Strengthening
earnings
power

Medium-term goal

Improve operational efficiency
Priority themesHigh quality
products

Increase added
value of processes

Relevant SDGs
Responsible
consumption andproduction

27

TOKYO ELECTRON SUSTAINABILITY REPORT 2017

High quality products
Quality control system
To provide consistent, high quality products, TEL has been acquiring ISO 9001 quality management
system certification at various sites since 1997 in line with its policy of making quality a top priority. Nine
manufacturing sites have achieved this certification to date. In 2016, we established a uniform Groupwide Quality Policy and since then each Group company has pursued the goal of achieving the world’s
best quality. In 2017, we will continue to work together as one to drive quality improvements.

Quality education
TEL believes that every employee needs to have a high awareness and understanding of quality. This is
why we conduct a range of education programs including the fundamental quality education that all
new employees receive.
For example, to enable employees to improve their knowledge and skills in the area of quality control,and to improve the quality of their work, we encourage them to obtain external quality certification
through the QM/QC Exam (Quality Management and Quality Control Examination). Administered by theJapanese Standards Association and the Union of Japanese Scientists and Engineers, the QM/QC Examis a major quality certification with more than 440,000 certification holders in Japan as of March 2017.
Since fiscal 2012, this initiative has increased the number of certified employees each year to a total of1,579 as of March 2017.
We also educate our employees around the world about the Plan, Do, Check, Act (PDCA) cycle.
Through e-learning courses, employees learn efficient process management using the iterative foursteps of the PDCA cycle. As of April 2017, 89% of our employees had completed the courses.
In addition, we have an education program called TEL 6-Step, a problem-solving model for serious
problems aimed at employees in production and service divisions. This is a customized version of theeight discipline (8D) problem-solving method* widely used in quality control. The TEL 6-step program
enables systematic and reliable analysis of problems to determine the root cause, leading to quickimplementation of countermeasures and prevention of similar problems. We currently use web-based
training for delivery, and as of May 2017, 2,751 employees had completed the program.

* 8D problem solving method: Amethod for solving problems inquality improvement through eight
disciplines or processes

PDCA cycle education

TEL 6-Stepof employees haveparticipatedemployees haveparticipated89%(As of April 2017)

2,751(As of May 2017)TOKYO ELECTRON SUSTAINABILITY REPORT 201728

Strengthening earnings power

Pursuing quality at the source –GD3 design review–TEL has adopted a front-loading approach to improve product quality. Specifically, we use the GD3 (GDcubed) management method of problem prevention to ensure thorough risk identification from theconcept design stage. Using this method, the designer and reviewer review each stage from design andevaluation to full production and identify risks, focusing on changes from the previous designs.
When using the GD3 method, we adjust techniques and work environments to improve our abilityto identify risks. To achieve a high quality review, we need high quality reviewers, so we request theparticipation of internal experts in the review process. At the same time, our basic rule is to assign
additional people from each division to identify risks from many different angles. To improve theefficiency of discussions, we have created search tools to find past instances of problems and we use
mind mapping to be more imaginative in risk identification.
Not only do we ensure full implementation of the GD3 review process internally, we also recommend
the method to suppliers to help further enhance quality in the upstream processes.

ReviewDevelopment process

DesignpersonnelExperts

Quality,manufacturing
and service personnel

Changes1

Design2

Prototype and evaluation

3

Mass production

Riskidentification

Safe equipment design
TEL carries out product risk assessments as early as possible in the development phase, taking theentire product life cycle into consideration. Based on the results of these assessments, we implement
intrinsically safe equipment design1 to reduce the risks posed to humans. We also examine and ensurecompliance with increasingly challenging laws and regulations around the globe and create systems forabiding by all safety regulations of the regions where our equipment is shipped.
Equipment shipped from our factories is checked by a third-party inspection organization to ensure it
complies with SEMI S22 international safety standards. For equipment requiring CE marking,3 we acquirea Certificate of Conformity (CoC) issued by Notified Body (NB) stating conformity with the Machinery
Directive and EMC Directive.4

