Medium- to Long-term Value Creation Story

Chapter 2Material Issues
Main Initiatives

Identifying Material Issues
We have come to understand social issues and businessenvironments, considered risks and opportunities, examined theopinions and requests of all stakeholders and identified ourmaterial issues with the approval of the CEO as well as directors
and executive officers related to sustainability.
We will work on “Product Competitiveness” that drives our
growth as a manufacturer and continuously creates nextgeneration products with high added value that will be needed bycustomers in the future; “Customer Responsiveness” for pursuing
technological innovation in semiconductors based on the absolute
trust of our customers as their sole strategic partner; and “Higher
Productivity” that pursues operational efficiency in all businessactivities—including research and development, procurement
and manufacturing, sales as well as installation and maintenanceservices—amid rapid expansion in business scale. At the sametime, with a strong financial foundation based on profits, we will
enhance our “Management Foundation” including governance,compliance, risk management and employee engagement in orderto support these.

Continuously create high value-added
next-generation products

Strong relationship based on trust
Sole strategic partner

Product
Competitiveness

Customer
Responsiveness• Utilize abundant technological capabilities cultivated as an industry leader andcontinuously create high-value-added, next-generation products based on
innovative technology on a timely basis
Product
CompetitivenessPursuit ofoperational efficiency• Help customers manufacture leading-edge semiconductor devices and displaysby maintaining an accurate and prompt grasp of customer needs and providing
innovative technologies for future generations

Management Foundation

Customer
Responsiveness

Issues Awareness⚫Abnormal weather conditions, natural
disasters, human rights issues, conflicts
between nations, stagnation of supply
chains, cyberattacks and so forth

Business Environment

Stakeholder Engagement2

Identifying Material Issues

Social Themes of Risks andOpportunities⚫Response to risks and creationof business opportunities in theenvironment, human rights, supply chain
management, governance, compliance,
evolution of technology, information security

Shareholders/Investors⚫Realization of medium- to long-term growthand enhancement in corporate value

Customers⚫The provision of Best Products and BestTechnical Service

Suppliers⚫Further improving added valueof products and services throughcollaboration with our company⚫Identify material issues based on
their importance to society and theirimportance to business1⚫Determine annual goals for eachmaterial issue and clarify SDGs4 toaddress⚫Discussion and approval by CEO as
well as directors and executive officers
related to sustainability

Employees⚫Creation of a workplace environment
replete with dreams and vitality thatenables employees to demonstrate achallenge spirit

Local Communities⚫Promotion of regional revitalization andenvironmental preservation as well as
paying taxes

Management
Foundation
Identified
Material Issues    • Propose optimal solutions
and provide high-valueadded services• Help customers
create innovation andvalue through safety,
consciousness of theenvironment and so forth    • Pursue productivity
improvement andcontinually improve
operational efficiency• Contribute to thedevelopment of the industry
and society and to economic
growth by promoting
sustainable productionconsumption mode  • Build a highly effective corporate governance system to ensure that operational
decision-making and supervisory functions are exercised sufficiently

  

  

  

• Further strengthen compliance and risk management• Preserve the global environment through contributing to semiconductor
technological innovation as well as through initiatives in products, at plants andoffices and in the supply chain• Build a workplace environment replete with dreams and vitality that respects
employee diversity and enables them to realize their full potential

Importance to businessenvironmentally friendly
products and services

  Governments/Associations⚫Provision of solutions that help solve anddevelop industrial and societal issues  • Build a strong and sound management foundation for underpinning continued
growth as a company• Practice respect for human rights based on high ethical standards

1 Refer to “Identifying Material Issues” in the “Tokyo Electron Sustainability Report 2022” for information about the material issues identification process and refer to“Annual Sustainability Goals and Results” for information about annual goals www.tel.com/sustainability/report/
2 Refer to Stakeholder Engagement on p. 25
3 WFE: Wafer Fab Equipment. The semiconductor production process is divided into front-end production, in which circuits are formed on wafers and inspected, and backend production, in which wafers are cut into chips, assembled and inspected again. WFE refers to the production equipment used in front-end production and in wafer-levelpackaging production.
4 SDGs: Sustainable Development Goals

13 TOKYO ELECTRON Integrated Report 2022

• Promote standardization, efficiency and automation throughout the entire Group by
integrating business systems, unifying databases and so forth• Optimize and level production operations by formulating detailed production plans
based on analysis of technology and market trends and customer investment plans
as well as promoting the stable procurement of parts and materials

Identifying Material Issues

Importance to society⚫Rapid transition to a data-driven
society, leading to further growth in
the semiconductor market that is thefoundation of this transition⚫Further expansion of wafer fab
equipment (WFE3) market⚫Initiatives for the preservation of the
global environment⚫Further strengthening of corporate
governance• Propose optimal solutions contributing to value creation for customers as asemiconductor production equipment manufacturer with a diverse product lineup• Improve business operations, implement quality-first management and pursue
operational efficiency continually
HigherProductivity

