TOKYO ELECTRON Annual Report 2012

PAGE

1

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

CONTENTSPROFILE

Highlights

Tokyo Electron Limited (TEL) is a world-leading supplier of semiconductor production

2 CONSOLIDATED FINANCIAL HIGHLIGHTSTop Message
3 TO OUR STAKEHOLDERS
4 INTERVIEW WITH THE CEO

Segment Information
7 TOKYO ELECTRON AT A GLANCE
8 REVIEW OF OPERATIONS

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 to semiconductor and LCD panel manufacturers aroundthe 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

Feature9 FEATURE 1
11 FEATURE 2

Corporate Governance
12 CORPORATE GOVERNANCE
15 BOARD OF DIRECTORS, STATUTORY AUDITORS AND EXECUTIVE OFFICERS

Corporate Citizenshiplies in our capability to proactively and precisely identify real customer needs andrespond 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.

16 ENVIRONMENTAL, HEALTH AND SAFETY ACTIVITIES

R&D/Intellectual Property
17 RESEARCH AND DEVELOPMENT
18 INTELLECTUAL PROPERTY

Financial Section
19
23
24
25
25
26
26
27
37

FINANCIAL REVIEWCONSOLIDATED ELEVEN-YEAR SUMMARYCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT

Corporate Data
38 GROUP COMPANIES
39 INVESTOR INFORMATION

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Disclaimer Regarding Forward-looking Statements
Matters discussed in this annual report, including forecasts of future business performance of Tokyo Electron, management strategies, beliefs and otherstatements are based on ­­Tokyo ­Electron’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 22.

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Corporate DataTOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan CONSOLIDATED FINANCIAL HIGHLIGHTSCONSOLIDATED FINANCIAL HIGHLIGHTS

2011

2012

2012

For the year:

Net Sales(Millions of Yen) (Millions of Yen)

200,000

1,000,000¥633,091$7,702,774

Operating income (loss).................

168,498

14,711(2,181)

97,87060,443

735,406

Income (loss) before income taxes.....

169,220

9,637(7,768)99,57960,602

737,340

Net income (loss)...........................

106,271

7,543(9,033)71,92436,726446,843

Depreciation and amortization.......

21,41323,06820,002

17,707

24,198294,415

Capital expenditures......................

22,703

18,10814,91939,14039,541

481,093

R&D expenses...............................

66,07360,98854,07470,56881,506991,678

800,000

150,000

600,000

400,000

14.6

15

9.5

100,000

10

50,0000200,0002.9

5

0–2,181¥668,722

633,091¥418,637

668,722¥508,082

418,637¥906,09220

18.6

508,082

Net sales.......................................

(%)

60,443

2010

97,8702009

14,711

2008

906,092

Years ended March 31

Operating Income (Loss) andOperating Margin

168,498

Thousands of
U.S. dollars

Millions of yen–0.5

Operating margin..........................

18.6%

2.9%

(0.5)%

14.6%

9.5%

ROE...............................................

21.4%

1.4%

(1.8)%

13.3%

6.3%

–50,000

0

08 09 10 11 12

08 09 10 11 12

Operating Income (Loss)
Operating Margin

Thousands of
U.S. dollars

Millions of yen–5

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

¥792,818
545,245¥668,998
529,265¥696,352
523,370¥809,205
584,802¥783,611
598,603

Yen$9,534,140
7,283,161
U.S. dollars

Net Income (Loss) per Share

ROE

(Yen)

(%)
24

600

594.01

Total assets....................................

21.4
18

450

¥(50.47)¥401.73¥205.04$2.49Cash dividends..............................

125.00

24.00

12.00

114.00

80.00

0.97

Notes: 1. U.S. dollar amounts are translated from yen, solely for convenience, at the prevailing exchange rate on March 31, 2012 of ¥82.19=U.S.$1.
2. Depreciation and amortization does not include amortization and loss on impairment of goodwill.

300

13.3
12

6.3
205.04¥   42.15

150

–150

6

1.4

0

0

–50.47¥ 594.01

42.15

Net income (loss)—Basic................

401.73Per share:

08 09 10 11 12

–1.8
–6

08 09 10 11 12

TOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Top Message
n TO OUR STAKEHOLDERS

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan INTERVIEW WITH THE CEOTO OUR STAKEHOLDERS
In fiscal 2012, the year ended March 31, 2012, the economic environ-

Based on its medium- and long-term vision, Tokyo Electron has posi-ment surrounding Japan saw a year of increasingly severe and even cha-tioned the past 2 years as a period for laying the foundations of businessotic conditions. The environment was characterized by the effects of thegrowth for the next 5 to 10 years down the road. Accordingly, we havemassive floods in Thailand, the yen’s prolonged and historic appreciation,

made high levels of investment in growth. R&D expenses have been allo-

and the European financial market risk, in addition to the impact of thecated not only to strengthening our existing mainstay SPE business, but

Great East Japan Earthquake. In the electronics industry, where Tokyoalso to building new businesses that fully harness our core SPE technol-Electron operates, even the largest Japanese companies faced extremely

ogy. Examples include 3DI packaging, which has been spotlighted as ansevere conditions, as reported on a daily basis in the media.

advanced wafer level packaging technology; production equipment forIn this environment, Tokyo Electron finished fiscal 2012 with net sales of

OLED displays, which are emerging as the next-generation of flat panel¥633.1 billion, operating income of ¥60.4 billion and net income of ¥36.7

displays (FPD); and production equipment for thin-film silicon photovoltaic

billion, despite some impact due to tax code reforms and other factors.

cells, which we consider to be an optimal environmentally friendly energy

This performance was only possible with the support of our customers

technology for megasolar power generation. We will make every effort toand all other stakeholders. Accordingly, we wish to take this opportunity

nurture these new fields into future growth drivers that take Tokyo Elec-to express our heartfelt gratitude for your continued support.

tron to an even higher level in the near future.

Smartphones and tablets have come to the forefront at blinding

Tokyo Electron will mark the 50th year of its founding in November.

speed. Indeed, we are currently standing on the threshold of the mobile

The semiconductor industry is a unique and exceptional sector in which

device era. Dramatic growth in shipment volume of these types ofgrowth continues to be driven today by repeated cycles of technologicalmobile devices should continue going forward, fueled by an expanding

innovation even after more than half a century has passed since thebase of purchasers in emerging economies, along with further market

invention of the semiconductor. In this industry, as it remains a global

penetration in developed countries. These IT devices, which exchange

leader in semiconductor production equipment, Tokyo Electron aspires

immense amounts of data, will require even higher performing semicon-

not only to help achieve the betterment of people’s lives, but also to

ductors than before. This evolution in semiconductors will be made pos-make a contribution to the global environment through technology. To

sible by technological innovation in semiconductor production

realize this vision, we believe that it is crucial for management andTetsuro Higashi,

Hiroshi Takenaka,

equipment (SPE). Though the market for SPE is subject to the short-term

employees to come together and share this common mission, while

Chairman of the Board

President & CEO

impact of the silicon cycle and macro-economic factors, the market ismaking Tokyo Electron a company brimming with aspirations and vitality

tipped for sustained growth as it undergoes repeated cycles of techno-that we can all be more proud of. At the same time, we will continue tological innovation in support of the evolution of semiconductors andtake a diligent approach to management in order to make Tokyo Elec-tremendous volume-based expansion. In this dynamic market, Tokyo

tron an even more attractive, high-value company for all of our stake-

Electron will continue to fulfill its role of supporting the very foundations

holders. We look forward to your continued understanding and supportof the mobile device era by providing outstanding products and tech-as we endeavor to reach these goals.

nologies that our customers demand.

Tetsuro Higashi, Chairman of the Board

Hiroshi Takenaka, President & CEO

TOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Top Message
n TO OUR STAKEHOLDERS

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan INTERVIEW WITH THE CEO

INTERVIEW WITH THE CEO
In relation to capital investments for the future, we established three new manufacturing
and development sites, namely the new Miyagi plant for strengthening the etch system business; the new Kunshan plant in China to address the country’s expanding demand for flat
panels through localization; and the TEL Technology Center Tsukuba, to enhance basic R&D
activities and promote the commercialization of photovoltaic cell (PV) production equipment.
In another development, in April 2012 we established TEL Technology Center Korea, in thecity of Hwaseong, South Korea, with the view to strengthen business operations in South
Korea’s booming semiconductor market. In this manner, we invested in the future according

Q& A

to each of our intended objectives.
In addition, we announced two acquisitions. We have often said that the source ofTokyo Electron’s growth lies in technological innovation. We believe that acquisitions fall
into three categories. The first is acquisitions to strengthen existing businesses. The second
is acquisitions to expand related businesses. Finally, the third is acquisitions to enter new
businesses. In every category, Tokyo Electron seeks to create high-value businesses by
incorporating technologies it does not have, and fusing them with its own technologies.
The latest acquisitions are intended to enhance our range of products in the semiconductor advanced packaging field, which has a high growth rate, and to enter the thin-film

Hiroshi Takenaka,
President & CEO

Q
A

silicon PV production equipment field, where we can harness the technologies Tokyo
Electron has developed over the years.

Capital Investments For Medium-term GrowthOver the last 2 years, Tokyo Electron has allocated high levels of R&D expenses and made sizable
capital investments, aiming at future growth.

What progress did you make on the management front in fiscal 2012?

The business environment surrounding Tokyo Electron was extremely severe over the pastn R&D Expenses

n CAPEX
Depreciation and Amortization(Billions of Yen)

(Billions of Yen)

100n New Miyagi plantn TEL Technology Center Tsukuba
n Kunshan (China) plantn TEL Technology Center Korea

100year, mainly due to the Great East Japan Earthquake that struck in March 2011, as well as
the yen’s rapid appreciation to historic levels and a downturn in final electronics products
due to the impact of the flooding in Thailand. In this environment, Tokyo Electron managed
to minimize the impact of the Great East Japan Earthquake through concerted efforts by the

81.5

75

70.6

66.1
61.0

50

50

54.1

entire company to restore operations in the aftermath of the earthquake. Nonetheless, overall net sales decreased by around 5% year over year.

75

New fields

Existing fields
25

39.1
25

which was an all-time high. We have started to see the positive results of these outlays grad-

22.7

0

39.5

23.1
20.0

Meanwhile, as in the previous fiscal year, we executed sizable growth investments in preparation for future growth. In fact, we allocated R&D expenses of ¥81.5 billion in fiscal 2012,

21.4

18.1

14.9

24.2
17.7

0

FY08

FY09

FY10

FY11

FY12

FY08

FY09

FY10

FY11

FY12

ually become apparent, including improved positions in focused areas like the markets foretch systems and cleaning systems. Fiscal 2012 was also a year that saw us make steadyprogress in several new business fields.

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TOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Top Message
n TO OUR STAKEHOLDERS

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan INTERVIEW WITH THE CEO

INTERVIEW WITH THE CEO

Q

Meanwhile, our basic approach is to conduct manufacturing primarily in Japan in order totake full advantage of the country’s strong manufacturing capabilities. However, we are

The market for semiconductor production equipment (SPE) seems tohave struggled to grow since the global financial crisis erupted three
years ago. What is your outlook for the industry?

expanding procurement of parts and materials to the rest of Asia, in order to leverage the
yen’s recent appreciation, in an effort to improve the overseas procurement ratio. In the SPE
business, we will work to strengthen Tokyo Electron’s position and enhance profitabilityAthrough these types of development and manufacturing strategies.
In the flat panel display (FPD) production equipment business, the market has now arrived

The semiconductor market has already seen fierce borderless competition for many years. A

at a major turning point. There has been a large drop in the prices of large LCD TVs at massglance at recent newspapers shows that the Japanese electronics industry in particular has

home appliance retailers. Because of the commoditization of LCD panels, FPD production

struggled to cope with intensified global competition. Looking around the world, demandequipment has also faced fierce price-based competition from emerging Asia-based players.

for final electronics products still remains weak due to the lingering impact of the global

In response, Tokyo Electron will maintain its competitive edge in the market by building man-financial crisis.

ufacturing infrastructure in China, which has enormous untapped demand for panels, while

However, semiconductors are finding growing uses in devices that process massive

striving to improve its cost structure. Furthermore, we are eyeing the full-scale emergence ofamounts of data exchanged over the Internet, including PCs and smartphones, as well as

the market for OLED TVs around 2015. OLED TVs promise to rival LCD TVs as the new gen-servers. More semiconductors are also being used in numerous digital home appliances, aseration of TVs. Accordingly, Tokyo Electron will accelerate the confirmation of the commer-

well as in automobiles and medical equipment. Considering these factors, along with accel-cial viability of OLED display production equipment for large panels, and launch this businesserated growth in the supply of these products to emerging countries, we believe that growth

as early as possible.

in demand for semiconductors and related technological advances will still continue indefinitely into the future. Indeed, the arrival of the mobile computing era heralds the beginningof the second major growth phase of semiconductors.
The evolution of semiconductors will be supported by unlimited technological innovation

Expanding Our Global Development Network
We use our development network linked to our major customers throughout the world to speedily
create the products that they demand.

in semiconductor production equipment, our technology. We have reconfirmed the importance of this fact.

Q

What changes have taken place in the business environment surrounding Tokyo Electron? How will you respond to these changes and how
will you convert them into business opportunities?

Korea

U.S.

TEL Technology Center, Korea (TTCK)TEL Technology Center, America (TTCA)

Imec (Belgium)
CEA-Leti (France)A

Albany NanoTech (U.S.)l TEL development basen Joint research institution

Tokyo Electron’s overseas sales ratio for SPE has now reached nearly 85%. There has also been an
increasingly prominent trend for only a few major customers to make very large investments.

SEMATECH (U.S.)

Japan

In response to these changes in the business environment, Tokyo Electron has conducted
its most important R&D activities in close proximity to global semiconductor manufacturers.
We have established cutting-edge process-technology centers in the U.S., South Korea andTaiwan, in addition to Japan. These centers allow us to work closely with customers in theirsemiconductor development from an early stage. Efforts are focused on embodying customers’ real needs in the next generation production equipment as early as possible.

TaiwanTEL Technology Center, Taiwan (TTCT)TEL Technology Center Tsukuba
Process Technology CenterTokyo Electron Technology Development Institute
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TOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Segment Information

Top Message
n TO OUR STAKEHOLDERS

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan INTERVIEW WITH THE CEO

INTERVIEW WITH THE CEO

Q
A

Could you please go into a little more detail on your new businesses?

Tokyo Electron has executed high levels of R&D and capital investment over the past two years,
and has recently announced two corporate acquisitions. In addition to strengthening existing
businesses, these measures are aimed at creating new growth drivers for Tokyo Electron.
These growth drivers include new products based on new plasma technology that uses aradial line slot antenna; 3DI packaging technology in the wafer level packaging field; nextgeneration test systems; OLED display production equipment; and thin-film silicon PV production equipment. If these growth drivers become viable, Tokyo Electron will create new
businesses worth between ¥100 billion and ¥200 billion combined.
Elsewhere, while miniaturization is becoming more and more difficult for memory chips,
the era of STT-MRAM, a promising candidate for the next generation of memory, is drawing
near. Eyeing the development of this revolutionary new device, Tokyo Electron has teamed
up with Tohoku University, which possesses the world’s most advanced technology in thisfield. Under this partnership, Tokyo Electron will take on the challenge of developing highvolume production technology for these devices as a production equipment manufacturer.
If new business fields emerge, and STT-MRAM devices are successfully introduced in themarket as well, we expect they will allow us to establish new growth drivers alongside ourexisting core SPE products.

Q

Tokyo Electron has transformed itself into an enterprise that can generate stable cash flow. What is your policy on returning profits to shareholders and using cash?

A

The year before last, we raised the performance-linked dividend payout ratio target from

Developing Businesses in New Fields
We are targeting business expansion by entering new business fields where we can take fulladvantage of our core SPE Technology.

Production
equipment for3DI packaging

20% to 35%, as part of our effort to increase returns to shareholders. In addition, as Tokyo­Electron marks the 50th year of its founding, we plan to pay a commemorative dividend of¥20 per share, expressing our appreciation for the continued support of shareholders.

Technology Expansion

However, we believe that our shareholders’ strongest expectations for Tokyo Electron are

PV production
equipment

for us to enhance its corporate value by achieving growth. Therefore, we intend to continue

LCD production
equipment

OLED display
production
equipmentusing surplus funds primarily to invest in technology development, as well as for othergrowth investments including corporate acquisitions.
At the same time, we will undertake appropriate considerations for stock buybacks
depending on situations. While remaining consciously aware about the need both to drive

Semiconductor production equipment (SPE)Zoomsales and earnings growth and improve ROE, management will continue to provide the leadership needed to enhance Tokyo Electron’s corporate value.

TOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Top Message

Segment Informationn TOKYO ELECTRON AT A GLANCE

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan REVIEW OF OPERATIONSTOKYO ELECTRON AT A GLANCE
Consolidated Net Sales

Summary of Business

Main Products

Share of Net Sales

Semiconductor Production Equipment(Millions of Yen)

Semiconductor devices (IC chips) are the key components of smartphones, tab-

700,000

lets and other digital products. Tokyo Electron offers a wide range of equipment

668,722for producing these devices, along with superior technical support and service.
The product lineup comprises six product groups: coaters/developers, plasma

633,091

etch systems, thermal processing systems, single wafer deposition systems,• Coater/Developer• Plasma Etch System• Cleaning System
Auto Wet Station, Single Wafer Cleaning System,
Pre-clean System, Scrubber System

Dielectric Etch System, Silicon Etch System• Thermal Processing System• Single Wafer Deposition System• Wafer Prober

75.5%

CVD System, Plasma Processing Systemcleaning systems used in wafer processes, and wafer probers used in the wafer

600,000

testing process. Moreover, Tokyo Electron is expanding the product lineup foradvanced packaging processes, including equipment used for through-silicon via(TSV) processes.

500,000
Coater/Developer
CLEAN TRACK™ LITHIUS Pro™ V-i

Plasma Etch System
Tactras™

Summary of Business
400,000

Thermal Processing System
TELINDY PLUS™

Single Wafer CVD System
Trias™ e+

Single Wafer Cleaning System
CELLESTA™ -i

Main Products

Wafer Prober
Precio™

Share of Net Sales

FPD/PV Production Equipment

511,332
477,873

Tokyo Electron supplies flat panel display (FPD) production equipment used to
manufacture displays for PCs, LCD TVs and other electronic devices, along withsolid technical support and service.
The product lineup includes FPD coater/developer and plasma etch/ash system.
300,000

Photovoltaic cells (PV) are in the spotlight these days as an environmentally• 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)

friendly form of clean energy. In FY2009, Tokyo Electron added PV production

11.0%
FPD Plasma Etch/Ash System
Impressio™

equipment as a new field of operations.

FPD Coater/Developer
Exceliner™

200,000

Summary of Business

Main Products

Share of Net Sales

Electronic Components and Computer Networks
Tokyo Electron has developed a new type of dual model for this business: the66,721

trading business handles sales, in which it acts as a distributor of a wide array of

69,889sophisticated electronic components and computer network equipment, while

100,000

the development business designs and develops products in response to cus-

90,2160• Semiconductor Products• Other Electronic Components• Computer Networks• Software

13.4%

tomer needs, as well as our own in-house brand products. Business operations

84,868

453

461

2011

2012

for this segment are handled by Tokyo Electron Device Limited.

Others
(0.1%)

Xilinx, Inc.
FPGAF5 Networks, Inc.
Load Balancer

TOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Top Message

Segment Informationn TOKYO ELECTRON AT A GLANCE

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan REVIEW OF OPERATIONSREVIEW OF OPERATIONS
Overview of FY2012

Business Outlook

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

200

262.4

325.4

400

477.9

511.3

600

726.4

800

0

08

09

10

11

12

In the fiscal year ended March 31, 2012, the global economy was characterized by slowing growth, mostly in advanced economies, amid a clouded outlook over the future stemming primarily from the financial crises in Europe. In
the second half of the fiscal year, however, signs of a mild recovery emerged
primarily in the U.S. economy. The manufacture of logic chips that meet lower
power consumption and higher telecommunication standards was robust,
driven by strong demand for advanced mobile devices such as smartphones
and tablets. Meanwhile as for DRAM manufacturing, production adjustments
were carried out due to the slowing growth of PC sales.
Net sales in the segment declined 6.5% year on year to ¥477.9 billion,
as logic chips manufacturers’ robust investments in scaling, or miniaturization, was outweighed by the cutbacks in investment carried out by
memory manufacturers.
By region, while there were year-on-year sales increases of 73% in Europe,
24% in South Korea, and 12% in the United States, sales declined in all otherregions. There was an especially large decline in Taiwan, a 50% down, due tosluggish capital investment by DRAM manufacturers.

There is need for enormous quantities of IC chips as well as technological innovation for higher density, higher
speed and lower power consumption in IC chips because of the spread of mobile devices including smartphones and tablets, and the expansion of data communication volumes accompanying the spread of cloudcomputing. Semiconductor production equipment will play an increasingly important role in the realization ofthis quantitative expansion of IC chips and further technological innovation, and this importance will continue
to drive semiconductor capital investment.
Tokyo Electron will focus effort on the comprehensive strengthening of existing products and the launchingof new businesses to link these market and technology trends to business expansion. In existing products,
Tokyo Electron will continue to introduce high productivity models of coater/developers and thermal processing systems, products in which the Company possesses solid strengths. The company will seek sales growthfrom etch systems and cleaning systems, products that are targeted for reinforcement, by increasing customer
recognition of the technological superiority of Tokyo Electron products through customer evaluations. In addition, the Company will develop strategies that link expansion of the served available market (SAM) to
increased sales of single wafer deposition systems by entering into the new product area for logic chips, andthe introduction of new testing products that meet the customer need to reduce test costs.
In new business fields, Tokyo Electron will expand the product line in the wafer-level packaging sector,
where high growth is expected, above all in 3DI packaging technologies. In May 2012 the Company acquired
and integrated NEXX Systems of the U.S., which owns technologies related to this field.

Overview of FY2012

Business Outlook

Sales by Region
China &
Others

10%

Japan

17%

16%
Taiwan

24%
23%
10%

North
America

Korea
EuropeFPD/PV Production Equipment
FPD/PV Production
Equipment Sales(Billions of Yen)
100

69.9

66.7

71.4

68.0

60

88.1

80

40
20

While demand for small- and medium-sized LCD panels used in smartphones
and tablets was robust, the market for large LCD panels used in TVs slumped
as global shipments of TVs declined year-on-year for the first time ever. Investments by flat panel manufacturers mirrored this trend, focusing on the smalland medium-sized LCD production equipment for advanced mobile
electronics. In the photovoltaic cell (PV) production equipment business, while
the PV market continued to grow, the market environment became severe as
panel prices continued to plunge amid a worsened supply-demand balance,
which forced many PV-related companies to exit the business.
Net sales in the segment rose 4.7% year-on-year to ¥69.9 billion. FPD
production equipment sales were slightly down compared with the previous year, while sales of PV production equipment increased.

The market for small and medium-sized high-definition displays incorporated in smartphones, tablets, andother mobile products is growing.
The use of low-temperature polysilicon (LTPS) or indium gallium zinc oxide (IGZO) instead of conventional
amorphous silicon in thin-film transistor (TFT) processes is becoming prevalent. In addition, high-definition,
low-power-consumption organic light-emitting diode (OLED) displays have already been practically applied in
mobile devices as post-liquid crystal display (LCD), and development toward production of large OLED displays
for televisions has been accelerating.
As this technology innovation advances, Tokyo Electron will aim for business growth through the launch ofcompetitive products adapted to new TFT processes and the introduction of production equipment for OLEDs,
which will mark the Company’s entry into new product areas. In addition, amid intensification of competition,
the Company will pursue greater efficiency in operation to reduce costs.
In the PV business, Tokyo Electron will focus on thin-film silicon production technology, which is considered
optimal for large-scale power generation. This technology brings down the electricity cost. The Company
believes a large market will form over the medium to long term provided high conversion efficiency is realized.
The Company will concentrate R&D for PV production equipment at the TEL Technology Center Tsukuba, afacility opened in Ibaraki Prefecture in the spring of 2012, and aim for an early business start-up.

Overview of FY2012

Business Outlook

0

08

09

10

11

12

Sales by Region
Japan

21%

79%

Overseas

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

90.2

84.9

60

84.5

94.2

90

111.2

120

30

0

08

09

10

11

12

In the Japanese electronic components market during the fiscal year ended
March 31, 2012, while the market for smartphones and other mobile devices
expanded steadily, demand slumped for digital household electronics, particularly TVs. In terms of IT investment, there were signs of a gradual recovery,
with expanded investment in cloud computing and other areas amid a growing awareness of the benefits of IT to support corporate and social activities.
Net sales in the segment declined 5.9% to ¥84.9 billion. In the electronic
components business, while sales of semiconductors used in communications
equipment such as mobile phone base stations were robust, sales of semiconductors both for consumer and industrial electronics products slumped. In thecomputer networks business, sales of equipment, primarily storage, and maintenance services were strong on increased corporate demand for cloud computing and a greater use of data centers.

In the electronic components business, market growth in the Asia region is expected to continue. In thecomputer networks business, the use of data centers is expected to increase reflecting the further spread ofcloud computing.
With these market trends in mind, Tokyo Electron will expand sales in the Asia Region. The measures todo this include sales expansion to the overseas subsidiaries of Japanese companies located in the Asia
region, and sales promotion to overseas customers of newly acquired trade rights and the Company’s own
products under the inreviumTM brand. The Company will also undertake high growth in the IT market
through providing optimal solutions: for instance, the introduction of high-value-added new products forcloud computing and data centers.

Sales by Region
Overseas

14%

Japan

86%

TOKYO ELECTRON Annual Report 2012

PAGE

9

CONTENTS

Highlights

Top Message

Segment Information

Featuren FEATURE 1

Corporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FEATURE 2

FEATURE 1

Management Talks About Manufacturing,Core SPE and New Growth Drivers

Manufacturing as a Platform for
Maximizing Customer Value
Hirofumi Kitayama
Representative Director,
Executive V.P. and General Manager,
Manufacturing Division (Quality)

We have set ourselves the challenge to “become the world’s top

expectations. The new plants in Miyagi and China put this con-semiconductor production equipment manufacturer.” As part of

cept of value into practice.

our plan to achieve that goal, we began operations at the Tokyo

Other issues which we must always keep in mind are the provi-

Electron Miyagi new plant in Japan in October 2011. This newsion of fast, high-quality services delivered close to the customer,

plant unifies all the processes behind etch systems, from develop-

exchange rate fluctuations, BCP, and the national policies of thement to product manufacturing. The plant’s mission is to use thiscountries in which we operate. To deal with these issues, we areunified structure to deliver products with even higher value topromoting localization and global procurement initiatives aimed

customers on a timely basis. We will shorten the product develop-

at ensuring our costs are in line with market expectations.

ment time, enhance product quality from the development stage,Through our sourcing in Taiwan, Korea, and China, we haveand improve productivity by completely eliminating wasted time,

gradually grasped the characteristics of the cost and quality ofcommunication, and costs. What we challenge with flow-line

goods in each region. Important things are, we have to fully

manufacturing introduced at this new plant is “production innova-

leverage these characteristics, and at the same time we havetion” through visualization.

to value the good faith and trusting relationships with new

In March 2012, Tokyo Electron (Kunshan) Limited began oper-

Hirofumi Kitayama

Hikaru Ito

Kenji Washino

Representative Director

Corporate Director

Corporate Director

When pursuing costs, we

In fiscal 2012, the SPE division

We are challenging ourselves

should not overly focus on

was able to gain a foothold toto create new growth drivers

direct costs and neglect to see

further raise our position inwhich draw on our SPE

the mechanism of production

coming years in our focus areas.

strengths and lead to theand quality.

local partner companies as well as established partner compa-

ating its plant in Kunshan, China. Initially, the plant is engaged innies. When pursuing costs, we should not overly focus on

the repair of parts used in FPD plasma etch systems. It successfully

direct costs and neglect to see the mechanism of production

shipped its first products to customers at the end of April.

and quality. Paradoxically, by utilizing global sourcing, the Jap-

Through the challenge to manufacture FPD etch systems at a costanese art of manufacturing can continue to find value throughthat meets market expectations, we seek to build a manufactur-

thoroughly examining indirect costs for all processes and slim-

ing base in the area where demand for digital consumer electron-

ming them down.

ics is expected to grow significantly.

With our 50th anniversary approaching, we will spare no effort

From the customers’ perspective, our value lies in products
backed by unsurpassed technology and product manufacturing

to advance product manufacturing based on our enduring desire
to maximize customer value.

supported by a cost structure consistent with market
Operations Start at New Production Base for Etch Systems

Operations Start at New Kunshan Plant in China

The new Miyagi Plant integrates
development and manufacturing aswell as using a new production
system, thereby improving quality andincreasing productivity.

establishment of differentiated technologies.
Tokyo Electron Miyagi Limited

We have built a manufacturing basefor FPD production equipment in
China which is expected to become acenter for flat panel display manufacturing, aiming to reduce costs andquickly respond to customers
Tokyo Electron (Kunshan) Limited

Zoom

Zoom

TOKYO ELECTRON Annual Report 2012

PAGE

10

CONTENTS

Highlights

Top Message

Segment Information

Featuren FEATURE 1

Corporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FEATURE 2

FEATURE 1

Seizing Opportunities toAchieve Our Growth Strategy

Actively Introducing
New Products to Achieve Growth
That Outpaces Market Expansion

Kenji Washino

Hikaru Ito

Corporate Director,
Executive V.P. and General Manager,
Corporate Business Strategy/Organic EL/
FPD/PVE

Corporate Director,
Executive V.P. and General Manager,
SPE

After the global financial crisis of 2008, two major changes intrends have been occurring in the semiconductor production
equipment (SPE) market. One is an increase in the ratio of investment for logic devices. The other is a decrease in the number ofsemiconductor manufacturers who are able to make large capital
investments: in other words, advancement of so-called “oligopolization.” In response to these changes, the SPE Division has
upgraded and expanded the line of products for logic devices andstrengthened the sales organization.
In fiscal 2012, in particular, we gained a foothold for further
increasing our position in the coming years in the fields of etchand clean, our focus areas. These two products achieved market
share gains, and in addition, succeeded in getting approvals
from major customers as their next-generation volume production equipment.
At the same time, the year brought considerable accomplishments in product development. A notable example is Atomic
Layer Deposition (ALD), a new deposition process that is

expected to be an essential technology for the manufacturing of
next-generation devices. Tokyo Electron succeeded in developing
and commercializing a semi-batch ALD system for this process. In
addition, in coaters/developers, an area in which Tokyo Electron
has dominant market share, the Company began full-scale
market introduction of a new model for 20nm node following
favorable evaluations from customers.
Looking ahead, Tokyo Electron will aim for further expansion of
the SPE business by boosting competitiveness in etch systems,
cleaning systems, and the field solutions business while solidifying
its position for products with high market share through active
introduction of new products.
To that end, we will continue to develop products and technologies unavailable from competitors, as exemplified by new
plasma technology that uses a radial line slot antenna, and tonurture and develop human resources all around the world who
can provide the best solutions by matching such technologies tocustomer needs.

Expand Sales with Differentiated New Products

In recent years, the amount of IP traffic being sent over the Internet has exploded, as GPS, sensor data and other types of data arebeing transmitted to servers, in addition to computer data. By
2015, the amount of data transmitted is forecasted to be morethan double compared to today. We are also seeing smartphones,
tablets, and other mobile products drive the growth in the electronics industry, as consumers demand products that are faster,
more energy efficient, and thinner.
To meet the era’s needs, we are expanding our products for
wafer-level packaging (WLP) which promises strong future growth,
as well as strengthening our existing products for front-end wafer
processing. Ranging from our Etch system and CVD system to therecent additions of wafer bonder/debonder, our product lineup forthrough-silicon via (TSV) processes is winning high appreciationfrom our customers. In May 2012, we bolstered our presence in
the WLP market with the acquisition of NEXX Systems, a U.S. company with an established reputation for electrochemical deposition
and PVD technology. We will maximize synergies between our
existing product lines to aggressively expand this business.
In the display fields, organic light-emitting diode (OLED) displays
continue to draw attention for their high resolution and energy efficiency. We are collaborating with Seiko Epson Corporation on thedevelopment of a coating system using an inkjet method, while developing an evaporation system using our own proprietary technology.