1 Safe equipment design: Innovative
machinery designs that eliminate
causes of machinery-related
hazards posed to humans
2 SEMI S2: The Environmental,
Health, and Safety Guideline for
Semiconductor Manufacturing
Equipment is a set of guidelines forsafe design of equipment. It is usedmainly by the leading manufacturersof semiconductor equipment in theUnited States and Europe, not onlyfor ICs but also as safe procurement
guidelines for electric and electronic
device manufacturing equipment
around the world.
3 CE marking: When exporting into
the European Union, CE marking
defines rules for displaying a CE
mark as proof that the equipment issafe and complies with EU-definedrules (Directives)
4 EMC Directive: One of the New
Approach Directives that apply
to the 27 EU member states. This
directive applies to all electric orelectronic devices that are at risk ofbeing disturbed by electromagnetic
interference or that may interferewith other equipment. The current
directive is 2014/30/EU.

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TOKYO ELECTRON SUSTAINABILITY REPORT 2017

Quality improvement cost reductions
As a key issue for enhancing earnings power, TEL implements initiatives to reduce costs associated withquality improvements that are required after equipment is shipped. Each year, we select five types ofdefects to prioritize for elimination, focusing on those that either result in a significant cost or occurfrequently. We identify the causes of the defects, whether in the design, handling, or another area, andadjust our products based on our findings.

Response to quality problems
TEL complies with ISO and EN safety standards, as well as establishing design rules applicable to its own
equipment to achieve the highest level of safety possible.
In addition to developing systems to manufacture safe products, we fulfill our mission as anequipment manufacturer by developing systems for responding to design- or manufacturing-related
issues or accidents arising from operation-related problems. If an accident occurs, we use our S-VICS
accident reporting system to report and share information with all levels of management, from safety
and quality personnel in each division all the way to senior management. We immediately conduct anaccident investigation to identify the cause and plan preventive measures. In addition to implementing
the measures on the problem equipment, we use a proprietary system called QABOX to quickly
implement the measures on equipment operated by other customers and reflect those measures indesign standards in operation.
Response to serious workplace accidents

TEL GroupManagement
SeriousaccidentFire
department
Policedepartment
Customer
contact
point

Customer

Operations
divisions
Safetydivision
Qualityassurance
division

Report and workplace recovery

Permanent measures

Accident
reportingsystem(S-VICS)(Q-VICS)

Servicedivision

Relevant divisions
Investigation of causes and development ofrecurrence prevention measures
Investigate andidentify causes

Issue FCN1

Confirm spread

Share with Group(QABOX2)

Determine measures

Establish
implementation plan

Reflect in design
standards
Revise standards
Notify revision

1 FCN: Field Change Notice (general recall notice)
2 QABOX: TEL Group internal information sharing and horizontal
deployment tool
Accident information