Social Issues• Further enhance customer satisfaction, a key management theme that has beentackled since foundation, to become the sole strategic partner for customers• Help customers with the stable long-term operation of various generations ofequipment by providing high-value-added services making full use of leading-edge
AI, digital technologies and knowledge management tools

Material Issues Identification Process1  • Promote leading-edge research and development on a global level by jointly creating • Create innovativetechnologies bytechnology roadmaps spanning multiple generations with customers to respondpromoting innovation
to the requirements of technological innovation as well as collaboration with the• Help develop a sustainable
world’s leading consortiums and academia
society by providing• Strengthen development capabilities and product competitiveness by promoting
digital transformation, which utilizes data and AI

HigherProductivity

SDGs Initiatives• Build a solid managementfoundation that achieves
sustainable growth• Promote respect humanrights, environmentconscious actions and value
creation in the supply chain

Continuing our support of the SDGs, which are globally sharedgoals to be achieved by 2030, we have clarified appropriate SDGs
initiatives through our business for each material issue and are
conducting these initiatives throughout the entire Group.
In fiscal 2022, we reconfirmed the 17 goals and 169 targets5.
5 Refer to “169 Targets of the SDGs” in the “Tokyo Electron Sustainability Report2022” for details www.tel.com/sustainability/report/

TOKYO ELECTRON Integrated Report 2022

14

Chapter 2

Medium- to Long-term Value Creation Story

Medium-term Management Plan
Previous Medium-term Management Plan
Review of the Previous Medium-term Management Plan
We formulated our Medium-term Management Plan in May of2019 and have been engaging in efforts to achieve a financial
model with net sales of 2 trillion yen, an operating margin of 30%
or more, and ROE of 30% or more by fiscal 2024. As the wafer fab
equipment (WFE) market has expanded significantly, we
outperformed the market growth by making steady progress inour business development in our focus areas. With net sales of
2,003.8 billion yen, an operating margin of 29.9%, and ROE of
37.2% for fiscal 2022, our best-ever performance, we reached ourtargeted financial model two years ahead of schedule. The main
reasons for this are as follows.
1. Continue to Invest in Growth
Even when net sales declined where the WFE market wasundergoing adjustment, we continued to increase ourinvestment without loosening the reins and invested
approximately 600 billion yen in R&D over the past five years
to strive to maintain and improve our industry-leading
technological innovations. As a result, progress was made in
developing new functions and products with high-valueadded, leading-edge technology and bringing them to market,
leading to the acquisition of new business. In addition, ourcontinuous capital investment and systematic production
capacity preparations enabled us to increase our market shareof all the semiconductor production equipment we handle
in 2021.
2. Execution of Agile Business Strategy
Our basic strategy is the continuous provision of high-valueadded Best Products and Best Technical Service. We were
impacted by the travel restrictions caused by the spread of
COVID-19 from the beginning of 2020, but despite thesecircumstances, we were able to conduct sales activities,
equipment start-up, and provide services without delay
through close communication with customers and ouroverseas companies. In addition, we strengthened our
response capability at local sites by increasing the number ofJapanese employees stationed abroad and striving to improve
the skills of local engineers. We were able to strengthen therelationship of trust with our customers and contribute to theimprovement of business performance by fully demonstrating
the challenging spirit of our employees, who are capable offlexibly and rapidly adapting to changes in the environment.

New Medium-term Management Plan
3. C
 lose Communication and Collaboration with Partner
Companies
While the WFE market increase approximately 40% year-on-year
in 2021, there were parts and materials procurement shortages
worldwide. Under these circumstances, we provided information
to our partner companies on a continuous and regular basis tobuild a system of collaboration and facilitate the smoothprocurement of parts and materials, increasing production
volume and resulting in our business performance greatly
exceeding market growth.
Market Capitalization
Against a backdrop of the aforementioned improvement ofbusiness performance, our market capitalization has increased
more than 10-fold over the past decade.
In addition to proactive growth investment in recent years, suchas in R&D and production capacity expansion, our market
capitalization has increased significantly compared to total net
assets as a result of the stock market’s evaluation of value that is
not reflected on balance sheets, such as the securing of talented
human resources and collaboration with customers and suppliers.
We will continue to strive to enhance both shareholder value
and corporate value, and continue to proactively invest in growth.
Trends in Market Capitalization and Net Assets
Market capitalization

Highest market capitalization

Fiscal 2022
ActualNet Sales¥1,500.0
billion¥1,700.0
billion¥2,000.0
billion¥2,003.8
billionOperatingMargin

26.5%

28%

>30%

29.9%

ROE

>30%

15 TOKYO ELECTRON Integrated Report 2022

Financial Targets (by Fiscal 2027)
Net Sales¥3 trillion or more

Operating Margin

35% or more

ROE

30% or more

We will promote the following initiatives based on our material
issues of “Product Competitiveness,” “Customer Responsiveness,”“Higher Productivity” and “Management Foundation” to achieve
the new Medium-term Management Plan.

