Review of Operations

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

200262.4

325.4

486.9

400642.6

600

726.4

800

006070809

10

Overview of FY2010
The global economic downturn, triggered by the economic crisis which began in the fall of 2008,
caused business conditions to deteriorate during the first half of fiscal 2010, to a level even belowthat which followed the collapse of the IT bubble in 2001. However, semiconductor demand recovered significantly from mid 2009, elevating capacity utilization levels at major semiconductor manufacturers’ production facilities. As a result, capital investment in semiconductor production
equipment in the second half of the year became brisk.
The Division’s sales dropped off sharply in the first half, but recovered steadily in the second half,
thanks to increased investment by foundries and memory manufacturers. Sales for the full fiscal
year were down 19% year on year, to ¥262.4 billion.
By region, sales in Taiwan rose 56% year on year, and sales in Korea were up 19%, due to thesurge in demand during the second half. However, in all other regions, sales for fiscal 2010
declined year on year.
By product, sales of etch systems maintained almost the same level as in the previous fiscal year
partly due to the adoption of chip scaling technology by memory manufacturers and in capacity investment by logic manufacturers. However, sales of the other products further decreased year on year.

FPD/PV Production Equipment
FPD/PV Production
Equipment Sales

Overview of FY2010(Billions of Yen)
120

71.4

88.1
68.0

81.2

60

100.8

90

30006

07080910The global economic downturn, which began in the latter half of 2008, created a situation ofoversupply in the market for LCD panels. LCD manufacturers held back on new investments
through the first half of 2009. However, the rising market penetration of LCD TVs, particularly in
China, has been steadily closing the supply-demand gap. This contributed to an upturn in orders
for FPD production equipment from mid 2009. Due to the economic downturn, government subsidies for photovoltaic power generation were reduced, and many customers postponed investments,
causing a sudden drop in demand for photovoltaic (PV) cell production equipment.
The Division’s sales declined 19% year on year in fiscal 2010, to ¥71.4 billion.
By region, sales in Japan rose 131% year on year, supported by shipments of production equipment for 10th-generation glass substrates. However, sales in Korea fell 77% year on year, and sales
in Taiwan dropped by 49%. A product breakdown highlights the rapid shift towards larger panel
sizes. FPD production equipment for glass substrates for the 8th generation or larger accounted for
67% of total FPD production equipment sales. From fiscal 2010, Tokyo Electron commenced shipments of PV cell production equipment.

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

60

84.5

07

94.2

06

111.2

107.5

90

104.4

12030

00809

Overview of FY2010
Sales in Japan account for almost 90% of total sales in this business. Looking at the domestic
electronics market, the semiconductor market turned toward a recovery from mid 2009, with thecompletion of adjustments made in response to the economic slump that occurred in the fall of2008. Investment in IT and network infrastructure, however, has remained weak despite the signsof economic recovery.
The Division’s sales declined 10.3% year on year in fiscal 2010, to ¥84.5 billion. Sales of semiconductors used in consumer electronics products, such as flat-screen TVs and digital home electronics, remained firm from the start of the fiscal year, thanks in part to economic stimulus
measures. Sales of semiconductors used in industrial equipment and computers recovered in thelatter half of the fiscal year, but sales of storage and other IT infrastructure products remained
weak, as corporations held back on new IT investment.

10*Tokyo Electron Device Limited operates this business

12Tokyo Electron

Annual Report 2010

Sales by Region

Business Outlook
Strong demand for new PCs and “smartphones,” coupled with expansions in network infrastructure are driving a strong recovery in the semiconductor market, and it is expected that investments
to increase capacity will become active in 2010.
Initially, the Company will work to rigorously solidify operations in existing product segments. In
addition to bolstering operations in segments where it is already strong, Tokyo Electron will further
expand its business by introducing strategic new products in areas where there is still strong potential to increase market share, such as etch systems and cleaning systems, and by enhancing collaborations with core customers to develop future technologies.
Meanwhile, new semiconductor-related technologies such as double patterning, chip scaling
technology using new materials, 3D memory cell stack and 3D chip stack technologies are advancing efforts to enhance chip density. These trends are supported by core Tokyo Electron technologies,
and should allow the Company to make strong inroads into new markets.
The Company expects markets for new, high-end products to expand. Meanwhile, as chipmakers seek to extend the operating life of their equipment through upgrades and refurbishing, themarket for post-sales business is likely to grow. For Tokyo Electron, which already has an installed
global base of over 50,000 units of semiconductor production equipment, efforts to provide valueadded solutions should help the company to attract business from existing customers andelevate earnings.

China &Others

Japan

12%
29%

17%
Korea

4%
NorthAmericaEurope

Sales by Region
China &Others

Japan

8%
20%Taiwan

12%

60%

Korea

Sales by Region

Business Outlook
Demand for semiconductors in Japan is expected to continue improving, supported largely byexpanding demand from the Asian region. The Company also expects the current freeze in IT
investment to thaw slowly. As a semiconductor-related trading company, Tokyo Electron Device will
work to strengthen its sales structure and product support capabilities. The Company is also focusing efforts on the development of new in-house products such as the inreviumTM product line, andwill work to increase sales in Asia to support earnings growth.

21%Taiwan

Business Outlook
China’s policy of promoting the consumer electronics market with subsidies to rural residents has
contributed to strong demand for flat-screen TVs, and many manufacturers are expected to invest
in new LCD production lines in China to address the demand. In addition to the trend towards
larger screen size, technology advances will be needed to make displays more responsive andimprove picture definition to higher levels. We aim to introduce differentiated products and technology that customers require from us, while at the same time we will make efforts to reduce costs
as the competition is intensifying.
A new generation of display technology is also starting to emerge—Organic Light-Emitting
Diode (OLED) displays. Efforts to develop production equipment for manufacturing OLED displays
are accelerating, and these will probably reach the market in the near future.
In the market for PV cell production equipment, Tokyo Electron currently focuses on production
equipment for thin-film silicon PV cells. As efforts to address global warming intensify, demand forthese products is likely to enjoy strong growth over the medium-to-long term. Tokyo Electron currently
operates a joint development with Sharp, and serves as the Asian and Oceanian representative for
Oerlikon Solar, a Swiss equipment supplier. In addition, the Company is developing its own in-house
technology. The Company continues to seek the best business model for the growing PV cell production equipment market, and expects this business to expand into a third core source of income, alongside the semiconductor production equipment and FPD production equipment businesses.

17%

Japan

Overseas

11%

89%

Annual Report 2010

Tokyo Electron13