Information sharing

Operations and information flow

TOKYO ELECTRON SUSTAINABILITY REPORT 201730

Strengthening earnings power

Initiatives with suppliers
Developing strong partnerships with suppliers is essential to improve product quality. Since 2000,
TEL has regularly conducted Supplier Total Quality Assessments (STQA) to clarify what is expected ofsuppliers in terms of maintaining and improving quality.
Before starting business with new suppliers, an STQA is conducted via self-assessment to evaluate
their product quality, costs, and information security. The assessment also includes CSR issues, including
human rights, ethics, safety, and the environment. If any risks to quality are found, our trained andcertified auditors visit the supplier on-site to explain the problems, our expectations for improvement,
and the level of quality we require. After the supplier understands the issues, we ask that they planand implement improvement measures in line with our written requests. We keep track of all requests
and improvement measures internally, and offer continual support to suppliers until all necessary
improvements have been made. We conduct on-site audits once every three years at suppliers who
manufacture important components and at suppliers where quality issues have been found.
We focus on change control with our suppliers. We aim to reduce the number of quality issues that
occur as a result of changes to the design or manufacturing of equipment components and modules.
We also aim to reduce the cost of quality improvements. We use change control briefings to informsuppliers of the requirement to submit a request when changes are made. We have been conducting
web-based training since 2015 to get more suppliers to understand the importance of change control inrespect to quality and to ensure they submit the required change requests. Approximately 900 people
participated in this training during fiscal 2017.
SQIP defect prevention activities
TEL works with suppliers to implement the Supplier Quality Improvement Program (SQIP), a series ofactivities designed to prevent defective components. The SQIP aims to visualize the root causes ofproblems (defect factors) and encourage independent defect prevention activities by asking each of oursuppliers to explore defects that have occurred in the past. Through this process, the program aims toreduce the number of defects by half.
Our suppliers use the self-assessment of their quality control systems to analyze closely the sourceof previous problems in their manufacturing environments, whether in ordering, design, production,inspection, or training. This helps them to identify weak points and make improvements to systems orwork methods.
QC Patrol
Component module manufacturing processes have a strict requirement for accuracy. Processes like
crimping work, soldering work, and terminal block connecting work have a significant impact on thesafety and service life of our equipment, yet, from the outside, it is not immediately obvious whether
they have been done correctly. We treat such processes as important tasks. In our suppliers’ production
facilities, our systems ensure that these tasks are performed by skilled employees who have passed
tests conducted by TEL-accredited trainers. Our quality and manufacturing division personnel also visit
our suppliers as part of our QC Patrol activities to check on the quality of their work. In addition to this,our technology and quality personnel join forces in a separate QC Patrol activity to inspect channel
welding work and inspect for leaks and cleanliness of gas components.

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TOKYO ELECTRON SUSTAINABILITY REPORT 2017

Increase added value of processes
Company-wide business process re-engineering
As one of the key issues in the medium-term management plan, TEL is working to increase profits
by improving the efficiency of its operations. To achieve this aim, each business unit and overseassubsidiary is re-engineering its business processes. They are working to acquire the necessary dataand information for management decisions and business operations more quickly and accurately byoptimizing business processes, creating standards where necessary, and optimizing those processes
across the whole company.
We have gathered experts from across our production, sales, logistics, services, accounting, andbusiness management divisions around the world. Together, we are currently conducting a multifaceted review of our business processes, including vertical processes within each division, horizontal
processes across different divisions and functions, and customer-related processes such as ordering,production, shipping, and acceptance. We plan to incorporate the results of this review into new core ITsystems, and we will start a phased rollout with a view to full utilization by 2019. By creating a businessplatform from new core systems that take into account the entire value chain, including other divisions
and customers, and at the same time eliminating waste, we aim to become a company that can drive
efficient businesses based on highly-accurate business predictions, while making strategic use of ourhuman resources, material, capital, and information.

Quality and productivity improvement through TPM
TEL has been implementing company-wide Total Productive Maintenance (TPM) for over 10 years.
The purpose of TPM is to eliminate inefficiencies, waste, and loss, and thereby improve productivity.
At the same time, it aims to change employees thinking and behavior. The TPM approach plays a rolein employee development and has been successfully integrated into our production lines. Promoted incooperation with design and administration divisions, the synergistic effects improve both quality andproductivity. TPM is also being used to improve business process quality between indirect divisions.
TPM activities that have produced outstanding results are shared company-wide at the annual TPM
presentation, with a Grand Prize and other awards to help motivate employees in their activities. Fromfiscal 2016, participants included not only teams from Japanese manufacturing sites, but from ouroverseas site Tokyo Electron (Kunshan) Limited (established in 2012) as well.

TPM presentation

TOKYO ELECTRON SUSTAINABILITY REPORT 201732