• Continuing proactive investments to enable maximum
capture of future growth opportunities, andimplementing research and development investments ofat least 1 trillion yen over five years¥10,756.3B(January 4, 2022)

10,0008,000• Enhancing the field solutions business by utilizing ourindustry-leading installed base

6,000

¥9,943.6B(March 31, 2022)¥855.2B(March 31, 2012)¥598.6B(March 31, 2012)¥1,347.0B(March 31, 2022)

Progress on the Previous Medium-term Management Plan
Financial Model(by Fiscal 2024)

Financial Targets• Providing leading-edge technological products with highadded value and superior technological services

12,0002,000

Financial Targets and Principal Initiatives
We have set financial targets for net sales at 3 trillion yen or morein scale, an operating margin of 35% or more, and ROE of 30% ormore by fiscal 2027. We are also working diligently toward sturdier
financial structures and aiming to create world-class profit.

Net assets(Billions of yen)

4,000

We will be reaching our milestone 60th fiscal year in 2022 andhave formulated our new Vision and new Medium-termManagement Plan as we strive for further growth. Under thisplan, we will continue to work toward the Best Products and BestTechnical Service, and will strive to achieve short-term andmedium- to long-term profit expansion and continuous
corporate value enhancement.

02012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

• Increasing productivity and added value using data and AI• Advancing E-COMPASS1 in order to establish a sustainablesupply chain in the industry• Revising environmental long-term goals for 2050,
declaring achievement of net zero (reducing greenhousegas emissions to virtually zero) and developing activities
to achieve goals

Corporate GovernanceIn relation to the aforementioned execution of principal
initiatives, it is important to ensure the development of highly
effective corporate governance as a management foundation. As
part of that, we introduced a Corporate Officer system in June of2022. Corporate officers, including the CEO, exchange opinions
and engage in discussions from the same perspective as the CEO
as well as make important decisions promptly at the Corporate
Officers Meeting, which is positioned as the highest decisionmaking body on the executive side. In addition, corporate officers
promptly share important decisions with each responsible
department and realize flexible and dynamic executive
management that is based on even stronger cooperation.
By enhancing executive side systems and appropriatelytransferring authority from the Board of Directors to the
executive management side under this system, we arestrengthening the supervisory functions of the Board of
Directors and establishing a system for holding in-depth
discussions on more important medium- to long-term matterssuch as management issues and growth strategies.
Capital Policy and Shareholder Return Policy
View Regarding Capital Efficiency
Our capital policy is based on securing the funds necessary forinvestment in growth, continuing to make proactive efforts toreturn profits to shareholders, and striving for appropriate balance
sheet management from a medium- to long-term growth
perspective. Specifically, we will target sustainable growth byfurther improving our operating income to sales and capitalefficiency and making efforts to expand cash flow, and shallpursue a high level of capital efficiency, including improving ROE.
Shareholder Return Policy*
Our dividend policy is to link dividend payments to businessperformance on an ongoing basis and a payout ratio is around
50% based on consolidated net income attributable to owners ofparent. However, the amount of annual dividend per share shallnot be less than 150 yen. We will flexibly consider share buybacks.
* We will review our dividend policy if we do not generate net income for two
consecutive fiscal years.

• Clarifying key indicators for continuous corporate valueenhancement2
1 Refer to E-COMPASS on p. 41
2 Refer to Key Indicators for Continuous Corporate Value Enhancement on p. 17

37.2%

TOKYO ELECTRON Integrated Report 2022

16

Medium- to Long-term Value Creation Story

Chapter 2

Key Indicators for Continuous Corporate Value Enhancement
We have clarified key indicators related to the continuous enhancement of corporate value in the new Medium-term Management Plan
and are taking actions in collaboration with the persons responsible for each indicator in order to achieve them.
Target Area

FinanceResearch and Development

Plants and Offices

Environment

Logistics

Products

Engagement

Objective

Objective

Fiscal 2027

• Operating Margin: 35% or more

Fiscal 2027

• ROE: 30% or more

Fiscal 2027

• Continuously create high value-added next-generation products byimplementing R&D expense of at least 1 trillion yen over 5 years

Fiscal 2027

• Reduce total CO2 emissions by 70% (compared to fiscal 2019)

Fiscal 2031

• A rate of 100% renewable energy usage

Fiscal 2031

• Reduce energy consumption (per-unit basis) by 1% from the previous fiscal
year at each plant and officeEvery fiscal year

