Unrealized
gains (losses)

Fair value

Thousands of U.S. dollars
Unrealized
gains (losses)

Fair value

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

2. Designated derivative financial instruments
Millions of yen

Thousands of U.S. dollars

2011: Hedge accounting

Contract
amountFair value

Contract
amountFair value

Sell U.S. dollars�����������������������

¥ 6,411¥(54)$ 77,102$(649)

Sell Korean won����������������������

37

11

445

132

Buy U.S. dollars�����������������������

4,099

(1)

49,296(12)

Total���������������������������������������

¥10,547¥(44)$126,843$(529)

2010: Hedge accounting

Contract
amountFair value

Sell U.S. dollars�����������������������

¥ 9,003¥(193)

Sell Korean won����������������������

96

23

Buy U.S. dollars�����������������������

3,859

5

Total���������������������������������������

¥12,958¥(165)

Millions of yen

Annual Report 2011

The contract amounts of forward foreign exchange contracts, enteredinto to hedge receivables and payables denominated in foreign currencies
that have been translated by the corresponding contracted rates, are as
follows:
Contract amountThousands of
U.S. dollars

Millions of yen
2011

2010

2011

Sell U.S. dollars������������������������������

¥ 90

¥614

Buy U.S. dollars������������������������������

62

206

$1,082746

Total����������������������������������������������

¥152

¥820

$1,828

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 (Trade notes
and accounts receivable) and liabilities (Trade notes and accounts payable).

16. Other Income (Expenses)
As discussed in note 6, losses on impairment of property, plant andequipment of ¥811 million ($9,753 thousand) were recognized for the year
ended March 31, 2011 and losses on impairment of property, plant andequipment and intangible assets of ¥7,553 million were recognized for theyear ended March 31, 2010.
Reversal of allowance for doubtful accounts of ¥1,892 million ($22,754
thousand) for the year ended March 31, 2011 is related to the subsequent
collection of specific accounts receivable.
Expenses for plant relocation of ¥1,839 million ($22,117 thousand) wererecognized as a result of the transfer of etch system business.
	Loss from natural disasters of ¥1,114 million ($13,397 thousand) for theyear ended March 31, 2011 represents losses relating to the Great East
Japan Earthquake which occurred on March 11, 2011, which mainly consists of fixed costs during the inactive period and repair costs for damaged
facilities.
Expenses for integration of domestic facilities of ¥1,909 million, including expenses for transportation of machineries is recognized for the year
ended March 31, 2010.

Tokyo Electron

17. Segment Information
General information about reportable segments
A reportable segment is a component or an aggregated component ofTokyo Electron. For each of the components, its discrete financial information is available and its operating result is regularly reviewed by the 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 andservices based on business units (BUs), and Tokyo Electron identifies as areportable segment, “Semiconductor Production Equipment (SPE),” “FlatPanel Display and Photovoltaic Cell (FPD/PV) Production Equipment,” and“Electronic Components and Computer Networks.”
Products of the SPE segment consist of coaters/developers, plasma etchsystems, thermal processing systems, single wafer deposition systems,
cleaning systems used in wafer processing, wafer probers used in thewafer testing process and other semiconductor production equipment.
The SPE segment principally develops, manufactures, services and distributes such products.
Products of the FPD/PV Production Equipment segment consist of coaters/developers, plasma etch/ash system used in the manufacture of flat
panel displays, and plasma CVD systems used in the manufacture of thinfilm silicon PV cells. The FPD/PV segment principally develops, manufactures, services and distributes such products.
The Electronic Components and Computer Networks segment principally designs, develops, procures, and distributes semiconductor products
centering on integrated circuits (IC), other electronic components, computer networks and software.
Basis of measurement of reported segment net sales, segment
profit, segment assets and other items
The accounting policies applied in each reportable segment are generally
consistent with that applied for the preparation of the consolidated financial statements. Intersegment sales or transfers are determined based on
current market prices. Assets in common use have not been allocated toeach reportable segment, while costs associated with these assets havebeen allocated to reportable segments on a systematic basis.