This two-pronged approach will enable us to take advantage of theopportunities offered by the revolutionary shift in our markets, andalso meet customer needs with the optimal approach.
In the belief that one of our missions is to address environmental issues through our technology, we are enhancing the photovoltaic cell (PV) production equipment business. We areaccelerating the development of the equipment for thin-film
silicon technology as we expect it to be the most suitable forlarge-scale power generation and to have high growth potentialfrom the medium to long term perspective.
Amid a market where the pace of innovation is accelerating andsophisticated solutions are demanded, there are three priorities for
product development: planning capabilities to accurately grasp
customer needs; capabilities to move quickly by taking ideas from
R&D to commercialization in a short time period; and producttechnology and service capabilities. To hone these three capabilities, we need to consider collaborations and tie-ups with companies outside our industry to respond flexibly and proactively tomarket needs without overly relying on our own technology.
In FY2012, Tokyo Electron invested the highest R&D expenses
to date of ¥81.5 billion. We will continue to invest in new areas,
as well as in our existing core SPE fields, and challenge ourselvesto create new businesses which draw on our strengths and leadto the establishment of differentiated technologies.

TEL Products for Advanced Packaging Technology
Expanding our product lineup for advanced packaging technology by purchasing the U.S. company NEXX Systems.
Cleaning
Deep Si etcher

Plasma Etch System
Tactras™ RLSA™ Etch

Single Wafer Cleaning System
CELLESTATM -i

ALD SiO2 System
NT333TM

High-density low-damage silicon etcher. Its
strength lies in critical processes such astransistor formation.

This system boasts max. 1,000 wafers/hour,
the highest in the industry. It responds tovarious cleaning requirements accompanying
miniaturization.

A semi-batch ALD system that uses a different concept from conventional ones. It
simultaneously realizes high quality and highproductivity.

Dielectric liner deposition

Patterning

Electrochemical deposition

Wafer bonder

Zoom

Physical vapor deposition

Wafer debonder

Logic+Memory TSVMulti Chip TSV

Zoom

TOKYO ELECTRON Annual Report 2012

PAGE

11

CONTENTS

Highlights

Top Message

Segment Information

Corporate GovernanceFeaturen FEATURE 1

Corporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FEATURE 2

FEATURE 2

Tokyo Electron—50 years of untiring progress
through innovation
Tokyo Electron 50th Anniversary Logo

Tokyo Electron marks the 50th year of its founding in 2012. The driving force
behind the company’s growth has been its policy of placing the customer first,
unchanged since its founding, and a corporate culture facilitating flexible andswift response to market change. Tokyo Electron will continue to be a global
leader through the creation of revolutionary technologies and contribute to thecreation of a prosperous future society through its products and technologies.

Tokyo Electron marks the 50th year of its founding on
November 11, 2012.

“A Company with a Dream for the Future”
This logo mark was developed as a symbol ofTracking Sales Growth in Response to Market Changes

our commitment to the future as we celebrate

Zoom

the 50th anniversary of Tokyo Electron. It sym-

15 16

65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

13 14

A technology specialty trading company providing
the added value of technological support

The next stage

Establishment of first joint
venture (TEL-Thermco)

Listed on 2nd Section ofTokyo Stock Exchange

Withdrawal from business ofexporting consumer products

Semiconductor
Application

Developing our own products andbuilding our position as a manufacturer

Mainframe
ComputerGlobalization

Technological innovation“cutting edge technology” and “environment
and nature” become one and start moving income together to make contributions to afuture society as a single team, using the logo

Start of direct operations
overseasPCdream” through a figure in which “people,”one circle. We hope our employees will also

Strengthening of corporate
governance

Listed on 1st Section ofTokyo Stock Exchange

17bolizes our company’s concept: “a future with amark in a variety of TEL communication tools
MobilePhone

Digital Consumer
Electronics etc

Big
Data

and applications.

2012 marks an important occasion in the history of Tokyo

were a unique company with both trading and manufacturing

cycle is the key to our ability to continue our growth into theElectron—the 50th year of our founding. I wish to take this oppor-

functions, and then over the past 20 years we powerfully evolved

future. We have fostered an open corporate culture characterizedtunity to thank our shareholders, customers, suppliers, and busi-

into a world-class production equipment manufacturer alongsideby honesty, fairness, and open-mindedness and sincerity in every-

ness partners for the tremendous support and guidance which

the breathtaking growth of the electronics industry.

thing we do. This culture has won us the respect and trust of ourhave made Tokyo Electron the company it is today.
Since our founding, the Company has astonishingly repeatedly

The key factor behind our growth over the years has been ourcommitment to placing the customer first—a policy which hascustomers worldwide and has greatly contributed to our half century of growth.

changed its business model and operations in the course of evolv-

rooted the company since its founding. On the basis of this policy,

To enhance our corporate value further, I believe it is impor-

ing to its present form. The driving force behind Tokyo Electron’s

we strive to maximize the added value we provide through ourtant to set our sights on even higher world-class goals and per-growth throughout these changes has been a DNA which

products and technology, and in return we receive a profit con-formance standards while demonstrating a technologicalenables us to respond to market needs and customer demands

nected with that value. The profits we receive are reinvested into

leadership in our industries. We must also continue to be aflexibly, rapidly, and boldly. We started business in 1963 as a tech-the development of cutting-edge technology and high value-

vibrant global company with ambitious dreams. I am very confi-

Tetsuo Tsuneishi

nology specialty trading company, and we grew swiftly in theadded products which can contribute to the growth of the market

dent that the electronics and IT industry, driven by semiconduc-

Vice Chairman of the Board

1970s and 1980s in tandem with the growth and progress ofand industry as well as to a more prosperous life for people. At

tor technology, will achieve remarkable growth together withJapan’s semiconductor and electronics industry. For a period, weTokyo Electron, we recognize that the sustainment of this positivetechnological innovation.

TOKYO ELECTRON Annual Report 2012

PAGE

12

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate Governance
n CORPORATE GOVERNANCE

Corporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan BOARD OF DIRECTORS, STATUTORY AUDITORS AND EXECUTIVE OFFICERSCORPORATE GOVERNANCE

The Assurance of Transparency Generates Dynamism

CORPORATE GOVERNANCE
Against a backdrop of ongoing business globalization, Tokyo

has adopted the executive officer system to separate the businessElectron maintains a management philosophy that puts empha-

execution function from the Board of Directors. Moreover, Tokyo

sis on improving corporate value for its shareholders and all

Electron has been disclosing the individual remunerations of rep-other stakeholders. To this end, the Company considers it isresentative directors since 1999 in recognition of the importanceimportant to strengthen corporate governance. In line with theof managerial transparency for shareholders.

following three basic principles, the Company is building ahighly effective corporate governance structure, and upgrading

The Board of Directors

and strengthening its internal control systems and risk manage-

The Board of Directors consists of 14 directors, two of whom

ment system.

are outside directors. In principle, the Board of Directors meetsonce a month, with additional meetings if necessary. (During

Tetsuro Higashi
Chairman of the Board

The business environment in Japan in
fiscal 2012 was extremely difficult
because of the Great East Japan Earthquake, power shortages stemming fromthe accident at the Fukushima nuclear
power plants, supply chain disruption
resulting from the flooding in Thailand,
and yen appreciation triggered by thefinancial crisis in Greece. Nevertheless,as mentioned elsewhere in this annual
report, Tokyo Electron was able to makeimportant strategic moves, includingcommencing operations of a new
Miyagi plant, and other new manufacturing and development bases that holdthe key to the Company’s future growthand market penetration of its new

products. I am deeply grateful for theearnest support and understanding of
our shareholders and other stakeholders, which made this progress possible.
Many uncertainties continue toweigh on the worldwide economic
situation, and the future outlook
remains unclear. However, I believe that
it is at just such a time that it is critically important for a company to clearly
set forth policies and measures forcorporate value enhancement from a
medium- to long-term perspective,
articulate a vision for the future, andmaintain and strengthen managementtransparency and soundness. To that
end, the Company must function as adynamic organization, with the Boardof Directors, the organization entrustedwith management of the Company by
the shareholders, the executive body,which is responsible for the executionof business, and the individual employees who execute business on the front
lines, each brimming with vision andvitality to create a bright future.
It is also essential that communication
among these three levels of the organization be prompt and highly transparent. Moreover, the management andbusiness policies generated by thesethree organizational levels must win
wide-ranging acceptance and generate
expectations from our customers andsociety at large.
Dynamic growth can be ensured only
when a company enhances the governance I have described above. As a
global supplier, the Company should
gain the trust and meet the expectations of our shareholders and all otherstakeholders worldwide by maintaining
and strengthening our highly transparent management activities. In this light, I
continue to offer support, encouragement, and advice to the Company’s
executive body and employees. I lookforward to your continued understanding and support.

Tokyo Electron’s Basic Principles of Corporate Governancefiscal 2012, the Board of Directors met on 12 occasions.) In

1. Ensure the transparency and soundness of business operations

order to ensure that the Company can respond quickly to

2. Facilitate quick decision-making and the efficient execution ofchanging business conditions, and to more clearly define management accountability, the term of office for directors is set atbusiness operations

one year.

3. Disclose information in a timely and suitable manner

Furthermore, Tokyo Electron has set up two committees

The Corporate Governance Framework

whose activities are intended to ensure the transparency ofTokyo Electron uses the statutory auditor system based on the

management: the Compensation Committee and the Nomi-

Companies Act, and furthermore has established its own Com-nation Committee. The members of both these committees

pensation Committee and Nomination Committee to increase theare directors and statutory auditors, excluding the represen-transparency and objectivity of management. Also, Tokyo Electron

tative directors.

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Annual Shareholders’ Meeting
Compensation Committee
Nomination Committee

Statutory Auditors

Board of Chief Business Ethics Director
Directors Chief Internal Control Director

Request for improvement/Report

Representative Directors

Confirm the progress of improvements andgive instructions
Audit and improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer

Independent Auditors

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 Dept.
Request for improvement/
ReportBusiness Depts.

Monitoring
Check and balance

Administrative Depts.

TOKYO ELECTRON Annual Report 2012

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13

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate Governance
n CORPORATE GOVERNANCE

Corporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan BOARD OF DIRECTORS, STATUTORY AUDITORS AND EXECUTIVE OFFICERSCORPORATE GOVERNANCE
Compensation for Corporate Directors and Statutory

internal control systems and make them more effective. The

Coordination Between Statutory Auditors and Indepen-

remuneration to be paid to representative directors at the Board

AuditorsCompany is implementing practical measures in line with thedent Auditors

meeting for approval.

Tokyo Electron has adopted the following executive com-

Fundamental Policies Concerning Internal Controls within the

The statutory auditors receive audit plans for the fiscal year from

Nomination Committee: This committee nominates candi-

pensation program with the intention of tying compensa-

Tokyo Electron Group decided by the Board of Directors. The

the independent auditors, as well as explanations regarding

dates for directors to be selected at the annual shareholders’tion more closely to financial results and shareholder value,Company is also implementing measures for the Internal Con-

auditing methods and particular areas of focus, among othermeeting, and nominates a candidate for CEO to be selected byraising corporate competitiveness, and enhancing manage-

trols Over Financial Reporting, based on the Financial Instru-

matters. The independent auditors audit the year-end financial

the Board, which it submits at the Board meeting for approval.

ment transparency.

ments and Exchange Act.

statements and review the quarterly financial statements, andCompensation Committee: This committee proposes thereport the results of their audits to the statutory auditors.

1. The compensation for corporate directors consists of a monthly
The Board of Statutory Auditors

fixed remuneration and a performance-linked compensation.

Internal Control Systems

The Company provides KPMG AZSA LLC, its independent audi-

To strengthen the internal control and risk management systems

tors, with all necessary information and data to ensure that it candirectors is designed to align compensation more clearly withof the entire Tokyo Electron Group more effectively, Tokyo

conduct its audits during the fiscal year promptly and correctly.

the Board of Directors, the Top Management Conference andfinancial results and increases in shareholder value. It takes into

Electron appointed a Chief Internal Control Director and a Com-other important business meetings, but also conduct operations

account consolidated return on equity (ROE) and consolidated

pliance & Internal Control Executive Officer. Under them, theCompliance

audits and accounting audits, and evaluate risk management, in

net income, two performance indicators of consolidated busi-

Company established the Risk Management & Internal Control

Trust from stakeholders is the corner-

addition to auditing the performance of duties by directors. During

ness results. Necessary adjustments are then made when there

Department, which evaluates and analyzes the risks which could

stone of business activities. In order tofiscal 2012, the board of statutory auditors met seven times.

are special factors that should be taken into account, such asaffect the Group, and works to reduce risks by promoting themaintain trust, it is necessary to continu-

principal performance indicators for the term under review,necessary measures. Tokyo Electron has also established theously act in rigorous conformity to busi-

Outside Directors and Outside Auditors

including profits and losses, and so on. Performance-linked

Information Security Committee and the Export Trade Control

ness ethics and compliance. In line with

From the viewpoint of objectively ensuring the effectiveness ofcompensation comprises cash bonuses and stock-based com-Committee to further strengthen the management of confiden-

the Fundamental Policies Concerning

the decision-making of the Board of Directors, Tokyo Electron

pensation. The ratio of cash bonuses to stock-based compen-tial information and the export compliance system.

Internal Controls within the Tokyo

has appointed two outside directors to the Board: Mr. Hiroshi

sation has generally been one to one. Stock-based

Inoue, who is Chairman of the Board, Tokyo Broadcasting

compensation consists of granting share subscription rights

Internal Audit Department (Global Audit Center)and employees are required to maintain

System Holdings, Inc., and Mr. Masahiro Sakane, who is Chair-with a set strike price of one yen per share and setting unexer-

The Global Audit Center oversees the internal auditing activi-

high standards of ethics and to act withman of the Board, Komatsu Ltd. From the viewpoint of objec-

cisable period for three years. Performance-linked compensa-

ties of the entire Tokyo Electron Group. The Center is respon-a clear awareness of compliance.

tively ensuring the reasonableness of the audits, Tokyo Electrontion is limited to five times the fixed compensation.

sible for auditing the business activities of the Group’s

The Company has four statutory auditors, two of whom are out-

2. The performance-linked compensation system for corporateside auditors. The statutory auditors not only attend meetings of

has appointed two outside auditors: Mr. Togo Tajika, and Mr.
Ryuji Sakai, who is a Partner at Nagashima Ohno & Tsunematsu.
Mr. Togo Tajika conducts audits of the Tokyo Electron Group asa full-time company auditor.

3. The performance-linked compensation of outside directors
does not include stock-based compensation.
4. The compensation for statutory auditors consists only of amonthly fixed remuneration, to maintain independenceElectron Group, all Group executives

5. Retirement allowances systems for corporate directors andhttp://www.tel.com/eng/ir/ethics.htm

domestic and overseas bases, as well as their compliance andCode of Ethics, Chief Business Ethics Director and Ethics

systems, and evaluating the effectiveness of internal control

Committee

systems. When necessary, the Global Audit Center also pro-

In 1998, Tokyo Electron formulated the “Code of Ethics of thevides guidance to operating divisions.

Tokyo Electron Group” to establish uniform standards to govern
all of its global business activities. In the same year, the Company

from management.
The Executive Officer System

Code of Ethics of
the Tokyo Electron Group

Coordination Between Statutory Auditors and Internal

appointed a Chief Business Ethics Director and established the

In order to further clarify the roles of the Board of Directors andstatutory auditors have been abolished in and after the end

Audit Department

Ethics Committee, which is responsible for promoting businessexecutives in charge of business operations, Tokyo Electron hasof fiscal 2005, as part of the revisions to Tokyo Electron’s

The statutory auditors coordinate with the Global Audit Center,ethics awareness throughout the Group. The Code and its Q&A

adopted the executive officer system. This system promotes fast

executive compensation program.

a department responsible for internal auditing activities, primar-

section are published in Japanese, English, Korean and Chinese

ily by attending its report meetings, which were held 13 times

editions, and the Company distributes it to all Group executives

during fiscal 2012.

and employees, including those overseas. Moreover, the Code isdecision-making and the quick establishment and execution ofbusiness strategies.

Internal Control and Risk Management System
In order to enhance corporate value and ensure that all businessappropriately reviewed and revised in response to changes in

activities are carried out responsibly and in the interests of all

the environment and societal demands. The most recent revision

stakeholders, Tokyo Electron is taking steps to strengthen itsof the Code and Q&A was in April 2011.

Zoom

TOKYO ELECTRON Annual Report 2012

PAGE

14

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

n CORPORATE GOVERNANCE

R&D/Intellectual Property

Financial Section

Corporate Datan BOARD OF DIRECTORS, STATUTORY AUDITORS AND EXECUTIVE OFFICERSCORPORATE GOVERNANCE
shareholders are free to cast their votes via the Internet.