• Maintain water consumption (per-unit basis) at each plant and office at
individual base year levels

Every fiscal year

• Reduce CO2 emissions of total logistics (own delivery) by 10% by further
promoting modal shift and joint delivery

Fiscal 2027

• Reduce the amount of use of wooden packaging materials by 50%(packaging for semiconductor production equipment)

Fiscal 2024

• Reduce per-wafer emissions of CO2 by 30% (compared to fiscal 2019)

Fiscal 2031

• Engagement survey score: Achieve further improvement (compared to theprior survey) or outperform the benchmark

Every survey

Every fiscal year

Corporate GovernanceRisk Management• We are building and further improving a highly effective risk management
system that supports a strong management foundation.
• We are enhancing risk management and compliance based on theslogan “Safety, Quality and Compliance. Our top priority. It’s our pride.”
Together with establishing a dedicated Compliance Department at ourheadquarters and appointing a Chief Compliance Officer and Regional
Compliance Controllers, we are also conducting assessments by external
agencies and undertaking education.
•W e are conducting supervision and monitoring through reports to the
Corporate Officers Meeting—the highest decision-making body on theexecutive side—and the Board of Directors (twice annually).
• T o conduct appropriate measures with certainty across the entire Group,
we are identifying risks (13 risks in fiscal 2023) expected in the executionof business centered on the Risk Management Committee and deploying
them in the activities of each company.
•W e are continuously conducting activities to foster awareness about
safety, compliance and risk management, and reflecting the awarenessof all executives and employees as well as their autonomous and specificinitiatives in our human resource evaluation.

* Excluding retirement at the mandatory retirement age and so on.

Employees

Careers• We have created an environment where every employee can create value
for the Company’s growth and for society with the support of supervisors
and others by challenging themselves to do what they want while imagining Fiscal 2027
their own futures (career paths) and growing.
(For details, refer to “Employees Both Create and Fulfill Company Values” on p. 47)

Work-life Balance• Annual paid leave utilization rate
Japan: (1) 80% / (2) 90%,
Overseas: Equal to or better than the previous fiscal year’s results

Japan: ( 1) Fiscal 2027 /(2) Fiscal 2031

• Ratio of female managers Japan: 5%; Global: 8%

Fiscal 2027

Diversity andInclusion

Overseas: Every fiscal year

Target Year

• We are working at all times to establish an optimally effective Boardof Directors and an aggressive management execution system, and bycontinuously addressing issues based on evaluations of the effectivenessof the Board of Directors and input from institutional investors and otherstakeholders, we will achieve solid corporate governance for enhancing
corporate value over the medium to long term and sustainable growth.
1. Seeking a Board of Directors with high effectiveness• Audit & Supervisory Board System:
Ratio of outside directors: One-third (including two female)Free and open discussions including corporate auditors• Off-site meetings: For discussions on medium- to long-term strategies,
issues, etc. (twice annually)• CEO reports: Reports to the Board of Directors on the status of
Every fiscal year
execution of key duties by the CEO (every Board of Directors)• CEO mission: Information is shared concerning the CEO’s mission forachieving the new Medium-term Management Plan
• Representative director assessment closed sessions: Sessions including
directors and Audit & Supervisory Board members but excluding therepresentative director (once annually)
2. Operating rhythm supporting the execution of business• Corporate Officers Meeting: The highest decision-making body on theexecutive side (once monthly)• CSS (Corporate Senior Staff): Global, across-the-board coordination ofcompany-wide business execution (four times annually)• Quarterly review meeting: Monitoring the progress of the new
Medium-term Management Plan (four times annually)

Target Year

• Net Sales: ¥3 trillion or more

• Employee retention rates*
Japan: 99%; overseas: Higher than the industry average

Target Area

Every fiscal year

Characteristics of Semiconductor Production Equipment BusinessAs technological innovations in semiconductors drive the growth of the production equipment market, it is essential to provide leadingedge technologies as well as services that support them. We will promote initiatives in our new Medium-term Management Plan basedon the following requirements for semiconductor production equipment manufacturers.

• Supply chain sustainability assessment implementation rate
Material suppliers: Covering at least 85% of our procurement spend
Logistics suppliers: 100% of customs-related operators
Supply Chain Management

Every fiscal year

Staffing suppliers: 100% of employment agencies and contracting
companies (internal contractors)• Supply chain BCP assessment implementation rate
Material suppliers: Covering at least 85% of our procurement spend

Technological innovations in semiconductors driving the growth of the production equipment market• TCIR No more than 0.10 (Globally No. 1 in the industry)*

Safety* TCIR: Total Case Incident Rate. The number of workplace incidents per 200,000 work
hours.