51

Tokyo Electron

Annual Report 2011

Information about reported segment net sales, segment profit, segment assets and other items
Reportable segment information as of and for the year ended March 31, 2011 is as follows:
Millions of yen
Reportable Segment

2011:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Eliminations
and Corporate

Consolidated¥668,722

Net sales
Sales to external customers�������������������������������������������������

¥511,332¥66,721¥90,216¥    453¥668,722¥        –Intersegment sales or transfers��������������������������������������������

0

–

1,100

14,90816,008(16,008)–

Total�����������������������������������������������������������������������������������

511,332

66,721

91,316

15,361

684,730(16,008)

668,722

Segment profit��������������������������������������������������������������������

120,846

6,641

2,907

1,916

132,310(32,731)

99,579Segment assets�������������������������������������������������������������������

239,70742,81250,255

2,094

334,868

474,337

809,205

OthersDepreciation and amortization��������������������������������������������

7,369

543

456

354

8,722

8,985

17,707

Capital expenditures, including intangible and other assets���

13,182

553

774

28

14,537

26,723

41,260Eliminations
and Corporate

Consolidated$$8,042,357

Thousands of U.S. dollars
Reportable Segment

2011:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Net sales
Sales to external customers�������������������������������������������������

$6,149,513$802,417$1,084,979$ 5,448$8,042,357

Intersegment sales or transfers��������������������������������������������

0–

13,229179,290

192,519(192,519)––

Total�����������������������������������������������������������������������������������

6,149,513

802,417

1,098,208

184,738

8,234,876(192,519)

8,042,357

Segment profit��������������������������������������������������������������������

1,453,349

79,86834,961

23,043

1,591,221(393,639)

1,197,582

Segment assets�������������������������������������������������������������������

2,882,826

514,877

604,390

25,183

4,027,276

5,704,594

9,731,870

OthersDepreciation and amortization��������������������������������������������

88,623

6,530

5,484

4,258

104,895

108,058

212,953

Capital expenditures, including intangible and other assets���

158,533

6,651

9,308

337

174,829

321,383

496,212

Notes: 1. “Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services, leasing and insurance.
2 (1)	“Eliminations and Corporate” segment profit totaling ¥32,731 million ($393,639 thousand) includes corporate expenses not allocated to any reportable segments. The corporate
expenses mainly consist of research and development costs of ¥22,719 million ($ 273,229 thousand) pertaining to fundamental research and element research, not allocated toany of the reportable segments.
		 (2)	“Eliminations and Corporate” segment assets totaling ¥474,337 million ($5,704,594 thousand) consists mainly of cash and cash equivalents, short-term investments, buildings, notallocated to any of the reportable segments.
3	“Eliminations and Corporate” capital expenditures totaling ¥26,723 million ($321,383 thousand), consists mainly of capital expenditures for buildings not allocated to any of thereportable segments.
4. Reported segment income is reconciled to Income before income taxes and minority interests in the consolidated statement of operations.

52

Annual Report 2011

Tokyo Electron(Supplementary Information)
	As mentioned in note 3 (b), from the year ended March 31, 2011, the Company adopted the “Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation” (Statement No. 17 issued by the Accounting Standards Board of Japan), and “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise andRelated Information” (Guidance No. 20 issued by the Accounting Standards Board of Japan). Since it is impractical to revise previously reported segment information, the Company
discloses current period segment information on the old basis of segmentation and segment measures as follows:

Millions of yen

2011:

1. Net sales and operating income
Net sales(1) Sales to external customers���������������������������������������������������������������������������������������
(2) Intersegment sales or transfers����������������������������������������������������������������������������������
Total������������������������������������������������������������������������������������������������������������������������������
Operating expenses�������������������������������������������������������������������������������������������������������
Operating income����������������������������������������������������������������������������������������������������������
2. Assets, depreciation and amortization expenses, impairment losses and capital expenditures
Assets����������������������������������������������������������������������������������������������������������������������������
Depreciation and amortization expenses������������������������������������������������������������������������
Capital expenditures, including intangible and other assets��������������������������������������������

Industrial
electronicequipment

Electronic
components andcomputer networks

Total

Eliminations
and corporate

Consolidated¥578,506
536
579,042483,934¥ 95,108¥90,216
1,100
91,316
88,570¥ 2,746¥668,722
1,636
670,358
572,504¥ 97,854¥
–(1,636)(1,636)(1,652)¥ 16¥668,722–
668,722570,852¥ 97,870¥762,227
17,494
40,486¥50,254456
774¥812,481
17,95041,260¥(3,276)––¥809,205
17,95041,260Millions of yen

2010:

1. Net sales and operating income (loss)
Net sales(1) Sales to external customers���������������������������������������������������������������������������������������
(2) Intersegment sales or transfers����������������������������������������������������������������������������������
Total������������������������������������������������������������������������������������������������������������������������������
Operating expenses�������������������������������������������������������������������������������������������������������
Operating income (loss)�������������������������������������������������������������������������������������������������
2. Assets, depreciation and amortization expenses, impairment losses and capital expenditures
Assets����������������������������������������������������������������������������������������������������������������������������
Depreciation and amortization expenses������������������������������������������������������������������������
Loss on impairment of property, plant and equipment and intangible assets�������������������
Capital expenditures, including intangible and other assets��������������������������������������������

Industrial
electronicequipment

Electronic
components andcomputer networks

Total

Eliminations
and corporate

Consolidated¥334,164785
334,949
339,218¥ (4,269)¥84,473673
85,146
83,066¥ 2,080¥418,637
1,458
420,095
422,284¥ (2,189)¥
–(1,458)(1,458)(1,466)¥
8¥418,637–
418,637
420,818¥ (2,181)¥654,026
19,7597,553
16,070¥45,649485–
122¥699,675
20,244
7,553
16,192¥(3,323)–––¥696,352
20,244
7,553
16,192Thousands of U.S. dollars

2011:

Industrial
electronicequipment

Electronic
components andcomputer networks

Total

Eliminations
and corporate

1. Net sales and operating income
Net sales(1) Sales to external customers���������������������������������������������������������������������������������������
$6,957,378$1,084,979$8,042,357$–(2) Intersegment sales or transfers����������������������������������������������������������������������������������
6,446
13,22919,675(19,675)
Total������������������������������������������������������������������������������������������������������������������������������
6,963,824
1,098,208
8,062,032(19,675)
Operating expenses�������������������������������������������������������������������������������������������������������
5,820,012
1,065,183
6,885,195(19,867)
Operating income����������������������������������������������������������������������������������������������������������
$1,143,812$ 33,025$1,176,837$ 192
2. Assets, depreciation and amortization expenses, impairment losses and capital expenditures
Assets����������������������������������������������������������������������������������������������������������������������������
$9,166,891$ 604,378$9,771,269$(39,399)
Depreciation and amortization expenses������������������������������������������������������������������������
210,391
5,484
215,875–
Capital expenditures, including intangible and other assets��������������������������������������������
486,903
9,309
496,212–
Notes: 1. Method of classifying business segments: Business segments are classified after considering similarities in types of products and services, as well as sales methods.
2. Major products in each business segment:		 Business segment
Major products
		 Industrial electronic equipment
Semiconductor production equipment, FPD production equipment, PV production equipment and others
		 Electronic components and computer networks
Semiconductor products, boards, electronic components, computer networks and software
3. Depreciation expenses and capital expenditures include those for long-term prepaid expenses.

Consolidated$8,042,357–
8,042,357
6,865,328$1,177,029$9,731,870
215,875
496,21253

Tokyo Electron

Annual Report 2011

Other Information(1) Domestic and overseas net sales by destination for the years ended March 31, 2011 and 2010 are as follows:

Thousands of
U.S. dollars

Millions of yen
2011

2010

2011

¥182,165
169,276
106,374
103,013
107,894¥668,722¥162,609
91,47455,641
52,94855,965¥418,637$2,190,800
2,035,791
1,279,302
1,238,882
1,297,582$8,042,357

Net sales

Japan��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Taiwan������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Korea��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
United States of America��������������������������������������������������������������������������������������������������������������������������������������������������
Others������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

Note:	For the reporting of domestic and overseas net sales, overseas net sales (other than Japan) include export sales of the Company and its domestic subsidiaries and sales of foreignsubsidiaries, except for export sales to Japan.