Compliance & Internal Control Executive Officer

employees may use to report their concerns. The entire Group• Even when the information is not subject to the listing reg-Tokyo Electron has appointed a Compliance & Internal Control

has established an ethics hotline and a compliance hotline, andulations pertaining to marketable securities, the Company

Moreover, Tokyo ­Electron participates in the web-based voting

Executive Officer from among the executive officers to raise

this reporting system is also in place at each overseas base. In all

discloses the information proactively, in a fair, prompt andplatform for institutional investors operated by Investor Com-

awareness of compliance across the Group, and further improvecases, this system ensures that strict confidentiality is main-

accurate manner if the information is deemed useful inmunications Japan Inc. (ICJ). To supplement the above share-

its implementation.

tained to protect the whistleblower and ensure that they are notproviding stakeholders with an accurate understanding ofholder meeting-related initiatives, Tokyo Electron’s website

subject to any disadvantage or repercussions.

the Company.

carries notices, resolutions and presentation materials ofshareholders’ meetings. An English version of the Notice ofFramework for Thorough Implementation of ComplianceTokyo Electron has drawn up the Compliance Regulations set-

Disclosure Policy

Disclosure Practices

ting out basic compliance-related requirements in line with theTokyo Electron is committed to disclosing information about• If it is subject to the marketable securities listing regulations

Code. The Compliance Regulations are intended to ensure that

the Company in a fair, prompt and accurate manner, to ensure(material information), Tokyo Electron will release information

all individuals who take part in business activities for the Group

that all stakeholders, including shareholders and other inves-simultaneously in a press release and via the Tokyo Stockclearly understand the pertinent laws, regulations, internationaltors, can obtain an accurate, in-depth understanding of the

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

standards and internal company rules, and continuously apply

Company and its activities, and evaluate the Company’s corpo-

the information on its website as soon as possible, following

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

rate value appropriately. The Company also solicits feedback

the official announcement.

web-based training programs for employees, makes informationfrom its stakeholders as part of its information disclosure activ-• Even when it does not fall into the category of “material infor-

on compliance issues available to employees via the Company

ities, and uses the feedback as a point of reference to guidemation,” the Company will voluntarily disclose information

intranet, and takes other steps to promote broad awareness ofcorporate management.

which may be of interest to stakeholders in a fair, accurate,and easy-to-understand manner, either on its website or incompliance throughout the Company.
Information Disclosure Standards
Internal Reporting System• Tokyo Electron complies fully with the Financial Instruments

printed form, through various means of communication.
• Tokyo Electron conducts meetings to discuss its financial

In the event that an employee becomes aware of any activity

and Exchange Act, and the Tokyo Stock Exchange’s listing

results with securities analysts and investors; these meetings

which may violate laws, regulations or principles of businessregulations pertaining to marketable securities.

are also open to members of the press. The Company makes

ethics, the Group operates an internal reporting system thataudio recordings of its fiscal year-end and mid-term financial
results 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 toDoes Tokyo Electron have these major components of corporate governance?

the information, the Company strives to disclose all information simultaneously in Japanese and English. However, due

Compensation Committee

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

to the time required for translation, there may be cases

Nomination Committee

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

where the posting of English information to the website is

Outside directors

Yes Two of the 14 directors are outside directors

delayed slightly.

Outside auditors

Yes Two of the four statutory auditors are outside auditors

Executive officer system

Yes

Shareholder Measures

Disclosure of individual remunerations ofrepresentative directors

Yes Disclosed since 1999

Tokyo Electron mails a Notice of Annual General Meeting of

Performance-linked compensation systemYesadvance of the meeting, as one of its measures to vitalize

Stock options system

Yes Does not apply to outside directors and auditorsthese meetings and to promote smooth and efficient voting.

Retirement allowance system for executives

No

It also sets the date of the Company’s meeting to avoid days

Anti-takeover measuresNo

on which many such meetings are concentrated. In addition,

Shareholders to shareholders more than three weeks in

Annual General Meeting of Shareholders is also provided.

Tokyo Electron is a constituentof the FTSE4Good Global Index.

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 100%
owned by the London Stock Exchange.

TOKYO ELECTRON Annual Report 2012

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Segment Information

FeatureCorporate Governance
n CORPORATE GOVERNANCE

Corporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan BOARD OF DIRECTORS, STATUTORY AUDITORS AND EXECUTIVE OFFICERSBOARD OF DIRECTORS, STATUTORY AUDITORS AND EXECUTIVE OFFICERS(As of July 1, 2012)

Board of Directors

Executive Officers
President & CEO
Hiroshi Takenaka
Executive Vice Presidents
Hirofumi Kitayama
General Manager,
Manufacturing Division (Quality)

Tetsuro Higashi

2

Chairman of the Board

Tetsuo Tsuneishi

1

Vice Chairman of the Board

Hiroshi Takenaka

Hirofumi Kitayama

Kiyoshi Sato

Kenji Washino

President & CEO
Representative Director

Representative Director

Corporate Director

General Manager,
Corporate Business Strategy,
Organic EL/FPD/PVE

Hikaru Ito
General Manager, SPE
Senior General Manager,
SPE Sales Division

Senior Vice Presidents
Takashi Nakamura

Kenji Washino

Hikaru Ito

Takashi Nakamura 2,3,4

Takaaki Matsuoka

Masami Akimoto

Corporate Director

Corporate Director

Corporate Director

Corporate Director

Corporate Director

General Manager,
Corporate Administration Division
Compliance/Internal Control

Masami Akimoto
General Manager,
System Development Division

Takashi Ito
General Manager, PVE

Chiaki Yamaguchi

Yoshiteru Harada1

Hideyuki Tsutsumi

Hiroshi Inoue *Corporate Director

Corporate Director

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

Masahiro Sakane 1 *Corporate Director/
Chairman of the Board,
Komatsu Ltd.

Statutory Auditors

Vice Presidents
Yoshiteru Harada
Deputy General Manager,
Corporate Administration Division
HR/General Affairs/Accounting/Export and Logistics Control

Hideyuki Tsutsumi
General Manager, Etch Systems BU

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

Tetsuro Hori
General Manager,
Corporate Strategic Planning/Finance/
Legal/Intellectual Property

Keisuke Koizumi
General Manager,
Corporate Procurement
General Manager, IT

Seisu Ikeda (Yoh)General Manager, Clean Track BU

Toshiki Kawai
General Manager,
Surface Preparation Systems BU

Shingo Tada

General Manager, SPE Sales Division

General Manager,
Thermal Processing Systems BU

Gishi Chung

Takeshi Okubo

General Manager,
SPE Process Development Division

Shigetoshi Hosaka
General Manager,
Corporate Development Division

General Manager,
Single Wafer Deposition BU
General Manager, Organic EL

Yuichi Abe
General Manager, Test Systems BU

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

General Manager, Field Solutions BU

Yoshinobu Mitano
General Manager, 3DI

Tsuguhiko Matsuura
General Manager, FPD BU
Deputy General Manager, Organic EL

Shinichi Sasahara

Mitsutaka Yoshida 2

Shojiro Mori

Togo Tajika *Ryuji Sakai *Statutory Auditor

Statutory Auditor

Statutory Auditor

Statutory Auditor/
Attorney-at-Law,
Nagashima Ohno &Tsunematsu

General Manager, FPD Sales
General Manager, PV Project

Yutaka Nanasawa
General Manager,
PVE Integration Project*BU stands for “business unit”

TOKYO ELECTRON Annual Report 2012

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R&D/Intellectual Property

Financial Section

Corporate Datan ENVIRONMENTAL, HEALTH AND SAFETY ACTIVITIESENVIRONMENTAL, HEALTH AND SAFETY ACTIVITIESTokyo Electron’s important corporate missions include placing
the highest priority on ensuring people’s health and safety
and preserving the global environment when conducting
business activities.

Fundamental Policy
Tokyo Electron positions environmental, health and safety activities as one of its most important management issues to achieveboth sustained corporate growth and a sustainable society. With
that in mind, Tokyo Electron is committed to reducing the environmental impact of all its activities, and to ensuring absolutesafety in the Company’s facilities and in those of its customers.
In order to accelerate our environmental activities, in May 2008
we codified Tokyo Electron’s environmental commitment, selecting“Technology for Eco Life” as a slogan to guide our environmental
activities. One of the stipulated goals of this commitment is todevelop production equipment that will enable customers to cut
the total environmental burden of their factories in half by 2015,
and also to cut the Company’s own environmental burden frombusiness activities and logistics in half by the same date. As a resultof progress in the related activities, the Company expected toachieve these goals ahead of schedule. The Company has therefore
set new goals this fiscal year, and under the slogan “Technology for
Eco Life” continues its global environmental preservation activities
centered on contributions by innovative product and technology.
Moreover, to push ahead with these environmental, health andsafety 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, we are also actively engaging in activities that
contribute to society.

EHS Management
Since 1997, Tokyo Electron has developed and implemented environmental management systems based on ISO 14001 standards, mainly
for the plants conducting manufacturing operations, and obtained
the relevant certification. Furthermore, to enhance the workability
and effectiveness of the EHS Management System, we are continuously raising the level of the audits that check the system and its
results. These audits are performed from various viewpoints: fromwithin the workplace or the Group, or by a third party.

Initiatives to Reduce the Environmental Burdenof Products
Proactive Environmentally Conscious Product Design
Tokyo Electron believes that the promotion of product designs
sensitive to the environment is vital. In particular, Tokyo Electron
has positioned promotion of energy conservation in its products,
as well as the reduction and replacement of regulated hazardous
chemicals, as priority issues.
1. Initiatives to Reduce the Environmental Impact During
Equipment Usage
Tokyo Electron set a roadmap for reducing the environmental
impact of major products, together with such policies for theequipment usage as reducing the energy consumption, andreducing the heat, air output, water and chemical substancesused. In this connection, we now make technological and operational proposals to our customers, and in cooperation with themadjust our approach to each product’s characteristics in a multifaceted manner. We are actively implementing initiatives toachieve these goals. Furthermore, we are working to reduce thetotal environmental burden during product usage: not merely ofour products, but also of the facility equipment owned by customers by means of optimal power management.
2. Initiatives Regarding Regulated Hazardous Substances in
Products
As an environmental measure, Tokyo Electron promotes efforts to
reduce hazardous chemical substances in its products. Chemical
substances contained in the units and parts used in products aremanaged in a dedicated database. Tokyo Electron has positioned
those products in which at least 98.5% of the constituent parts
meet standards stipulated by the Europe RoHS directive* as“equipment containing reduced amounts of chemicals.” Shipment of these products first began in October 1, 2008.
* Refers to the “Restriction of the use of certain Hazardous Substances in Electrical and Electronic
Equipment” directive in Europe (2002/95/EC) and amendments thereto. With the exception ofcertain applications excluded from its scope, this directive prohibits the inclusion of lead, mercury,cadmium, hexavalent chromium, PBB, and PBDE over a maximum prescribed amount in products.

has set a goal of achieving a 50% reduction of per-unit CO2 emissions by 2015 compared with 2007 (FY2008) base line year, andwe are promoting measures to reduce environmental impact.

Achieving Environmental Goals and New Goals
1. D evelop equipment that enables a 50% reduction in the
total environmental impact of customer factories
We are nearly achieving the target of CO2 emissions per 300 mm
wafer unit for the most of our major products.
2. R
 educe the environmental impact of our business activities and logistics by 50%
2-1 Logistics
The amount of CO2 emissions in fiscal 2012 was decreased by
54%, and reduced by 22% per ton-kilometer in comparison to
the baseline year.
2-2 Business Activities
CO2 emissions for FY2012 centered on development and manufacturing factories decreased by approximately 25,000 tons compared to the baseline year (FY2008: CO2 emissions approximately
113,000 tons) to approximately 88,000 tons. We achieved this byenergy-saving environmental investment, including the installation of solar power generation systems at the Miyagi and
Yamanashi plants, energy-saving activities, and plant integrations.

We expect to achieve our goal of reducing CO2 emissions per unitof sales by 52% and by over 60% in total volume by using
Domestic CDM*1 (Clean Development Mechanism) to achievecarbon offset*2 of about 50,000 tons, including the Great East
Japan Earthquake Recovery Program under Japan’s Domestic
Carbon Credit System, and green power in the U.S.
Tokyo Electron has closed the initial environmental goals inthese three fields of activities because we expect to achieve them,and set new environmental goals.
Based on a new environmental vision, these new environmental
goals proclaim individual targets in the fields of products, plants
and offices, procurement and logistics, and we will strengthen
environmental management to contribute to global environmental preservation through enhanced initiatives. For further details,
see the “Tokyo Electron Environmental and Social Report 2012”(to be published in September 2012).
*1 Domestic CDM (Clean Development Mechanism)
The approved reduction amount in CO2 emissions in Japan’s Domestic CDM System (a Japanese
government scheme that allows small and medium-sized businesses to receive funding, technology, and technical support from large businesses in working collaboratively to reduce CO2 emissions and trade the reduced amount as emission credits)*2 Carbon offset
The compensation for part or all of greenhouse gas emissions that cannot easily be reduced bypurchasing credits equal to the amount of reduction, or re-absorption, in greenhouse gas
elsewhere.

Health and Safety Activities
Tokyo Electron promotes health and safety in all of its operations.
This includes giving top priority to the health and safety not only
to our employees but also our customers and cooperating companies, and to designing products with health and safety in mind.
In fiscal 2012, Tokyo Electron developed activities in line with its
important goal of preventing accidents that could lead to serious
injuries. As a result, succeeded in reducing the number of accidents to half of the number in fiscal 2011. The Company tenaciously continued to implement accident prevention measures
such as prior checks of clean rooms before installing equipment,
on-site risk prediction activities, safety patrols activities, and safety
education for workers that uses accident examples. Tokyo Electron
marks the 50th year of its founding this year, and will return toprioritizing fostering a safety culture in line with the safety slogan“Safety First,” with the entire Company unitedin preventing accidents and disasters. For further details, see the “Tokyo Electron Environmental and Social Report 2012” (to be
published in September 2012).

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

Tokyo Electron’s Environmental Goals
The Tokyo Electron Group has assessed the impact of its productson the environment throughout their entire lifecycle—from thedevelopment of major products, through manufacturing andlogistics to product use. Based on this assessment, Tokyo Electron

Initiatives in the Thermal Processing System TELINDY PLUSTM
The Thermal Processing System Business Unit (TPS BU) has developed a process for forming silicon dioxide films for double patterning*1 at room temperature. In conventional processes, atemperature of several hundred degrees is required in order tobreak down gases and promote a vapor phase reaction, but this
newly developed process takes place at room temperature throughtechniques such as selecting the source gas and generating radicals*2 of oxidized species using plasma.

Environmental Impact from Film Formation(CO2 Emissions per Wafer Area Unit)(%)
100
48% Reduction

0

Conventional Process

New ProcessThis process has yielded the following results.

environmental impact from energy usage, heat emissions andcooling water by 48% in CO2 equivalent.

1. Reduced number of process steps:

3. Reduced size of equipment:This process makes it possible to form film atop a highly heat-susceptible resist
and achieve miniaturization using double patterning to reduce the number ofprocesses, which results in reducing the energy used at other utilities.

2. Reduced environmental impact from film formation:
Because heat is not required when forming the film, this process reduces the

Because no heater is required to apply heat to the wafer, this process is able toreduce the number of parts by 30% and footprint by 39%.
*1 Double patterning: One type of miniaturization process.
*2 Generating radicals: Describes one type of atom configuration where a single electron orbits
around the atomic nucleus in the outer shell, where normally electrons orbit in a pair.

Status of Tokyo Electron Group’s Environmental Initiatives
Organization dedicated to the environment
Highest responsibility for the environment
Environmental audits
Introduction of environmental management systems
Zero emissions of waste
Setting of energy conservation targets
Environmental training for employees
Punished for violating environmental regulations?