Requirements of semiconductor production equipment manufacturers

Every fiscal year

Fiscal 2027

R&D from a
medium- to long-term
perspective andsolid management andfinancial foundations to
support it

Development ofhighest-performanceequipment that realizes
technological innovations

Solid relationship ofmutual trustwith customers

17 TOKYO ELECTRON Integrated Report 2022

Specialized expertise in avariety of fields,
including electronics,
mechanics,
process and software

Building ofsustainable supply chains

Provision ofhigh-value-added
technical services

Initiatives to reduce
environmental impact

TOKYO ELECTRON Integrated Report 2022

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Chapter 2

Medium- to Long-term Value Creation Story

Our Strengths and the Driving Forces behind Our Company
We have identified “abundant technological capabilities
cultivated as an industry leader,” “absolute trust from customers
based on our reliable technical services” and “challenging spirit of
our employees, who are capable of flexibly and rapidly adapting
to changes in the environment” as the driving forces behindfurther growth. By applying the strengths created by thesedriving forces to our business activities, we will strive to expand
profits over the medium to long term and continuously enhance
corporate value.

Strengths
Onlyone

Outlook of Semiconductor Production Equipment Business
As the trend towards a data-driven society progresses rapidly,
the importance of the semiconductors that form the foundationof this society is increasing even further. The semiconductor
market exceeded US$500 billion for the first time in 2021 and is

expected to exceed US$1 trillion by 2030, growth that will morethan double the current market. Accordingly, the WFE market
was approximately US$90 billion in 2021 and is expected to groweven further in the future.

Semiconductor Market

WFE Market(US$ trillion)
1.4

The world’s only manufacturer withproducts for the four key successive
processes necessary for semiconductor
scaling: deposition, coater/developer, etchand cleaning(US$ billion)>US$1 trillion

140

1.2
120
Deposition Coater/Developer

Etch

Cleaning
1.0

100％

100

100% share in EUV1 lithography coater/developer, which are necessary forsemiconductor evolution

0.8

1 EUV: Extreme Ultraviolet. Ultraviolet radiation(ultraviolet rays) in the wavelength range of 1 nm
to 100 nm.

Coater/Developer

80

EUV lithography
0.6

No.1/
No.2

Our product lines are all strongly positioned intheir respective segments, all of which having
achieved first or second place in market share2
2 Our estimate (2021)
3 Our product lines in respective segments:
Diffusion furnace includes furnace, batch
deposition includes ALD (Atomic Layer
Deposition), metal deposition includes single
wafer deposition, and cleaning includes single
wafer cleaning and batch cleaning.

No.1

No.1

No.2

No.1

No.2

No.1

No.2

US$555.9 billion(2021)

No.1

60

0.4

Diffusion
Furnace3

Batchdeposition3

Metaldeposition3

Coater/Developer

Plasma etch Gas chemical
etch

Cleaning3

Prober

40

0.2

20

0

1990
Industry-leading installed base (cumulative)

No.1

Building a business model for field solutions
where equipment sold becomes a new
business opportunity and creates value

No. 1

90

approximately 82,000 units4
Increase of approximately 6,000 units
each annually

4 As of March 31, 2022

The Driving Forces behind Our Company
Abundant technological capabilities cultivated as an industry leader• Innovative and varied technologies created through joint development with customers and collaboration with world-leading consortiums• Proactive R&D investment aimed at creating leading-edge technologies based on strong management and financial foundations• Product development through digital transformation which utilizes data and AI

2000

2010

2020

2030

Source: 1990-2021 (WSTS), 2022-2030 (IBS, May 2022)

0

1990

2000

2010

2020

2030

Source: TechInsights Manufacturing Analysis Inc. (VLSI) (1990~2021)

Semiconductor Device Technology Evolution andBusiness Opportunities
Further growth in the semiconductor and WFE markets will besupported by technological innovation in semiconductor
devices. In logic/foundry, NAND and DRAM applications,increased demand for further scaling, lower manufacturing costs

through higher multi-layering, lower power consumption andhigher speeds is expected.
We will utilize our broad product lineup to contribute to the
manufacturing of devices with a highly competitive advantage.