(2) Geographical segment information as of and for the years ended March 31, 2011 and 2010 are as follows:
Millions of yen
2011:

Japan

Property, plant and equipment¥97,775

Thousands of U.S. dollars

Other regions¥14,777

Total

Japan

Other regions

Total¥112,552$1,175,887$177,715$1,353,602

Eliminations
and corporate

Consolidated

Millions of yen
2010:

Japan

Other regions

Total

1. Net sales and operating income (loss)
Net sales(1) Sales to external customers������������������������������������������������������������������������������

¥369,382¥49,255¥418,637(2) Intersegment sales or transfers�������������������������������������������������������������������������

31,85626,08957,945¥(57,945)–¥418,637–

Total���������������������������������������������������������������������������������������������������������������������

401,238

75,344

476,582(57,945)418,637

Operating expenses����������������������������������������������������������������������������������������������

402,436

74,027476,463(55,645)

420,818

Operating income (loss)����������������������������������������������������������������������������������������

¥ (1,198)¥ 1,317¥

119¥ (2,300)¥ (2,181)

2. Total assets�������������������������������������������������������������������������������������������������������

¥665,518¥67,453¥732,971¥(36,619)¥696,352

Notes: 1.	For the reporting of geographical segment information, net sales and operating income (loss) are separated based on the location of the Company and its subsidiaries. Assets are
separated by geographic location.
2. Other regions comprise primarily Taiwan, the United States of America and Korea.

(3)	  Major customer information
	 Net sales to external customers that represent 10 percent or more of the company’s total net sales are as follows:
Millions of yen
Name of customer

Samsung Electronics Co., Ltd.

Related reportable segment

Semiconductor production equipment and FPD/PV production equipment

Thousands of
U.S. dollars

2011

2011

¥101,074$1,215,562

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

18. Subsequent Event
Grant of Stock Options under the Stock Options Plans
	On May 13, 2011, the Company’s board of directors decided to submit
a resolution to the shareholders’ meeting for approval of the issuance ofstock subscription rights to directors and selected employees of Tokyo
Electron. The issuance of stock subscription rights is intended to enable thegrant of stock options. Under these stock option plans, options to purchase
up to 105,900 shares of the Company at an exercise price of ¥1 ($0.01),
will be granted to directors of the Company as of March 31, 2011 (excluding outside directors and directors who resigned on June 17, 2011), andoptions to purchase up to 140,000 shares of the Company at an exercise

54

price of ¥1 ($0.01), will be granted to certain executive officers of theCompany as of March 31, 2011, certain directors of the Company who
resigned on June 17, 2011, certain directors and executive officers ofdomestic subsidiaries and certain chairmen, presidents, and vice chairmenof overseas subsidiaries as of March 31, 2011, who was determined by aresolution at a board of directors meeting subsequent to the approval of
grant at the general meeting of shareholders. This grant of stock options
was approved at the general meeting of the shareholders of the Company
on June 17, 2011.

Annual Report 2011

Tokyo Electron

Independent Auditors’ Report

To the Board of Directors ofTokyo Electron Limited:

We have audited the accompanying consolidated balance sheets of Tokyo Electron Limited and subsidiaries as ofMarch 31, 2011 and 2010, and the related consolidated statements of operations, comprehensive income, changes
in net assets and cash flows for the years then ended, expressed in Japanese yen. These consolidated financial­statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and­significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Tokyo Electron Limited and subsidiaries as of March 31, 2011 and 2010, and the results of theiroperations and their cash flows for the years then ended, in conformity with accounting principles generally
accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2011 are presented solely for convenience. Our audit also included the translation of yen amounts into
U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in note 1 to theconsolidated financial statements.

Tokyo, Japan
June 17, 201155

Tokyo Electron

Annual Report 2011

GROUP COMPANIESAs of April 1, 2011, the Tokyo Electron Group was made up of the parent company and its 31 consolidated subsidiaries.