Corporate Environment Promotion Dept.
Board of Directors and Board of Executive Officers
Internal and external audits each conducted yearly; other irregular inter-Group audits
Acquired ISO 14001 at 8 plants and offices
Achieved at all domestic manufacturing bases; recycled products used in-house
Implementing energy-saving products and energy-saving targets at plants and offices
Conducted for all employees
Tokyo Electron has never been punished for thisTOKYO ELECTRON Annual Report 2012

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FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property
n RESEARCH AND DEVELOPMENT

Financial Section

Corporate Datan INTELLECTUAL PROPERTYRESEARCH AND DEVELOPMENT/INTELLECTUAL PROPERTYRESEARCH AND DEVELOPMENT
The semiconductor industry will continue toexpand.
Electronic devices pervade every corner of the world, and thenumber of semiconductors in each device continues to increase.
In the future, the reach of semiconductors will not be limited tocomputers and telecommunications but will expand to healthcare, agriculture and myriad other applications. Already a corecomponent supporting modern society, semiconductors willtake on an even large role as their applications expand.
Technology is driving the growth in the semiconductor industry. Speed is increasingly important in achieving technology
development. In this ultra-competitive era, business opportunities are lost if technology—even superior technology—misses its
window. Tokyo Electron establishes development sites close to
the customers and builds collaborative relations to acceleratetechnology commercialization and ensure that the right technology is supplied to customers exactly when they need it.
The development of cutting-edge technology, commonly
called “high technology,” requires the integration of expert
knowledge in a variety of fields to invent entirely new technicalconcepts. The proactive use of open innovation to gain outside
knowledge has become increasingly important as a result. In
April 2012, Tokyo Electron relocated its corporate R&D division,
which is tasked with developing future technologies, from
Yamanashi to the newly established TEL Technology Center
Tsukuba, in Ibaraki Prefecture (Japan). Tsukuba has been amagnet for R&D organizations, and we will increase collaborative research efforts with these outside organizations on new
semiconductor materials, photovoltaic (PV) power generation,and other high-tech fields to nurture new seed technologies.
Over the next five to ten years, the research and development
activities at Tsukuba will crystallize into new products which will
become the foundation of Tokyo Electron’s future growth.

In the area of three-dimensional interconnect (3DI) packaging, in which multiple silicon chips are stacked to increase performance, we are pursuing commercialization ofhigh-aspect-ratio silicon etch systems and proprietary polyimide
dielectric film deposition systems to support through-silicon via(TSV) technology. These efforts will prepare Tokyo Electron for
the full-fledged arrival of 3DI packaging technology.

Developing Low-Power-Consuming
Semiconductors
In recent years, semiconductors’ power consumption has
become a major issue. With an astounding number of miniaturized elements packed onto a small silicon chip, the chip’s power
consumption rises dramatically and a significant amount of heatis generated. At datacenters where large numbers of servers
and other electronic equipment are concentrated, it is amazing
to find that cooling the electronic equipment requires more
power than the equipment itself. It’s not an exaggeration tostate that semiconductors will not advance unless their power
consumption is reduced. Amid this conundrum, important technological innovations are being made with the goal of reducing
the power consumption of semiconductors.
One approach to lower power consumption involves changing the structure and materials of transistors. Intel Corporation
announced the introduction of the world’s first 22nm-node
three-dimensional transistor (Tri-gate FET) which promises both
low operating voltage and high performance. Tokyo Electron is
supporting the device manufacturers of these kinds of threedimensional transistors with the development of new products
which incorporate proprietary low-damage plasma technologies needed in the transistor manufacturing process.

Addressing Environment and Energy-related
IssuesThe Tokyo Electron Group is leveraging all of its resources toaddress the global issues of the environment and energy.
PV power generation is widely considered to be the green
energy solution of the future. Though the photovoltaic cell
Evolution of Semiconductors

Chip Scaling and 3DI Packaging Initiatives
The value of semiconductors is rooted in scaling, or miniaturization.
Tokyo Electron has always been at the cutting edge of lithography technology innovation. We are developing resist coatingsand development technology for extreme ultraviolet (EUV)
lithography, a next-generation lithography technology, while
continuing to enhance our multiple patterning technologies.
Additionally, we have begun intensive collaboration with
universities and research consortiums on the development of
directed self-assembly (DSA) technology in which patterns areautomatically formed using a substance’s chemical attributes,
eliminating the need for exposure. Through these efforts, wehave built a structure to ensure we can fully support whatever
lithography technology takes hold in the marketplace.

In other areas of technological innovation for transistors,
indium gallium arsenide (InGaAs) and germanium (Ge) areamong the new materials being adopted. Considering silicon’slong history as the core semiconductor material, its replacementwith InGaAs and Ge represents a major innovation. Many of thecurrent semiconductor manufacturing processes, including epitaxial growth, surface processing, and gate dielectric film formation, require innovation. Tokyo Electron views the changes in theindustry as new opportunities. We are proactively responding torecent innovations in semiconductor materials with the development of new equipment and processes.
Another approach to reducing power consumption is thedevelopment of nonvolatile memory based on new scientificprinciples and materials. Semiconductor manufacturers areracing to develop spin transfer torque-magnetoresistive random
access memory (STT-MRAM), a promising technology seen as
the possible next-generation memory device. STT-MRAM
records data in terms of 1s and 0s by changing the direction of
the magnetic field. Since no electricity is used to store data,
STT-MRAM device can operate using less than half the energy
consumed by today’s DRAM and SRAM devices. We are collaborating with Tohoku University, the world’s leading technology
research organization in this field, to develop cutting-edge manufacturing technology for STT-MRAM to ensure that we are fully
prepared for the advent of the technology in the marketplace.

industry continues to experience a harsh business environment
due to oversupply and plunging panel prices, significant
medium- to long-term industry growth is expected. Tokyo
Electron is accelerating the development of thin-film silicon PV,
considered optimal for large-scale power generation due tolower manufacturing costs gained from reduced silicon usage,
with the goal of enhancing conversion efficiency. PV-related
R&D will be consolidated at the newly established TEL Technology Center Tsukuba. The center will be engaged in research anddevelopment on PV manufacturing technology using different
materials besides thin-film silicon, including new chemical compounds and organic materials.

Exploring New Fields
Tokyo Electron nurtures new fields of research in order to ensure
the company’s sustainable growth.
One example is the development of manufacturing technology for printed electronics, a field attracting significant attention. Innovative printed electronics technologies utilizing
patterning and deposition have the potential to greatly lower
display panel manufacturing costs. Tokyo Electron is a memberof the Japan Advanced Printed Electronics Technology Research
Association (JAPERA) and monitors the development of applicable products for insights on promising new technologies.
We also have our sights on life sciences and other fields withstrong growth potential. The boundaries of our technologicalinnovation are not limited to miniaturization and other semiconductor manufacturing technologies. Instead, we are pursuing
applications of our technology to fields outside semiconductor
manufacturing and taking initiatives to create new industries
and business areas.

Joint Development of Next-generation Memory with
Tohoku University
Advantages of STT-MRAM*1• Magnetic materials used
• Low power consumption• Non-volatile

TOHOKU UNIVERSITYTEL Technology Center Tsukuba — Our New R&D Base

3D Transistor(Logic FinFET)

3D NAND

3DI TSV

We have established a new R&D base in the city of Tsukuba, theworld’s pre-eminent academic town. The center is engaged inresearch on PV manufacturing technology, semiconductor manufacturing technology, and a variety of new seeds technology.

New transistor structurethat enables both lower
power consumption andhigher device performance.

New NAND flash memory
with vertically stacked
memory cells realizing
higher capacity.

Through-silicon via interconnection technology forthree dimensional chip
stack achieving higher
performance.

Zoom

Magnetic materials
technology
Device design technology

STT-MRAM*1

Process technology
Equipment technology*1 STT-MRAM: Spin Transfer Torque-Magnetoresistive Random Access Memory

Zoom

TOKYO ELECTRON Annual Report 2012

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R&D/Intellectual Property
n RESEARCH AND DEVELOPMENTRESEARCH AND DEVELOPMENT/INTELLECTUAL PROPERTYINTELLECTUAL PROPERTY
Policy for Intellectual Property Activities

Status of Intellectual Property Rights

Tokyo Electron basic policy for intellectual property (IP) activities is that our IP activities should contribute to increase corporate revenues through supporting our business activities. It’s
also essential that our IP strategy is integrated with our technological and product strategies. Our IP strategy prioritizes
differentiation of our products and bolstering our competitive
advantages with our IP rights, over earning income fromlicensing to other companies.
Technologies are continuing to advance in complexity in ourbusiness fields and the risk to become involved in IP disputes inthe development of new products increases significantly unless
we fully respect the IP rights of other companies. To minimize
the risks of disputes, Tokyo Electron monitors others’ IP andtakes appropriate approaches including obtaining licenses fromothers if necessary.

Tokyo Electron vigorously builds an IP portfolio that encompasses our technology in each business field. We obtain IP rights
not only for core technologies but also for technologies associated with and around our core technologies.
We always optimize the numbers of our patent applications
and patents in each country, reflecting market and competitor
trends in each of our business fields. The graph in this section
shows the numbers of patent applications and patents of Tokyo
Electron in each country. In recent years, we have filed about
70%*1 of our applications globally, reflecting the importance ofoverseas markets for our business. In particular, we have been
increasing the numbers of patent applications and patents inSouth Korea and China. These numbers are based on our patent
strategies reflecting the recent growing importance of the South
Korean and Chinese markets for our business, as well as the riseof semiconductor and FPD production equipment manufacturers in South Korea.

Operation of Intellectual Property Activities
Tokyo Electron continues aggressive R&D activities to satisfy therequests of our customers. In order to maintain competitivenessfrom the achievements of our R&D activities, it is necessary that
we protect such achievements through steadily obtaining IP
rights. To facilitate obtaining IP rights, we cooperate closely
among our R&D operations and we have local IP departments in
our major plants. We also assign IP engineers/staff locally inseveral countries outside of Japan in response to an increase of
our R&D activities globally. We also revised our internal regulations regarding IP management last fiscal year to deal with frequent interaction and joint R&D activities between engineers in
different countries.
For effective IP activities, it is necessary to respond flexibly todramatically changing markets and various technological trends.
To exchange information about the market and technologicaltrends frequently, IP engineers in charge of surveys and externalaffairs related to IP are assigned our corporate headquarters,
which has sales and marketing divisions. In addition, IP engineers in the plants and headquarters, a manager of sales ormarketing division, and a manager of R&D division have meetings periodically so that our IP activities are conducted to include
market and technological trends.

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

Number of Tokyo Electron Patent Applications(Fiscal year)
1,000
800
600
400
200
0

08

09
Japan

U.S.

10

11

EuropeSouth Korea

12
TaiwanChina

Number of Patents Held by Tokyo Electron(As of March 31)
5,000
4,000
3,000
2,000
1,000

0

08

09
Japan

U.S.

10

11

EuropeSouth Korea

12
TaiwanChina

Financial Sectionn INTELLECTUAL PROPERTY

Corporate DataTOKYO ELECTRON Annual Report 2012

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Corporate Data

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTFINANCIAL REVIEWSALES AND INCOME
Operating Environment
During fiscal 2012, the global economy slowed overall, especially in developed
nations, due to future uncertainty rooted in Europe’s financial crises. However, inthe second half of the fiscal year, there were signs of the beginning of a gradual

Gross Profit, SG&A Expenses and Operating Income (Loss)

Other Income (Expenses) and Net Income

Cost of sales for the period was down 2.8% year on year, to ¥421.6 billion, and theDuring fiscal 2012, Tokyo Electron posted income of ¥1.4 billion in gain on collec-

cost of sales ratio was 66.6%, 1.7 percentage points worse than in fiscal 2011.

tion of written-off receivables and ¥1.1 billion in revenue from development

As a result, gross profit decreased by 9.9% year on year, to ¥211.4 billion, andthe gross profit margin decreased to 33.4%, from 35.1% in fiscal 2011.

grants, and expenses of ¥1.8 billion in provision of allowance for doubtful
accounts and a ¥0.9 billion loss from natural disasters. As a result, other income

SG&A expenses increased by 10.3% year on year, to ¥151.0 billion as a result of(expenses) amounted to a net income of ¥0.2 billion.

recovery, mainly in the U.S. In emerging countries such as China and India, theaggressive spending in research and development. As a percentage of consoli-This contributed to ¥60.6 billion in income before income taxes and minority

speed of growth slowed, but economic growth continued, led by internal demand.

dated net sales, the SG&A ratio increased to 23.9%, from 20.5% in the previous

interests, compared with ¥99.6 billion in fiscal 2011. A net income for fiscal 2012

Japan’s economy quickly began its recovery from the Great East Japan Earthquake

year. Consequently, operating income decreased by 38.2% to ¥60.4 billion andof ¥36.7 billion was recorded, compared to ¥71.9 billion in fiscal 2011. Net income

at an early stage, but the subsequent worldwide economic recession and histori-

the operating margin declined from 14.6% to 9.5%.

per share was ¥205.04 in fiscal 2012, compared with ¥401.73 in fiscal 2011.

Research & Development

Comprehensive Income

tablets have spread widely, resulting in an overall positive performance. However,R&D expenses are included in SG&A expenses. The Company views these expenses

For fiscal 2012, Tokyo Electron posted comprehensive income of ¥37.0 billion,

as sales of PCs and televisions continued to be sluggish, sales of semiconductors

as the source of future growth and as such incurred ¥81.5 billion in R&D expenses

compared with ¥69.6 billion in the previous fiscal year. This mainly reflected aand LCD panels that are key components in these products were not sufficient toin fiscal 2012, up 15.5% year on year.

gain of ¥0.8 billion from changes in fair value of investment securities and acally high yen have slowed this recovery.
In the electronics industry, in which Tokyo Electron serves, smartphones andBreaking down these costs by division, R&D investment in the semiconductor

lead to active capital investments.

production equipment business focused on the development of next-generation

loss of ¥0.9 billion due to foreign currency translation adjustments with highyen appreciation.

Sales

models in various equipment fields, and on the development of original double

Net sales in fiscal 2012 decreased 5.3% year on year to ¥633.1 billion. This wasand multiple patterning technology that helps to promote further chip miniaturiza-

Dividend Policy and Dividends

mainly because memory manufacturers refrained from investments due to sluggish

tion, of film deposition technologies for new materials, and of extreme ultraviolet

It is the policy of Tokyo Electron to pay dividends on the basis of business perfor-

PC sales. Sales in Japan were down 5.9% year on year, to ¥171.4 billion, and over-(EUV) lithography which is a promising next-generation lithography process. Tokyo

mance and earnings results. The dividend payout ratio has been set at approxi-seas sales decreased 5.1% to ¥461.7 billion. Overseas sales as a share of total

Electron’s R&D investments focused not only on existing business segments, but

mately 35% of consolidated net income. As a result, the Company paid anconsolidated sales remained at about the same level, up from 72.8% in fiscal 2011

also on the development of production equipment for 3DI packaging technology,interim dividend of ¥53 (a ratio of 35.6%), and set the year-end dividend at ¥27

to 72.9% in fiscal 2012.

OLED displays, photovoltaic cells and other new product segments.

(a ratio of 48.0%). Thus, the total dividend applicable to fiscal 2012 was ¥80 (aOrders received during the fiscal year decreased by 26.4%, to ¥541.0 billion,

combined ratio of 39.0%). Looking ahead, we will respond to the support of all

and the order backlog at the end of March 2012 decreased 29.8% year on year,

our shareholders through achieving business expansion and earnings growth.

to ¥216.7 billion. Behind these decreases were declines in the willingness to invest
by memory manufacturers and panel manufacturers, the Tokyo Electron Group’s

9,637(7,768)99,57960,602

Net income (loss) ����������������������������������������������������

106,271

7,543(9,033)71,92436,726

633.1

0

08
■ Domestic■ Overseas

09

90

10

60

5

30

–2.2

0

0

0

–5

–30

71.9
7.5

2.9

36.7

60.4

50

9.5

–9.0

97.9

461.7

15

106.3

668.7

418.6

508.1

486.6

300

120

14.6

100

–0.5

171.4

169,220150

600(Billions of Yen)

20
18.6

900

182.2

Income (loss) before income taxes andminority interests���������������������������������������������������

906.1

2012

¥633,091
211,44533.4%
151,00260,4439.5%

256.0

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

2011¥668,722
234,758
35.1%
136,888
97,870
14.6%

162.6

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

2010¥418,637
108,31625.9%
110,497(2,181)(0.5)%

299.2

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

2009¥508,082
137,408
27.0%
122,697
14,7112.9%

208.9

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

2008¥906,092
311,298
34.4%
142,800
168,498
18.6%

Net Income (Loss)
(%)

200

582.1

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

(Billions of Yen)

323.9

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

(Billions of Yen)
1,200

Millions of Yen

Sales and Income

Operating Income (Loss) andOperating Margin

14.7

to surplus inventory in LCD panels caused by sluggish sales of TVs.