Semiconductor Devices and Our Product Lineup
Logic
NAND

DRAM

3D System
Integration

Absolute trust from customers based on our reliable technical services• Co-creation of technology roadmaps with customers and quick launch of next-generation products with overwhelming added value• Dedicated to improving customer satisfaction level and building of relationship of mutual trust with the aim to be the sole strategic partner for customers• T imely provision of high-value-added technical services based on a long track record in response to the increasingly advanced and diverse technological needs of customers

Wafer Bonder/
DebonderFurnace

Challenging spirit of our employees, who are capable of flexibly and rapidly adapting to changes in the environment• Focus on strengthening human resource development and promoting management that places an emphasis on employee motivation• Implementation of “TEL Values,” which summarize values and the codes of conduct for all employees• Understanding of issues and implementation of policies based on a regular global engagement survey

19 TOKYO ELECTRON Integrated Report 2022

Wafer prober

ALD
Single wafer
deposition

Batch cleaning
Coater/Developer

Plasmaetch

Gas chemical
etchSingle wafer cleaning

TOKYO ELECTRON Integrated Report 2022

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Chapter 2

Medium- to Long-term Value Creation Story

Logic/Foundry
Increasing patterning complexity requires co-optimization
between unit processes. It is expected that high-NA EUV1
lithography technology will be applied to mass production toachieve further scaling going forward. In addition to scaling
through high-NA EUV, various new technologies and structures
will be introduced. Transistor structures are also expected toshift to new 3D structures (FinFET2, GAA3, CFET4). Our front-end
process equipment and wafer bonding equipment willcontribute to the realization of this kind of technologicalinnovation.

NAND
3D NAND multi-layering is progressing even further, and layercounts will increase to 300 and 500 in the future. Accordingly,
this will require etch that enables processing of deep holes andtrenches with a high aspect ratio5, high productivity sacrificial
film removal and atomic level deposition on 3D structure. In
addition, process integration is required to control the increase inchip manufacturing costs that are associated with this increasein layer counts. We are striving to further improve theperformance of our etch and ALD deposition systems to meetthese technological requirements.

1 High-NA EUV: Refers to next-generation EUV, an exposure technology thatshortens the resolvable line width by increasing the numerical aperture (NA)
2 FinFET: Fin Field Effect Transistor, a process technology with a three-dimensional
structure in the shape of a fin
3 GAA: Gate All Around, a next-generation technology for FinFET
4 CFET: Complementary Field Effect Transistor, transistor with a new structure

5 Aspect ratio: Depth to width ratio of the pattern formed on the wafer

Logic

FinFET

GAA

CFET

DRAM
Technologies such as those that suppress delays caused byinterconnects and those that further advance 2D scaling are in
demand. While many of our deposition, etch and cleaningsystems are used for this technology in DRAM, we will continue
to provide new products and solutions to achieve even further
scaling. 2D scaling is progressing and the further shift to 3D
DRAM that uses a 3D structure is expected. In 3D DRAM, as withthe shift from 2D to 3D NAND, vertical multi-layering will drive
scaling in place of 2D lithographic scaling. This is particularly
expected to increase the importance of the deposition andetch processes.

DRAM

21 TOKYO ELECTRON Integrated Report 2022

3D DRAM

NAND (1tier)

NAND (2tier)

3D System Integration
3D system integration is advancing to improve the performanceof semiconductor devices, using wafer bonding technology. The
wafer bonding technology application is now under production
for CMOS image sensors, and its developments in 3D NAND,
where memory cells and drive circuits are bonded together, andalso in Logic backside power delivery network, are accelerating. In
addition, the industry is moving to chip disaggregation, called Chiplet,
and then bond those together, expecting the device speed increase,and lowering power consumption and cost as one of advanced
assembly technologies. We contribute to evolve the leading-edge
device and the system level performance by providing wafer
bonding and laser trimming equipment based on the technology
and experience we have cultivated in front-end processes.
Logic

Development for Several Generations through Collaboration
with Customers
With the increasing technical difficultly of scaling, in addition to
the evaluation of the Nth mass production generation,
development from N+1 to N+4 is also progressing simultaneously
for leading-edge memory, logic and foundry. In order to continue
this kind of development and evaluation with semiconductor
manufacturers, high technology development capabilities,
resources in engineering and a strong financial base are required.
We work with our customers, who are semiconductor
manufacturers, in their respective roles to co-create long-term
technology roadmaps and develop and evaluate technologies up
to four generations ahead. We are able to quickly demonstrate
both equipment and process performance by conducting
evaluations using wafers that are actually used in the
manufacturing processes of our customers. Through initiatives
like this, we steadily create high-value-added products and strive
to capture new business opportunities.

Further Strengthening of Development Structure
We are further strengthening our development structure in orderto advance the development and evaluation of leading-edge
semiconductor devices up to four generations ahead.
We have already established the TEL Digital Design Squareand the Miyagi Technology Innovation Center, and we plan toopen new development buildings at sites in Yamanashi,

Development and Evaluation up to Four Generations Ahead
Demo Evaluation (TEL)

N+1

Demo Evaluation (Customer)
Mass Production

N+2

N+3

N+4

Kumamoto and Miyagi between 2023 and 2025. The Yamanashisite will be responsible for film deposition, gas chemical etch andcorporate development, the Kumamoto site for coater/developer and cleaning system development, and the Miyagi site
for etch system development.