Company

Main business

JAPAN
Consolidated subsidiaries
Tokyo Electron Yamanashi Limited

Manufacture and development

Tokyo Electron Kyushu Limited

Manufacture and development

Tokyo Electron Tohoku Limited

Manufacture and development

Tokyo Electron Miyagi Limited

Manufacture and development

Tokyo Electron TS Limited

Manufacture and development

Tokyo Electron Technology Development Institute, Inc.

Manufacture and development

Tokyo Electron Software Technologies Limited

Development

Tokyo Electron PV Limited

Development

Tokyo Electron FE Limited

Field solutions

Tokyo Electron Device Limited

Sales

Tokyo Electron BP Limited

Logistics, leasing, facility management, etc.

Tokyo Electron Agency Limited

Nonlife insurance

Pan Electron Limited

Sales

AMERICA
Consolidated subsidiaries
Tokyo Electron U.S. Holdings, Inc.

Holding company

Tokyo Electron America, Inc.

Sales and field support

Tokyo Electron Massachusetts, LLC

Manufacture and development

Timbre Technologies, Inc.

Development

TEL Technology Center, America, LLC

Development

TEL Epion Inc.

Development

TEL Venture Capital, Inc.

Identification and evaluation of new technologies

EUROPE
Consolidated subsidiaries
Tokyo Electron Europe Limited

Sales and field support

Tokyo Electron Israel Limited

Field support

ASIA
Consolidated subsidiaries

56

Tokyo Electron Korea Limited

Sales and field support

Tokyo Electron Korea Solution Limited

Field solutions

Tokyo Electron Taiwan Limited

Sales and field support

Tokyo Electron (Kunshan) Limited

Manufacture

Tokyo Electron (Shanghai) Limited

Sales and field support

Tokyo Electron (Shanghai) Logistic Center Limited

Logistics

Tokyo Electron Device Hong Kong Limited

Sales

Tokyo Electron Device Singapore Pte. Ltd.

Sales

Tokyo Electron India Private Limited

Sales and field support

Annual Report 2011

Tokyo Electron

Investor Information(As of March 31, 2011)

Corporate Name and Head Office:

URL:

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

http://www.tel.com

Principal Shareholders:Established:
November 11, 1963

Annual General Meeting of Shareholders:June

Common Stock:
Stock trading unit
Authorized
Issued and outstanding
Number of shareholders

100 shares
300,000,000 shares
180,610,911 shares
44,896

Common Stock Listed on:
The Tokyo Stock Exchange 1st Section (#8035)

The Master Trust Bank of Japan, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account)
Tokyo Broadcasting System Holdings, Inc.
The Chase Manhattan Bank 385036
JPMorgan Securities Japan Co., Ltd.
SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTSMellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension
Japan Trustee Services Bank, Ltd. (trust account 9)
JPMorgan Chase Bank 380055
State Street Bank and Trust Company 505225

Number ofshares held
(thousands)

Votingshare
ratio (%)

18,707
13,726
7,727
4,564
3,923
3,398
3,319
3,300
3,179
2,919

10.44
7.66
4.31
2.54
2.19
1.89
1.85
1.84
1.77
1.63

Shares of less than one thousand have been rounded down in the “Number of shares held.”
Voting share ratio is calculated by the number of shares held excluding treasury stocks(1,554,231 shares).

Independent Auditors:
KPMG AZSA LLC

Distribution of Ownership Among Shareholders:

Administrator of Shareholders’ Register:
The Chuo Mitsui Trust and Banking Co., Ltd.
33-1 Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Other Japanese corporations
5.32%

Treasury stock
0.86%

For Further Information, Contact:

Foreign institutions and others
43.28%

Investor Relations
Corporate Communications Department
Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan
Tel: +81-3-5561-7003
Fax: +81-3-5561-7400
Individuals and others
9.97%

Japanese financial institutions andsecurities companies
40.57%

Stock Price and Trading Volume(Yen)(Thousands of shares)

10,000Stock price

8,000

6,000

120,000

4,000

2,000

Trading volume

60,00000FY2007

FY2008FY2009FY2010FY201157

PR49-128