Domestic and Overseas Sales

168.5

customers, due to surplus inventory in DRAMs caused by sluggish sales of PCs, and

10

11

12

–50

08

09

10

■ Operating Income (Loss)
Operating Margin

11

12

08

09

10

11

12

TOKYO ELECTRON Annual Report 2012

PAGE

20

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTFINANCIAL REVIEWPERFORMANCE BY SEGMENT■ Electronic Components and Computer Networks■ Others

Net sales (including intersegment sales or transfers) in the segment decreased

Sales in the “Others” segment mainly include group-wide logistics services, leasing■ Semiconductor Production Equipment

5.5% year on year to ¥86.3 billion. Demand for electronic components used in

and insurance.

Net sales (including intersegment sales or transfers) for fiscal 2012 decreased byconsumer electronics and industrial electronic equipment were sluggish except for

6.5% year on year, to ¥477.9 billion. While logic manufacturers made substantial

components used in mobile devices such as smartphones. Increased corporate

investments led by smartphones, tablets and other cutting-edge mobile devices,demand for cloud computing and the increased usage of data centers propelled

memory manufacturers refrained from making investments due to lower PC sales.

sales of computer networks products as well as maintenance services. As a result,

The segment profit declined by 26.3% to ¥89.0 billion and the segment profit

the segment profit decreased 20.5% to ¥2.3 billion and segment profit margin

margin decreased from 23.6% to 18.6%.

declined from 3.2% to 2.7%.

the same level as in fiscal 2011.

The segment’s net sales to external customers decreased 6.5% year on year, to

The segment’s net sales to external customers decreased 5.9% to ¥84.9 billion.

¥477.9 billion. Orders in this segment dropped 23.0% to ¥437.6 billion. The order

Orders in this segment decreased 7.4% to ¥84.3 billion. The fiscal year-end orderbacklog declined 17.6% to ¥188.7 billion as of March 31, 2012.

backlog declined 4.1% to ¥13.8 billion.

For a business overview of this segment, please see pages 8.

Net sales to external customers in the segment amounted to ¥0.5 billion, almost

For a business overview of this segment, please see pages 8.

■ F PD/PV (Flat Panel Display and Photovoltaic Cell) Production
Equipment

Millions of Yen
Reportable Segment

Net sales (including intersegment sales or transfers) in the segment stood at

Segment Information¥69.9 billion, up 4.7% year on year. The segment profit decreased 65.8% to ¥2.3

2012:billion and the segment profit margin from 10.0% in the previous fiscal year to

Net sales

3.3%. Demand for FPD production equipment for small- and medium-sized

Sales to external customers�����������������������������������������������������������

panels was robust due to strong demand for mobile devices, however, demandIntersegment sales or transfers������������������������������������������������������

for FPD production equipment for large-sized panels was weak due to sluggish
demand for TVs. Sales of PV production equipment rose year on year.
The segment’s net sales to external customers increased 4.7% to ¥69.9 billion.

Total���������������������������������������������������������������������������������������������
Segment profit������������������������������������������������������������������������������
Segment assets�����������������������������������������������������������������������������

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Eliminations
and Corporate

Consolidated¥477,873–
477,873
89,020262,789¥69,889–
69,8892,271
21,295¥84,868
1,432
86,3002,312
46,391¥   461
14,56515,026
1,827
1,927¥633,091
15,997649,088
95,430332,402¥–(15,997)(15,997)(34,828)451,209¥633,091–
633,091
60,602
783,611

11,282
13,518

687
672

570
407

170
36

12,70914,633

11,48928,572

24,19843,205

OthersOrders in this segment dropped 75.3% to ¥18.6 billion. The fiscal year-end order

Depreciation and amortization�������������������������������������������������������

backlog declined 78.3% to ¥14.2 billion as of March 31, 2012.

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

For a business overview of this segment, please see pages 8.

Selling, General and
Administrative Expenses andRatio to Net Sales(Billions of Yen)(%)

Receivable Turnover andInventory Turnover(Billions of Yen)

(Yen)

(Billions of Yen)

(Billions of Yen)

(Days)

100

150

150

40

15.8

482.3

476.2

433.8

400

416.4

783.6

809.2

4.6

441.4

600

696.4

669.0

70.6

4.0

100

3.8

92

96
109

90

87

86

3.2

80

20.5

121

4.9

792.8

81.5

20

100

54.1

60

86
74

400
200

50

40

6.0

800

125

80
30

23.9

(Times)

600

1,000

114

151.0

136.9

Working Capital and Current Ratio

61.0

80

Total Assets

66.1

24.1

Cash Dividends per Share

5.7

26.4

110.5

122.7

120

40

142.8

160

R&D Expenses

2.0

50

0

0

65

10
200

0

0

08

09

10

11

12

■ Selling, General and Administrative Expenses
Ratio to Net Sales

0

12

24

20

0

08

09

10

11

12

08

09

10

0

11

12

0

08

09

10

11

12

08

09

■ Working Capital
Current Ratio

10

11

12

08

09

Receivable Turnover
Inventory Turnover

10

11

12

TOKYO ELECTRON Annual Report 2012

21

PAGE

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTFINANCIAL REVIEWFINANCIAL POSITION AND CASH FLOWS
Assets, Liabilities and Net Assets■ Assets
Current assets decreased by ¥37.2 billion from the end of the previous fiscal year,to ¥607.1 billion, reflecting decreases of ¥37.4 billion in liquidity on hand (cashand cash equivalents + short-term investments) and of ¥19.5 billion in inventories,
and an increase of ¥13.9 billion in trade notes and accounts receivable. The turnover period for trade notes and accounts receivable increased from 74 days infiscal 2011 to 87 days in fiscal 2012, and the inventory turnover period decreased
from 92 days in fiscal 2011, to 86 days in fiscal 2012.
Net property, plant and equipment increased by ¥14.3 billion year on year, to¥126.9 billion, as ¥24.2 billion in depreciation and amortization was outweighedby ¥39.5 billion in fixed asset acquisitions.
Investments and other assets decreased by ¥2.7 billion year on year, to¥49.7 billion.
As a result, as of March 31, 2012, total assets stood at ¥783.6 billion, adecrease of ¥25.6 billion year on year.

¥5.5 billion in trade notes and accounts payable and ¥5.6 billion in customer
advances. The balance of interest-bearing debt, which consists only of short-termborrowings, stood at ¥4.4 billion as of March 31, 2012. The debt/equity ratio
declined to 0.8%, 0.6 points lower than the end of March 2011.
Non-current liabilities increased by ¥3.8 billion, to ¥60.2 billion.
Net assets increased by ¥13.8 billion year on year, to ¥598.6 billion. This
reflected an increase in retained earnings of ¥13.5 billion resulting from a net
income of ¥36.7 billion and ¥23.1 billion in dividends paid. As a result, the equity
ratio improved from 70.8% at the end of March 2011 to 74.9% as of March 31,
2012, and ROE dropped to 6.3%, from 13.3% in fiscal 2011.

Capital Expenditures*1 and Depreciation and Amortization*2
Total capital expenditures increased by 1.0% year on year in fiscal 2012, to ¥39.5 billion.
• New Miyagi plant (Taiwa-cho, Kurokawa-gun, Miyagi Prefecture)• New Kunshan plant (Kunshan, Jiangsu Province, China)• TEL Technology Center Tsukuba (Tsukuba, Ibaraki Prefecture)• Purchase of evaluation and measuring equipment
Depreciation and amortization increased by 36.7% year on year, to ¥24.2 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.

■ Liabilities and Net Assets

Cash Flows
Cash flows from operating activities showed a net inflow of ¥29.7 billion, ¥53.5
billion less than in fiscal 2011. The main contributors were ¥60.6 billion in income
before income taxes and minority interests, ¥24.2 billion in depreciation and amortization, and a ¥16.0 billion decrease in inventories. Major negative factors
included a ¥47.6 billion in income taxes paid and a ¥15.5 billion increase in tradenotes and accounts receivable.
Investing activities used net cash of ¥8.4 billion, compared with ¥35.9 billion
used in fiscal 2011. This mainly reflected a ¥36.0 billion outflow to purchase property, plant and equipment and a ¥31.0 billion inflow from a net decrease in shortterm investments.
Financing activities used net cash of ¥27.3 billion, compared with ¥5.2 billion in
fiscal 2011. The main outflow was ¥23.1 billion in dividends paid and ¥3.6 billion
in repayment of short-term borrowings.
As a result, the balance of cash and cash equivalents at the end of March 2012
stood at ¥158.8 billion, a decrease of ¥6.3 billion from the ¥165.1 billion balanceat the end of fiscal 2011. Total liquidity on hand, which consists of cash, cash
equivalents and short-term investments, decreased by ¥37.4 billion year on year,
from ¥285.1 billion at the end of March 2011 to ¥247.6 billion at the end of
March 2012.

Current liabilities decreased by ¥43.2 billion, from the end of fiscal 2011, to¥124.8 billion. This reflected decreases of ¥21.0 billion in income taxes payable,
Millions of Yen

2012¥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¥607,051
126,885
49,675
783,611
124,794
185,008
598,603¥81,030(160,622)(46,016)
65,883¥ 48,285
9,613
(288)
123,940¥ 83,239(35,882)(5,237)
165,051¥ 29,712(8,352)(27,335)
158,776

ROA

Capital Expenditures andDepreciation and Amortization

Total Liquidity on Hand

(%)

(%)

(Billions of Yen)

(Billions of Yen)

21.4

20

21.7

30

40

13.1

10

20

10

18.1

7.7
6.3
2.3

08

09

■ Interest-Bearing Debt
D/E Ratio

200

20

0
1.4

10

11

12

100

–0.2
–1.8

0.8

4.4

1.0

10

0

1.4

8.0

0.7

0

5.1

2

3.8

10

203.6

200
13.3

247.6

20

300

40

285.1

60

30

243.9

30

210.2

80

24.2

572.7

511.8

400

518.4

4

¥116,939(30,186)(27,033)
193,493

74.9

600

535.0

36.1

20

6

2012

ROE

70.8

67.5

6.7
30

2011

39.1

73.5

2010

17.7

77.5

2009

20.0

800

(%)

2008

39.5

(Billions of Yen)

Cash Flows
Cash flows from operating activities������������������������Cash flows from investing activities�������������������������Cash flows from financing activities�������������������������Cash and cash equivalents at end of year�����������������

23.1

8

2011

Equity and Equity Ratio
(%)

40

2010

14.9

(Billions of Yen)

2009

586.8

Interest-Bearing Debt, D/E Ratio

Millions of Yen

2008

22.7
21.4

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)��������������

0

0

0

08
■ Equity
Equity Ratio

09

10

11

12

–10

09

10

11

12

0

0

–10

08

08

09

10

11

12

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

08

09

10

11

■ Capital Expenditures■ Depreciation and Amortization

12

08

09

10

11

12

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

TOKYO ELECTRON Annual Report 2012

PAGE

22

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTFINANCIAL REVIEW
BUSINESS-RELATED AND OTHER RISKS(3) Impact From Research and Development(6) Impact of Intellectual Property Rights

The following are possible risks that may have an impact on Tokyo Electron’s busi-

Through ongoing and proactive R&D investment and activities in cutting-edge

In order to distinguish its products and make them more competitive, Tokyo

ness performance, stock price, or financial position.

technologies—miniaturization, vacuum, plasma, thermal processing, coating/Electron has promoted its R&D strategy for the early development of cutting-edge

developing, cleaning, wafer-transfer and clean technologies—Tokyo Electron has

technologies together with its business and intellectual property strategies. This

(1) Impact From Changes in the Semiconductor Market

created advanced technologies. At the same time, by quickly bringing to market

approach has enabled Tokyo Electron to obtain sole possession of many propri-Tokyo Electron has achieved a high profit margin by concentrating resources in

new products incorporating these technologies, Tokyo Electron has successfully

etary technologies that have been instrumental to the Company’s ability to capture

high-tech fields, including semiconductor production equipment, where techno-

captured a high market share in each of the product fields it has entered and gen-a high market share and generate high profit margins in each of its product fields.

logical innovation is rapid but Tokyo Electron can effectively use its strengths.

erated a high profit margin. However, delays in the launch of new products andTokyo Electron’s products incorporate and optimize many of these proprietary

Although technological change is responsible for the semiconductor market’s rapid

other factors could adversely affect Tokyo Electron’s business performance.

cutting-edge technologies. There may be cases in which, by avoiding the use of

growth, Tokyo Electron has actively undertaken structural reforms to be able tothird-party technologies and intellectual property rights, Tokyo Electron’s businessgenerate profits under any circumstances, including when the market contracts(4) Safety-related Impact

temporarily due to imbalance of supply and demand. However, order cancella-Tokyo Electron’s basic philosophy is to always bear in mind safety and health in thetions, excess capacity and personnel and increased inventories resulting from an

execution of business activities, including development, manufacturing, sales, ser-

(7) Impact of Fluctuating Foreign Exchange Rates

unexpectedly large market contraction, losses from bad debts resulting from thevices and management. In accordance with this philosophy, Tokyo Electron works

Success in the development of overseas operations has increased the share of sales

worsening of a customer’s financial position, and supply shortages resulting from

actively and continuously to improve the safety of its products and to eliminate any

generated overseas. As a rule, Tokyo Electron conducts export transactions on a

the worsening of a supplier’s management situation, could adversely affect Tokyo

harmful impact on health. However, harm to customers, order cancellations or

yen basis to avert exposure to foreign currency risks. However, some exports are

Electron’s business performance considerably.

other circumstances resulting from safety or other problems related to Tokyo

denominated in foreign currencies. In these cases, Tokyo Electron hedges foreign

Electron’s products could adversely affect Tokyo Electron’s business performance.

currency risk by using a forward foreign exchange contract when an order isperformance could be adversely affected.

(2) Impact From Concentration of Transactions on Particular
Customers(5) Impact From Quality Issues

fluctuations in prices due to sudden foreign exchange movements, which could

Tokyo Electron has been successful at increasing transactions with the leading

Tokyo Electron actively develops outstanding, cutting-edge technologies for incor-

have an indirect adverse effect on Tokyo Electron’s business performance.

semiconductor manufacturers worldwide, including those in Japan, through theporation in new products that are brought quickly to market. At the same time,

provision of products featuring outstanding, cutting-edge technology and of ser-Tokyo Electron works to establish a quality assurance system, efforts that include(8) Other Risks

vices offering a high level of customer satisfaction. However, Tokyo Electron’s sales

obtaining ISO 9001 certification, as well as to establish a world-class service

Tokyo Electron is actively engaged in reforming its corporate structure so that it

may from time to time be temporarily concentrated on particular customers due tosystem. These actions have resulted in a large number of customers adopting

can generate profits even when markets contract. These reforms have entailed

the timing of large capital investments of major semiconductor manufacturers. The

Tokyo Electron’s products. However, because Tokyo Electron’s products are based

creating new high-growth and high-return businesses and pursuing higher earn-

resulting escalation in sales competition could adversely affect Tokyo Electron’s

on cutting-edge technologies, and due to other factors, many of the technologies

ings from existing businesses. At the same time, Tokyo Electron has promoted

business performance.

developed are in unfamiliar fields. The occurrence of unforeseen defects or otheractivities to preserve the environment and worked to restructure its compliance,

issues could adversely affect Tokyo Electron’s business performance.

risk management and information security management systems. However, as

received or by other means. However, foreign exchange rate risks can arise fromlong as it conducts business activities, as with peer companies or companies indifferent 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, 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.