TEL Digital Design Square(Opened in November 2020)

Miyagi Technology Innovation Center(Began operation in October 2021)

Kumamoto New Development Building(Completion scheduled for fall 2024)

Miyagi New Development Building(Completion scheduled for spring 2025)

Yamanashi New Development Building(Completion scheduled for spring 2023)

3D NANDTOKYO ELECTRON Integrated Report 2022

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Medium- to Long-term Value Creation Story

Chapter 2

Value Creation Model
We will make the most of the capital we own and continue to provide new value that contributes to the resolution of issues
and development of industry and society through the development of a value chain in our business activities in research anddevelopment, procurement and manufacturing, sales and installation and maintenance services.

INPUT (investment capital) Fiscal 2022
Financial capital

Financial capital

Net assets

Net sales

1,347.0 billion yen
Equity ratio 70.5%
Total assets 1,894.4 billion yen
9

Manufacturing sites total(6 in Japan and 3 overseas)

Abundant technological capabilities cultivated as an industry leader

Manufacturing-related capital investment,such as new plant buildings andmanufacturing equipment

Absolute trust from customers based on our reliable technical services
Challenging spirit of our employees, who are capable of flexibly and rapidly
adapting to changes in the environment

Increasing of production capacity and leveling

Manufactured capital
Cumulative number of equipment installations Approximately(annual shipment volume of approximately 6,000 units)
Safety-first operation (TCIR)

Intellectual capitalIntellectual capital

Installation and
Maintenance Services

158.2 billion yen

Manufactured capital• Contributing to improved productivity incustomer product manufacturing (utilization
rate and yield)• Contributing to the growth of thesemiconductor and FPD markets

Observing equipment delivery and installation schedules

12

Broad-ranging knowledge and technologicalcapabilities in semiconductor and flat panel
display (FPD) manufacturing processes

82,000 units

0.30

Optimized and efficient production system

R&D investmentbuilding a solid financial foundation

High-quality and high-reliability products incorporating leading-edge technologies

Many years of know-how and provenperformance in manufacturing operations

R&D sites
total(6 in Japan and 6 overseas)

Financial capital• Returning generated profit to stakeholders• Continuing proactive investment for growth by

2,003.8 billion yen
Operating margin
29.9%
Net income
437.0 billion yen
ROE
37.2%
Total annual dividend 219.3 billion yen (payout ratio: 50%)

Support the stable operation ofequipment and provide prompt
and accurate high-valueadded service

Research andDevelopment
Continuously strengthening
research and development tocreate innovative and unique
technologies in a timely mannerIntellectual capital• Contributing to the further development of

Innovative, high-value-added unique technologies

1

2

Product lineup with No. or No.
semiconductor production equipment market
share and proposals that leverage thisNumber of patents owned

19,572industry and society through semiconductor
and FPD technological innovation• Contributing to the building of fair and soundmarkets that respect intellectual property

Highly efficient and high-quality service

Customer requests and technology trends
Human capital

Equipment-related data accumulated
through AI and knowledge management

Retention rate** Calculated using data on turnover rate

Systems and know-how for promoting digitaltransformation

96%

Improvement in desire for growth and demonstration of the challenge spirit inemployees, who both create and fulfill company values

Human capital

Sales

Number of employees

Propose optimal solutions
as the sole strategic partner

15,634
Proportion of engineers 67.1%

Procurement andManufacturing

Building of relationships of trust with stakeholders by employees with a high levelof engagement

Efficiently manufacturinghigh-quality products
backed by a sustainablesupply chain

Ratio of female managers

Social and relationship capital

Human resource development throughTEL UNIVERSITY

Percentage of respondents who selected “Very Satisfied” or“Satisfied” in the customer satisfaction survey** For each question, average score is calculated for all customers who responded

Rate of improvement after supply chain sustainability assessment

Social and relationship capital

100%
31.5%

(compared to fiscal 2021)

Relationship of mutual trust with customers
built through many years of performancerecords
Solid cooperative working relationships with
suppliers

Number of TEL FOR GOOD programs

OUTPUT

Foundation for business activities in local
communities

Natural capital

100,265kL
Water consumption 1,417,000m

Energy consumption

3• Improving value provided to stakeholders

155

Social and relationship capital• Contributing to the value creation andcontinuous growth of customers• Maintaining soundness and strengthening

competitiveness throughout the entire supply
chain• Contributing to the revitalization of andsustainable development in local communities

Creating employment opportunities in and paying taxes to local municipalities andnations where we carry out business activities

Natural capital

10.7% reduction (compared to fiscal 2019)
Renewable energy consumption 230,218MWh
Energy consumption at plants andoffices per net sales
26% reduction (compared to fiscal 2021)
Waste material recycling rate
98.1%
Per-wafer CO2 emissions

