PAGETOKYO ELECTRON ANNUAL REPORT 2016

6CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Medium-term Management Plan (Fiscal 2016-2020)

Sustainability

Financial Section

Corporate Data

Interview with the CEO

Interview with the CEOVision

A truly global company
generating high added value and proﬁts inthe semiconductor and ﬂat panel display
industries through innovative technologies andgroundbreaking proactive solutions that
integrate diverse technologies.

Q1

From your new position as CEO, what do you see ahead for Tokyo
Electron’s businesses?
The semiconductor and ﬂat panel display (FPD)
production equipment industries are approachinga new phase of growth for which I have great
expectations. I am certain that we will be able touse this opportunity as a springboard for dramatic new growth to create a business structure withworld-class proﬁtability.
Semiconductor manufacturing technologies
are evolving every minute. Miniaturization technologies have now reached the 10 nanometerlevel. In addition to lithography and other existing
technologies that have steadfastly upheld
Moore’s Law, development of new semiconductor technologies, such as 3D structure devices
and the use of new materials, is advancing.
Customers are now looking for advanced semiconductor production technologies that combine
such cutting-edge technologies in complex andnovel ways. I think that breadth of Tokyo
Electron’s product lineup, one of the greatest inPAGETOKYO ELECTRON ANNUAL REPORT 2016

7CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Medium-term Management Plan (Fiscal 2016-2020)

Sustainability

Financial Section

Corporate DataInterview with the CEOInterview with the CEO
the industry, and our wealth of cutting-edge
technologies will serve as major strengths in creating such innovative technologies. Greater
demand for more sophisticated technologies
means greater opportunities for growth.
Furthermore, the full-ﬂedged arrival of theinternet of things (IoT), which will connect allkinds of devices and objects, is just around thecorner. This is expected to cause semiconductor
applications to rapidly expand, from conventional
uses in mobile and other electronics, to automobiles, healthcare, and virtually all other ﬁelds ofbusiness. In China, the world’s greatest consumerQ2

As the IoT broadens semiconductor applications, new technological needs areemerging in semiconductor manufacturing processes of all generationsof semiconductors, domestic production isexpected to grow, with both overseas and local
manufacturers expanding their production facilities in the country. I believe that the establishment of such new semiconductor manufacturingbases will present Tokyo Electron with excellent
opportunities for business expansion.
The continued evolution of semiconductors ispowered by semiconductor production equipment manufacturers. By continuing to provide
innovative technologies, I believe Tokyo Electron
can achieve greater growth than ever.

AIHow will you turn these expanded business opportunities into real
growth for the Company?
As technologies grow more advanced, there isgreater demand for solutions that take a comprehensive view of the whole semiconductor production process. I think it is important for Tokyo
Electron to not just improve the performance ofits existing individual products, but also to leverage its extensive product lineup to combine
advanced technologies across product categories.
By doing so, we will be able to speed development of next generation products that optimize
entire production processes.
Furthermore, the IoT will cause rapid growth insemiconductor applications in the near future. In
addition to the advanced semiconductors used in
mobile devices, data centers and artiﬁcial intelligence, there will be an enormous number of sensors and other simple semiconductor devices in all
kinds of everyday objects. With all these different
devices being used together, different generations
and technologies will increasingly be used along-side one another. Tokyo Electron’s delivered semiconductor production systems number over
59,000, among the highest installed bases in thesemiconductor production equipment industry.
This broadening of technological applications
therefore presents us with a chance to generate
income on par with the opportunities in cuttingedge technologies. We will steadily turn thischance into results by selling older generations ofequipment, offering upgrades and providing new
forms of service to increase customer productivity.
Based on these measures, we formulated themedium-term management plan assuming a scenario in which we will be able to meet the medium-term ﬁnancial targets for ﬁscal 2020 of ¥900
billion in net sales, a 25% operating margin, and20% ROE. We will further reinforce our strengths inproduct competitiveness and responsiveness tocustomers and achieve world-class proﬁtability.