TOKYO ELECTRON Annual Report 2012

PAGE

23

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Section

n CONSOLIDATED ELEVEN-YEAR SUMMARYn FINANCIAL REVIEWn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTCONSOLIDATED ELEVEN-YEAR SUMMARYTokyo Electron Limited and Subsidiaries
As of and for the years ended March 31

Thousands of
U.S. dollars
2012

2012

2011

2010

2009

2008

Millions of yen
2007

2006

2005

2004

2003

2002

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 ���������������������������������������

$7,702,774
5,814,247
850,335–
1,032,583
5,609
735,406
737,340
446,843
449,617¥633,091
477,873
69,889–84,868461
60,44360,602
36,72636,954¥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
–

¥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)–

Domestic sales ��������������������������������������������������������������
Overseas sales ���������������������������������������������������������������

2,084,974
5,617,800

171,364
461,727

182,165
486,557

162,609
256,028

208,871299,211

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
231,309

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

294,415
481,093991,678

24,19839,541
81,506

17,707
39,14070,56820,002
14,91954,07423,068
18,10860,98821,41322,70366,073

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

Total assets �������������������������������������������������������������������
Total net assets (Total shareholders’ equity)6 ������������������

9,534,140
7,283,161

783,611598,603809,205
584,802696,352
523,370668,998529,265

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

10,684

10,343

10,068

10,391

10,429

9,528

8,901

8,864

8,870

10,053

10,171¥267.61
267.32
2,112.30
55.00
180,611
46,272¥343.63
343.54
1,863.28
45.00
180,61160,857¥46.3745.78
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

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

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

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

Net income (loss) per share of common stock:7
Basic �������������������������������������������������������������������������
Diluted8 ���������������������������������������������������������������������
Net assets per share of common stock ��������������������������Cash dividends per share of common stock �������������������
Number of shares outstanding (thousands) �������������������
Number of shareholders ������������������������������������������������

$2.49
2.49
39.85
0.97

Yen

¥205.04
204.723,275.14
80.00
180,61142,414¥401.73
401.103,198.66
114.00180,61144,896¥(50.47)–
2,859.37
12.00
180,61139,285¥42.1542.07
2,896.55
24.00
180,61142,509¥ 594.01
592.71
2,989.70
125.00180,611
43,324

6.3
9.5
74.9
0.79

13.3
14.6
70.8
0.89

(1.8)
(0.5)
73.5
0.61

1.4
2.9
77.5
0.70

21.4
18.6
67.5
1.16

¥59,256¥64,655¥41,581¥48,896¥86,882¥511.27
509.84
2,573.72
103.00180,61141,289Percent

ROE ������������������������������������������������������������������������������
Operating margin ���������������������������������������������������������
Equity ratio �������������������������������������������������������������������
Asset turnover (times) ���������������������������������������������������
U.S. dollars

Net sales per employee �������������������������������������������������
1
2
3
4
5
6

$720,964

21.8
16.9
59.7
1.19
Thousands of yen¥89,418

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.
From fiscal 2009, the FPD division was changed to the FPD/PV production equipment division. Photovoltaic Cell (PV) production equipment is included in FPD/PV production equipment.
From fiscal 2011, the Company applied “Accounting Standards for Presentation of Comprehensive Income”(Statement No. 25) released by the Accounting Standards Board of Japan (ASBJ). Accordingly, comprehensive income (loss) have been disclosed from fiscal 2010.
Depreciation and amortization does not include amortization and loss on impairment of goodwill.
Capital expenditures only represent the gross increase in property, plant and equipment.
From fiscal 2007, “Total net assets” has been disclosed in accordance with “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Statement No. 5) and “Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No. 8) released by the Accounting Standards Board of Japan (ASBJ). “Total net assets”
through fiscal 2006 represents “Total shareholders’ equity” under the former accounting standards.
7 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).
8 From fiscal 2011, the Company calculated net income per share of common stock (diluted) in accordance with “Accounting Standard for Earnings Per Share” (Statement No. 2 issued as of June 30, 2010) and “Guidance on Accounting Standard for Earnings Per Share” (Guidance No. 4 issued as of June 30, 2010) released by the Accounting Standards Board of Japan (ASBJ).
Dilution is not assumed for the years ended March 31, 2010, 2003 and 2002.
9 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.
10 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.

TOKYO ELECTRON Annual Report 2012

PAGE

24

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan CONSOLIDATED BALANCE SHEETSn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTCONSOLIDATED BALANCE SHEETSTokyo Electron Limited and Subsidiaries
As of March 31, 2012 and 2011ASSETS

Millions of yen
2012

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�����������������������������������������������������������������

¥158,776
88,849150,306(1,376)
149,470
23,54637,480607,051

2011¥165,051
120,000
136,385(1,154)
168,925
27,61027,414644,231

Thousands of
U.S. dollars
2012$1,931,817
1,081,020
1,828,763(16,742)
1,818,591
286,482456,016
7,385,947

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�����������������������������������������

26,260143,462
115,834
9,515
295,071
168,186
126,885

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

319,504
1,745,492
1,409,344
115,768
3,590,108
2,046,307
1,543,801

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

16,082
17,585
4,704
15,152(3,848)49,675¥783,611

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

195,669
213,955
57,233
184,353(46,818)
604,392$9,534,140

See accompanying Notes to Consolidated Financial Statements.

LIABILITIES AND NET ASSETS

Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

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�������������������������������������������������������������

¥  4,403
58,243
26,373
4,289
8,646
8,904
13,936
124,794¥  7,996
63,76631,92525,328
11,131
7,594
20,298168,038$   53,572
708,639
320,878
52,184105,195
108,334
169,558
1,518,360

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

55,266
4,948
185,008

52,826
3,539
224,403

672,418
60,201
2,250,979

54,961

54,961

668,707

78,023471,186(9,748)78,046457,658(10,484)

949,300
5,732,888(118,603)

3,576
(51)
(11,158)
1,157
10,657
598,603¥783,611

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

43,509(621)(135,759)
14,077
129,663
7,283,161$9,534,140

Contingent liabilities
Net assets:
Shareholders’ equity
Common stock�����������������������������������������������������������������������
Authorized: 300,000,000 shares
Issued: 180,610,911 shares as of March 31, 2012 and 2011
Capital surplus������������������������������������������������������������������������
Retained earnings�������������������������������������������������������������������
Treasury stock, at cost�������������������������������������������������������������
1,446,079 and 1,554,231 shares
as of March 31, 2012 and 2011, respectively
Accumulated other comprehensive income
Net unrealized gains on investment securities�������������������������
Net deferred losses on hedging instruments����������������������������
Foreign currency translation adjustments��������������������������������
Share subscription rights��������������������������������������������������������
Minority interests��������������������������������������������������������������������
Total net assets�����������������������������������������������������������������������
Total liabilities and net assets����������������������������������������������������

TOKYO ELECTRON Annual Report 2012

PAGE

25

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2012 and 2011

Tokyo Electron Limited and Subsidiaries
As of March 31, 2012 and 2011

Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

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

¥633,091
421,646
211,445
151,00260,443¥668,722
433,964
234,758
136,888
97,870$7,702,774
5,130,137
2,572,637
1,837,231
735,406

Other income (expenses):
Interest and dividend income������������������������������������������������������
Revenue from development grants���������������������������������������������
Provision of allowance for doubtful accounts������������������������������
Reversal of allowance for doubtful accounts�������������������������������
Gain on sale of property, plant and equipment���������������������������
Gain on collection of written-off receivables�������������������������������
Loss on business restructuring����������������������������������������������������
Loss on devaluation of investment securities�������������������������������
Maintenance cost for closed domestic facilities���������������������������
Loss from natural disasters���������������������������������������������������������
Expenses for plant relocation������������������������������������������������������
Other, net����������������������������������������������������������������������������������
Income before income taxes and minority interests����������������

1,010
1,131
(1,848)
–
566
1,437
(849)
(817)
(112)
(936)
(144)
721
60,602

696
3,027
0
1,892
34
–
–
(74)
(186)
(1,114)(1,839)(727)
99,57912,28913,761(22,485)–6,886
17,484(10,330)(9,940)(1,363)(11,388)(1,752)
8,772
737,340

Income taxes:
Current��������������������������������������������������������������������������������������
Deferred�������������������������������������������������������������������������������������
Income before minority interests����������������������������������������������

15,0238,400
37,17929,483(2,712)72,808

182,784
102,202452,354

Minority interests���������������������������������������������������������������������������
Net income����������������������������������������������������������������������������������

453¥36,726

884¥71,924

5,511$  446,843

Per share of common stock:
Net income — basic�������������������������������������������������������������������
Net income — diluted����������������������������������������������������������������
Net assets�����������������������������������������������������������������������������������Cash dividends���������������������������������������������������������������������������
See accompanying Notes to Consolidated Financial Statements.

Yen¥205.04
204.723,275.14
80.00

U.S. dollars¥401.73
401.103,198.66
114.00$     2.49
2.49
39.85
0.97

Thousands of
U.S. dollars

Millions of yen

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

2012

2011

2012

¥37,179¥72,808$452,354

769
(69)
(925)
(225)
36,954303
72(3,585)(3,210)69,598

9,356(839)(11,254)(2,737)
449,61736,532422

68,732866

444,482
5,135

TOKYO ELECTRON Annual Report 2012

PAGE

26

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTSn INDEPENDENT AUDITORS’ REPORTCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSCONSOLIDATED STATEMENTS OF CASH FLOWSTokyo Electron Limited and Subsidiaries
Years ended March 31, 2012 and 2011

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2012 and 2011

Thousands of
U.S. dollars

Millions of yen

Millions of yen

Accumulated
other comprehensive income

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Unrealized Deferred
Foreign
gains on losses oncurrency
Share
investment hedging
translation subscription
securities instruments adjustments
rightsBalance as of April 1, 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������������
Other, net�������������������������������������
Balance as of March 31, 2011�������

––¥54,96112–¥78,046––¥457,658

453–¥(10,484)–303¥2,807–56¥(12)–(3,551)¥(10,234)–(79)¥1,499–587¥10,561465(2,684)¥584,802

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

––(23,102)

–

–

–

–

–

–

(23,102)

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

––36,726

–

–

–

–

–

–

36,726

Repurchase of treasury stocks�������

–

–

–

(12)

–

–

–

–

–

(12)

Disposal of treasury stocks������������
Other, net�������������������������������������

–
–

(23)
–

(96)
–

748
–

–
769

–
(39)

–
(924)

–
(342)

–
96

629
(440)

Balance as of March 31, 2012�������

¥54,961¥78,023¥471,186¥(9,748)¥3,576¥(51)¥(11,158)¥1,157¥10,657¥598,603

Unrealized Deferred
Foreign
gains on losses oncurrency
Share
investment hedging
translation subscription
securities instruments adjustments
rightsMinority
interests

Total
net assets

Minority
interests

Total
net assets

Thousands of U.S. dollars
Accumulated
other comprehensive income

Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Balance as of March 31, 2011������� $668,707 $949,580 $5,568,293 $(127,558) $34,153$(146) $(124,516) $18,238 $128,494 $7,115,245

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

––(281,080)

–

–

–

–

–

–

(281,080)

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

––446,843

–

–

–

–

–

–

446,843

Repurchase of treasury stocks��������

–

–

–

(146)

–

–

–

–

–

(146)

Disposal of treasury stocks������������
Other, net�������������������������������������

–
–

(280)
–

(1,168)
–

9,101
–

–
9,356

–
(475)

–
(11,243)–(4,161)

–
1,169

7,653
(5,354)

Balance as of March 31, 2012������� $668,707 $949,300 $5,732,888 $(118,603) $43,509
See accompanying Notes to Consolidated Financial Statements.

$(621) $(135,759) $14,077 $129,663 $7,283,161

Cash flows from operating activities:
Income before income taxes and minority interests���������������������
Depreciation and amortization���������������������������������������������������
Amortization of goodwill������������������������������������������������������������
Increase in accrued pension and severance costs������������������������
Increase (decrease) in allowance for doubtful accounts���������������
Increase (decrease) in accrued employees’ bonuses���������������������
Increase in accrued warranty expenses���������������������������������������
Interest and dividend income������������������������������������������������������
Increase in trade notes and accounts receivable��������������������������
(Increase) decrease in inventories������������������������������������������������
(Increase) decrease in prepaid consumption tax��������������������������
Increase (decrease) in accrued consumption tax��������������������������
Increase (decrease) 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����������������������������������������������������������������������
Net cash provided by operating activities�����������������������������Cash flows from investing activities:
Payment for purchases of short-term investments�����������������������
Proceeds from maturities 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��������������������������������
Other, net����������������������������������������������������������������������������������
Net cash used in investing activities��������������������������������������Cash flows from financing activities:
Increase (decrease) in short-term borrowings������������������������������
(Increase) 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 (decrease) in cash and cash equivalents��������������Cash and cash equivalents at beginning of year�����������������������������Cash and cash equivalents at end of year��������������������������������
See accompanying Notes to Consolidated Financial Statements.

2012

2011

2012

¥60,602
24,198
–
2,446
2,111
(2,506)
1,343(1,010)(15,540)
16,023
1,508(2,417)(5,807)(4,567)(1,890)1,912
76,406978(43)(47,629)
29,712¥99,579
17,707242
2,317(4,341)
5,087
2,352
(696)
(13,319)(36,533)(8,025)
2,305
1,667
9,575
5,303
6,902
90,122746(46)(7,583)
83,239$737,340
294,415–
29,76025,684(30,490)
16,340(12,289)(189,074)
194,951
18,348(29,408)(70,653)(55,566)(22,995)
23,263929,626
11,900(523)(579,499)
361,504(284,500)
315,500(36,010)
1,102(2,140)(2,304)(8,352)(360,000)
360,000(33,542)509(926)(1,923)(35,882)(3,461,492)
3,838,667(438,131)
13,408(26,037)(28,033)(101,618)(3,594)(12)(23,102)(627)(27,335)(300)(6,275)
165,051¥158,776

2,891
428
(8,236)(320)(5,237)(1,009)41,111
123,940¥165,051(43,728)(146)(281,080)(7,629)(332,583)(3,650)(76,347)
2,008,164$1,931,817

TOKYO ELECTRON Annual Report 2012

PAGE

27

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Tokyo Electron Limited(hereinafter “the Company”) and its subsidiaries (hereinafter collectively referred
to as “Tokyo Electron”) have been prepared in accordance with the provisions set
forth in the Financial Instruments and Exchange 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 anddisclosure requirements of International Financial Reporting Standards.
The Company uses financial statements prepared by foreign subsidiaries inaccordance 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 is not presented in theaccompanying consolidated financial statements.
U.S. dollar amounts included herein are solely for the convenience of readers
and are presented at the rate of ¥82.19 to $1.00, the approximate rate as ofMarch 31, 2012. The translation should not be construed as a representation 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 the Company and its
30 and 32 subsidiaries for the years ended March 31, 2012 and 2011, respectively.
Investments in affiliates in which the Company’s ownership is 20% to 50% areaccounted for by the equity method.
All significant inter-company accounts, transactions and unrealized profits orlosses 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 forany 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 thoseprevailing 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 forshareholders’ equity accounts, which are translated at the historical rates. Revenue
and expense accounts of foreign subsidiaries are translated at average rates of
exchange in effect during the year. Resulting translation adjustments are presented
in net assets as a component of accumulated other comprehensive income andminority interests in the consolidated balance sheets.
(c) Cash equivalents
For purposes of the consolidated statements of cash flows, Tokyo Electron considers all highly-liquid instruments purchased with original maturities of threemonths or less to be cash equivalents.
(d) Short-term investments
Short-term investments consist of short term deposits and low-risk financial
instruments with original maturities of more than three months.
(e) Investment securities
Tokyo Electron examines the intent of holding each security and classifies thosesecurities as trading securities, held-to-maturity debt securities or other securities.
Tokyo Electron has no trading securities. Held-to-maturity debt securities are statedmainly at amortized cost. Other securities with market prices are valued at fairmarket value prevailing at the balance sheet date. The differences between thebook and market prices of other securities, net of applicable income taxes, arepresented 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.
(f) Inventories
Inventories other than raw materials are stated at the lower of cost, determinedby the specific identification method, or net realizable value, which is defined as
selling price less estimated additional manufacturing costs and estimated direct
selling expenses. Raw materials are stated at the lower of cost, determined principally by the moving-average method, or net realizable value.
(g) 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 is computed 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 thestraight-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(h) Intangible assets
Intangible assets, which primarily comprise of capitalized costs for computer
software and goodwill, are amortized by the straight-line method over their estimated useful lives. Capitalized costs for computer software for internal use areamortized over a period of 2 to 5 years. Goodwill is evaluated on an individual
basis and amortized over a period not exceeding 20 years.
(i) 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 recognized based 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 the assets. Net selling
price is determined using the fair value less disposal costs and value in use isbased 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.
(j) 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.
(k) 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 the fair value of pension assets. Prior service costs are charged toearnings 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 arecharged to earnings on a straight-line basis, beginning from the following fiscal
year after they are recognized, over a fixed number of years (four years) within the
average remaining years of service of employees when the differences occur.
The provision for accrued pension and severance costs for directors and statutory 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, andat 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 and the decision regarding the payment amountfor each director and statutory auditor was delegated to the board of directors andstatutory auditors. As discussed in note 9, the accruals for severance costs for
directors and statutory auditors are included in accrued pension and severance
costs in the consolidated balance sheets.