Semiconductor Production Equipment/
FPD Production Equipment
Field Solutions

dreams and vitality that enables employees torealize their full potential

5.5%

Personnel able to perform globally

23 TOKYO ELECTRON Integrated Report 2022

Human capital• Creating a workplace environment replete with

Natural capital• Contributing to the preservation of the global

Realization of Vision and Practice of Corporate Philosophy

The driving forces behind our company

Manufactured capital

IMPACT(impact on industry and society)

OUTCOME (created value) Fiscal 2022

environment through environmentally friendly
products and business activities as well as
collaboration with suppliers• Contributing to customer manufacturing ofsemiconductors and FPDs that have a low
environmental impact as well as customer
business activities

TOKYO ELECTRON Integrated Report 2022

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Chapter 2

Medium- to Long-term Value Creation Story

Stakeholder Engagement

Relationship with Stakeholders

Actively providing opportunities for engagement with our stakeholders and promoting mutual communication allows us toaccurately comprehend their requirements and reflect them in our business activities. We strive to build a solid relationship ofmutual trust with all the stakeholders surrounding our company and respond to each of their expectations, so that we can fulfill ourroles and responsibilities in society.

• Customers purchase the semiconductor and FPD production
equipment our company provides and also utilize services
necessary for maintaining that equipment• We not only provide products and services but also createtechnology roadmaps spanning multiple generations andcarry out joint technology development with customers
toward developing next-generation devices and processes

Relationship with Stakeholders• Employees help enhance corporate value by utilizing theirindividual abilities and know-how, and by improving theirskills through training

Value Provided to Stakeholders• Best Products with world-leading performance thatincorporate leading-edge technologies• We promote the improvement of employee engagement
under management that emphasizes employee motivation
Value Provided to Stakeholders• A workplace environment replete with dreams and vitalitythat enables employees to demonstrate a challenge spirit• High-value-added Best Technical Service

Employees

Customers• Environment-friendly products and services with a focus onsafety and quality• Solutions that satisfy a variety of application needs• Opportunities for career development and skill improvement• Fair performance review and remunerationcommensurate with results• Employee meeting• Global engagement survey• Technology conference• Individual workshops• Joint development• Customer Satisfaction Survey

Relationship with Stakeholders

Relationship with Stakeholders• Shareholders and investors support our company’sbusiness expansion from a financial aspect andparticipate in company management by exercising
their voting rights, etc.

• Suppliers supply the parts, materials and human resources necessary
for our company’s equipment manufacturing, and also perform
customs clearance and logistics operations• We improve and enhance the quality of our products and services
collaboratively with our suppliers and build a sustainable supply chainthat takes into account labor, the environment, health and safety
and ethics

Suppliers• Earnings release
conference, Medium-termManagement Plan
briefing, IR Day• Production update briefing• TEL Partners Day

Value Provided to Stakeholders• Maintaining soundness and strengthening competitivenessthroughout the entire supply chain• Sustainability Assessment(including E-COMPASS)• IR conference, IR road show*,
individual IR interview• STQA* audit* STQA: Supplier Total Quality Assessment• Shareholders’ Meeting• Further improving added value of products and services throughcollaboration with our company* IR road show: IR activities presented directly toshareholders and investors

Shareholders/
Investors• We share our management vision and growth scenario
with shareholders and investors, and incorporate thefeedback received from them through constructive
dialogue into management decision-making in aneffort to enhance our corporate value
Value Provided to Stakeholders• Return of profit generated from business activities• Realization of medium- to long-term growth andenhancement in corporate value• Providing business opportunities in the semiconductor and flat panel
display (FPD) production equipment market

Relationship with Stakeholders
Relationship with Stakeholders• We advance together with the local communities where
we carry out business activities. We create employment
opportunities, develop local industries and advanceenvironmental preservation initiatives as well as pay taxes
in line with the profit generated by our business activities
Value Provided to Stakeholders• TEL FOR GOOD
(Social Contribution
Activities)• Tours of plants andoffices• Environmental
debriefing• Cooperation with government
and administrative agencies• Collaboration with global
initiatives

Governments/
Associations• Industry group activities

Value Provided to Stakeholders• Provision of human resources development andemployment opportunities• Solutions that help solve and develop industrial andsocietal issues• Promotion of environmental preservation in communities• Products, services and business models that are consciousof the environment, human rights and other factors• Financial contributions through tax payments

25 TOKYO ELECTRON Integrated Report 2022

Local
Communities• In the markets where we carry out our business activities,
we work to accurately comprehend societal needs
by collaborating with highly relevant internationalorganizations, industry associations, initiatives and NGOs,
contributing to the resolution of issues faced by the industry
and society, as well as to further development• Business activities that comply with laws, regulations,industry codes of conduct and other rules
TOKYO ELECTRON Integrated Report 2022

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