MemoryQ3Processors

Sensors

Strengthening product competitiveness and responsiveness tocustomers are pillars of the medium-term management plan.
How, specifically, do you intend to achieve these goals?
In my new position as CEO, I have had the chance
to take a fresh look at Tokyo Electron’s history.
Doing so has reaffirmed my belief that the driving
force behind the Company’s growth is itsadvanced and diverse technological prowess thatgenerates innovation, the commitment to putting
customers ﬁrst passed down since its founding,and the Company’s trailblazing, future-oriented
spirit. To maximize these strengths and achieve

world-class proﬁtability, we have built a new operating structure, focusing on strengthening thedevelopment divisions.
We integrated Tokyo Electron’s development
divisions and reallocated resources. This was aimed
at effectively combining the Group’s many diverse
technologies, such as those related to wet and dry
cleaning, atmospheric and low-pressure deposition, plasma etching and temperature control, inPAGETOKYO ELECTRON ANNUAL REPORT 20168CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management PlanInterview with the CEO

Review of Operations
and Business Outlook

Medium-term Management Plan (Fiscal 2016-2020)

Sustainability

Financial Section

Corporate Data

Interview with the CEO

Interview with the CEO

Q5order to bring new products to market ahead ofthe competition. We reevaluated our development
priorities, and are now focusing on strengthening
the areas of etching, deposition and cleaning systems, markets which are expected to grow.
Furthermore, we have assigned account technology general managers for each customer to help us
zero in on and quickly offer new proposals to meetQ4

the technological needs presented by the next
generation of products and generations to come.
Through these initiatives, we will seek to generate customer demand by creating and providing
products that surpass expectations. By also bolstering product competitiveness and operational
efficiency, we aim to achieve the ﬁnancial targetsof the medium-term management plan.

Please tell us about your management philosophy as CEO and thekind of company you think Tokyo Electron should aim to be.

Tokyo Electron generates steady cash flows. Please tell us
your thoughts about shareholder returns and how cash
should be used.
Our greatest priority is the development of newtechnologies for growth. The source of Tokyo
Electron’s proﬁts is the Company’s advanced technological capabilities that create innovation. Assuch, our policy for using cash is now even more
focused on aggressive investment in R&D.
In terms of shareholder returns, beginning ﬁscal 2016, we have raised the payout ratio from
35% to 50%. As we aim for world-class proﬁtability, we feel that we must bolster returns to shareholders accordingly. Furthermore, with an eye toensuring stable dividends, we have set a lower
limit on annual dividends of ¥150 per share.* We
will also ﬂexibly consider stock repurchases, tak-ing a comprehensive view of such factors asneeded investment for growth, cash on hand andthe macroeconomic environment.
Fiscal 2016 annual dividends reached ¥237 pershare, a second consecutive record-high, due toincreases in the payout ratio and net income. The
Company also repurchased and cancelled stock(15,400,000 shares, or 8.53% of issued shares
before the cancellation). Going forward, we willcontinue working to maximize corporate value
and boost shareholder value through continuous
growth in proﬁt.
* This lower limit may be revised in the event that the Company does not
generate net income for two consecutive ﬁscal years.

New Policy for Shareholder Returns
As CEO, I want to do three things. These are providing returns to the shareholders who havetrusted and invested in the Company, helping ouremployees and their families prosper, and contributing to industry and society.
To achieve these goals, we must create proﬁt.
The source of proﬁt is our technologies, and ourtechnologies are created by our employees. We
must therefore be a company where employees
are excited to work, where they can grow by taking
on ambitious goals, and where growth is rewarded
fairly. To this end, it is important that we maintainthe open and energetic corporate culture thatTokyo Electron has nurtured since its founding andcreate frameworks that allow each employee touse his or her abilities to the fullest. By broadening

the scope of compensation systems that objectively evaluate ability and contribution based on clearlydeﬁned roles and responsibilities, I believe we canhelp all employees become high performers. I wanteach employee to feel highly motivated to work
together toward big goals, thus fostering a dynamic culture of ambition and energy.
The proﬁts generated this way will feed a virtuous cycle to create new proﬁts, providing continuous returns to all stakeholders. By doing so,
we can contribute to the development of society
as a leader in the semiconductor and ﬂat panel
display production equipment markets. Working
toward these goals is my mission as a member ofTokyo Electron’s top management.

Dividend payout ratio: 50%
Annual DPS of not less than ¥150
We will review our dividend policy if the company does not generate net
income for two consecutive ﬁscal years

We will flexibly consider share buybacks