TOKYO ELECTRON Annual Report 2012

PAGE

28

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(l) 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-sale repair expenses overwarranty periods are accrued based on the historical ratio of actual repair expenses
to corresponding sales.
(m) Leases
Until the year ended March 31, 2008, non-cancelable leases of the Company
and its domestic subsidiaries had been primarily accounted for as operating leases(whether such leases were classified as operating or finance leases), except forleases that transfer ownership to the lessee at the 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.” As a result, the Company
and its domestic subsidiaries capitalized leased assets under finance leases commencing after March 31, 2008 and such leased assets are depreciated using thestraight-line method over the period of the lease contract with zero residual value.
(n) Derivatives and hedge accounting
The Company and a domestic subsidiary make use of derivatives in order tomanage 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 the domestic 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 or losses on
hedging derivatives, net of taxes, are reported in net assets as a component ofaccumulated other comprehensive income. Receivables and payables hedged byqualified forward foreign exchange contracts are translated at the corresponding
foreign exchange contract rates.
(o) Income taxes
Tokyo Electron records deferred tax assets and liabilities on temporary differences between the carrying amounts of assets and liabilities for financial 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.
(p) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)/PV (Photovoltaic cell)
production equipment is principally recognized at the time of the customer confirmation of set-up and testing of products. Revenue from such equipment notrequiring substantial installation is recognized at the time 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 termof the maintenance contract.

(q) Per share information
Net income per share and net assets per share are computed based on theweighted-average number of shares of common stock outstanding during
each year.
Dividends per share has been presented on an accruals basis and include, ineach fiscal year ended March 31, dividends approved or to be approved after
March 31 but applicable to the year then ended.

(c) 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.

(r) Research and development expenses
Research and development expenses are charged to earnings as incurred andamounted to ¥81,506 million ($991,678 thousand) and ¥70,568 million for theyears ended March 31, 2012 and 2011, respectively.

(d) Accounting standard for disclosures about segments of an enterpriseand related information
Effective from the year ended March 31, 2011, the Company adopted“Accounting Standard for Disclosures about Segments of an Enterprise andRelated Information” (Statement No. 17 issued by the Accounting Standards
Board of Japan) and “Guidance on Accounting Standard for Disclosures about
Segments of an Enterprise and Related Information” (Guidance No. 20 issued by
the Accounting Standards Board of Japan). The accounting standard requires theCompany to adopt a management approach as the segment reporting method.
As a result of the adoption of this standard the Company changed the basis ofsegmentation and segment measures.

(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, 2012.

3. Change in Accounting Policies and Adoption of New AccountingStandards(a) Accounting standards for earnings per share
Effective from April 1, 2011, the Company adopted “Accounting Standard for
Earnings Per Share” (Statement No. 2 issued as of June 30, 2010 by the Accounting Standards Board of Japan) and “Guidance on Accounting Standards for Earnings Per Share” (Guidance No. 4 issued as of June 30, 2010 by the AccountingStandards Board of Japan). Based on these new standards, the Company haschanged its method of calculating diluted net income per share. Under the new
method, for share option rights which vest after a specified period of service, thefair value amount of the share options for service expected to be provided in
the future is included in the proceeds assumed to be received when options
are exercised.
(b) Accounting standard for accounting changes and error corrections
Effective from April 1, 2011, the Company and its domestic subsidiaries adopted“Accounting Standard for Accounting Changes and Error Corrections” (Statement
No. 24 issued by the Accounting Standards Board of Japan) and “Guidance on
Accounting Standard for Accounting Changes and Error Corrections” (Guidance
No. 24, issued by the Accounting Standards Board of Japan) for accountingchanges and corrections of prior period errors which are made from the fiscal year
beginning on April 1, 2011. The adoption of this standard had no significant
impact on the consolidated financial statements.

(e) Accounting standard for presentation of comprehensive income
Effective from the year ended March 31, 2011, the Company adopted“Accounting Standard for Presentation of Comprehensive Income” (Statement No.
25 issued by the Accounting Standards Board of Japan). As a result of the adoption of this standard the Company prepared a consolidated statements of comprehensive income from the year ended March 31, 2011.
(f) Accounting standard for consolidated financial statements
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 Consolidated Financial Statements” (Statement No. 22 issued by Accounting Standards
Board of Japan). As a result of the adoption of this standard, the Company
added a subtotal of “Income before minority interests” in the consolidated
statements of Income.

TOKYO ELECTRON Annual Report 2012

29

PAGE

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Securities
Other securities as of March 31, 2012 and 2011 are as follows:
Millions of yen
Cost
Carrying value

2012

Noncurrent
Securities with market prices  Equity securities�������������������������������������������������������
Securities without market prices  Unlisted stock����������������������������������������������������������
  Other�����������������������������������������������������������������������
Total�������������������������������������������������������������������������������

¥ 9,212¥14,699485
910¥10,607473
910¥16,082

Millions of yen
Cost
Carrying value

2011

Current
Noncurrent
Securities with market prices  Equity securities�������������������������������������������������������
Securities without market prices  Unlisted stock����������������������������������������������������������
  Other�����������������������������������������������������������������������
Total�������������������������������������������������������������������������������

¥232,058¥232,058¥  9,763¥ 14,445

365
911¥ 11,039

370
911¥ 15,726

Thousands of U.S. dollars
Cost
Carrying value

2012

Noncurrent
Securities with market prices  Equity securities�������������������������������������������������������
Securities without market prices  Unlisted stock����������������������������������������������������������
  Other�����������������������������������������������������������������������
Total�������������������������������������������������������������������������������

$112,082
5,901
11,072$129,055$178,842
5,755
11,072$195,669

Held-to-maturity securities classified as current assets are ¥211,790 million($2,576,835 thousand) and nil as of March 31, 2012 and 2011, respectively.
Reconciliation of held-to-maturity securities as of March 31, 2012 and Other
securities as of March 31, 2011 to the amounts of short-term investments in the
consolidated balance sheets are as follows:
Millions of yen
2012
2011

Held-to-maturity (current)�������������������
Other securities (current)���������������������
Deposits and low-risk financial
instruments with original maturitiesof three months or less���������������������
Deposits with original maturities ofmore than three months�������������������
Short-term investments�����������������������

¥211,790—¥—
232,058

Thousands of
U.S. dollars
2012$2,576,835—(132,790)(142,058)(1,615,647)

9,849¥88,849

30,000¥120,000

119,832$1,081,020

Loss on devaluation of investment securities were ¥817 million ($9,940 thousand)and ¥74 million for the years ended March 31, 2012 and 2011, respectively.
Net gain on sale of investment securities was ¥38 million ($462 thousand) and¥91 million for the years ended March 31, 2012 and 2011, respectively.

5. Inventories
Inventories as of March 31, 2012 and 2011 are as follows:

Finished products��������������������������������
Work in process, raw materials
and supplies��������������������������������������
Total���������������������������������������������������

Millions of yen
2012
2011

Thousands of
U.S. dollars
2012¥101,790¥111,918$1,238,472

47,680¥149,470

57,007¥168,925

580,119$1,818,591

The amounts of change in inventory provision included in cost of sales in the consolidated statements of income for the years ended March 31, 2012 and 2011 werean increase of ¥1,115 million ($13,566 thousand) and ¥1,202 million, respectively.

6. Impairment of Property, Plant and Equipment and Intangible
AssetsFor 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.

7. Pledged Assets
Tokyo Electron did not hold any assets pledged as collateral as of March 31,
2012 and 2011.

interest rate. The noncontributory plans provide for lump-sum payment benefits toemployees who retire or terminate their employment for reasons other than dismissal for cause. Certain foreign subsidiaries have noncontributory retirement andseverance benefit plans that provide for pension or lump-sum payment benefits toemployees who retire or terminate their employment for reasons other than dismissal for cause.
The funded status of the defined benefit plans, a substantial portion of which
consists of domestic benefit plans, as of March 31, 2012 and 2011 is as follows:

Benefit obligation�������������������������������
Fair value of plan assets����������������������
Funded status�������������������������������������
Unrecognized actuarial difference�������
Unrecognized prior service cost�����������
Net amount recognized����������������������
Amounts recognized in the
consolidated balance sheets
consist of:Prepaid pension and   severance costs (Note 1)����������������
Accrued pension and   severance costs (Note 2)����������������
Net amount recognized����������������������

9. Accrued Pension and Severance Costs
The Company and its domestic subsidiaries have defined benefit plans (cashbalance 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 toemployees who retire or terminate their employment for reasons other than dismissal for cause. Under the cash balance plan, each participant has an accountwhich is credited yearly based on the current rate of pay and market-related

Thousands of
U.S. dollars
2012¥(94,369)
45,139(49,230)(1,809)–(51,039)¥(89,350)
41,282(48,068)(90)
25(48,133)$(1,148,181)
549,203(598,978)(22,010)–(620,988)

3,607

4,097

43,886(54,646)¥(51,039)(52,230)¥(48,133)(664,874)$(620,988)

Notes: 1.	The prepaid pension and severance costs as of March 31, 2012 and 2011 is included in otherassets in the consolidated balance sheets.
2.	The provision for accrued pension and severance costs for directors and statutory auditors(¥620 million ($7,544 thousand) as of March 31, 2012 and ¥596 million as of March 31,2011) is not included.

Net periodic pension cost of the plans is as follows:

8. Short-term Borrowings
Short-term borrowings represent 365-day notes issued by Tokyo Electron tobanks and bore interest at an average annual rate of 0.40% and 0.39% as ofMarch 31, 2012 and 2011, respectively.
As of March 31, 2012, Tokyo Electron has unused lines of credit amounting to¥150,248 million ($1,828,057 thousand).

Millions of yen
2012
2011

Millions of yen
2012
2011

Service cost�����������������������������������������
Interest cost����������������������������������������
Expected return on plan assets������������
Amortization of actuarial difference����
Amortization of prior service cost��������
Net pension cost���������������������������������

¥5,597
1,768
(814)
401
25
¥6,977¥5,474
1,666
(767)
286
100
¥6,759Thousands of
U.S. dollars
2012$68,099
21,511(9,904)
4,879
304$84,889

Significant assumptions of domestic pension plans used to determine the above
amounts are as follows:2012 and 2011

Allocation method of benefit obligation����������������������
Discount rate��������������������������������������������������������������
Expected rate of return on plan assets�������������������������
Amortization period of actuarial difference�����������������
Amortization period of prior service cost���������������������

Straight-line method
2.00%
2.00%
4 years
4 years

TOKYO ELECTRON Annual Report 2012

PAGE

30

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Income Taxes
Significant components of the deferred tax assets and liabilities of Tokyo
Electron as of March 31, 2012 and 2011 are as follows:

Deferred tax assets
Accrued pension andseverance costs���������������������������������
Tax credit for research anddevelopment�������������������������������������
Elimination of unrealized profit
in inventories������������������������������������
Devaluation of inventories�������������������
Accrued warranty expenses�����������������
Accrued employees’ bonuses��������������Net operating loss carryforwards���������
Allowance for doubtful accounts��������
Other��������������������������������������������������
Total gross deferred tax assets�������������
Less valuation allowance���������������������
Total deferred tax assets����������������������
Deferred tax liabilities
Undistributed earnings offoreign subsidiaries���������������������������
Net unrealized gains on
investment securities�������������������������
Prepaid pension andseverance costs���������������������������������
Reserves under Special Taxation
Measures Law�����������������������������������
Other��������������������������������������������������
Total deferred tax liabilities������������������
Net deferred tax assets������������������������

Millions of yen
2012
2011

Thousands of
U.S. dollars
2012¥19,538¥21,172$237,717

12,564

5,910

152,865

9,161
4,749
2,971
2,954
1,609
1,035
6,994
61,575(15,134)
46,441

10,309
4,716
2,795
4,471
1,475
690
11,76863,306(9,031)
54,275

111,461
57,78136,14835,941
19,577
12,59385,095749,178(184,134)
565,044(3,760)(3,087)(45,748)(1,981)(1,916)(24,103)(1,200)(1,635)(14,600)(1,084)(748)(8,773)¥37,668(8)(1,524)(8,170)¥46,105(13,189)
9,100(106,740)$458,304

Net deferred tax assets are included in the consolidated balance sheets as ofMarch 31, 2012 and 2011 as follows:
Millions of yen
2012
2011

Current assets�������������������������������������
Investments and other assets��������������
Other current liabilities������������������������
Other liabilities������������������������������������

¥23,546
17,585(1)(3,462)¥27,610
20,728(1)(2,232)Thousands of
U.S. dollars
2012$286,482
213,955(12)(42,122)

The Company and its wholly-owned domestic subsidiaries apply a consolidated
tax filing system for corporate tax purposes.
The ultimate realization of deferred tax assets is dependent upon the generationof future taxable income during the period in which temporary differences become
deductible. For assessment of the realizability of deferred tax assets, management
considers the scheduled reversal of deferred tax liabilities, future estimated taxable
income, tax planning strategies and level of net operating loss carryforwards, ifany, in accordance with accounting principles generally accepted in Japan.
Based on the level of historical taxable income and future estimated taxable
income over the periods which the deferred tax assets are deductible, management believes Tokyo Electron will realize the benefits of these deferred tax assets,
net of valuation allowance, as of March 31, 2012 and 2011.
The Company is subject to corporate tax, inhabitants’ tax and a deductible
enterprise tax, which in the aggregate resulted in a statutory income tax rate of
approximately 40.69% for the years ended March 31, 2012 and 2011. On December 2, 2011, amendments to the Japanese tax regulations were enacted into law.
As a result of these amendments, the statutory income tax rate for the Company
will be reduced to 38.01% for years beginning on or after April 1, 2012 and35.64% for years beginning on or after April 1, 2015. Based on the amendments,
the statutory income tax rates utilized for the measurement of deferred tax assets
and liabilities expected to be settled or realized from April 1, 2012 to March 31,
2015 and on or after April 1, 2015 are 38.01% and 35.64%, respectively, as ofMarch 31, 2012. Due to these changes in statutory income tax rates, net deferred
tax assets decreased by ¥3,310 million ($40,273 thousand) as of March 31, 2012and deferred income tax expense recognized for the year ended March 31, 2012
increased by ¥3,587 million ($43,643 thousand).
Significant components of the difference between the statutory and effective
tax rates for the years ended March 31, 2012 and 2011 are as follows:
Statutory tax rate in Japan����������������������������������������������
Adjustments:
Effect of enacted changes in Japanese tax rates
on net deferred tax assets���������������������������������������������
Tax credit for research and development�������������������������
Difference in statutory tax rates of subsidiaries����������������
Others, net���������������������������������������������������������������������
Effective tax rate�������������������������������������������������������������

2012

2011

40.69 %

40.69 %

5.92
(5.20)(4.04)
1.28
38.65 %–
(7.22)(2.26)(4.33)
26.88 %

11. Net Assets
Net assets comprises four subsections, which are shareholders’ equity, accumulated other comprehensive income, share subscription rights and minority interests.
Under Japanese laws and regulations, the entire amount paid for new shares isrequired to be designated as common stock. However, a company may, by aresolution of the board of directors, designate an amount not exceeding onehalf 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 an amountequal to 10% of the dividend or the excess, if any, of 25% of common 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 consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in capital used to eliminate or reduce a deficit generally require a resolution of the shareholders’ 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 othercapital surplus and retained earnings, respectively, which are potentially available
for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company inaccordance with Japanese laws and regulations.
At the general shareholders’ meeting on June 23, 2006, in accordance withJapanese laws and regulations, the Company altered its articles to allow for the
distribution of earnings to shareholders on dates, other than the mid-term andyear-end, by a resolution of the board of directors.
At the board of directors’ meeting held on May 15, 2012, the distribution of
cash dividends amounting to ¥4,837 million ($58,851 thousand) was resolved.
Such appropriations have not been accrued in the consolidated financial statements as of March 31, 2012 since they are recognized in the period in which they
are resolved at the board of directors’ meeting.

TOKYO ELECTRON Annual Report 2012

PAGE

31

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Other Comprehensive Income (loss)
Other comprehensive income for the year ended March 31, 2012 is as follows:
Millions of yen
2012

Net unrealized gains on investment securities
Unrealized gains arising during the year����������������������
Reclassification adjustments����������������������������������������
Sub-total, before tax���������������������������������������������������
Tax expense�����������������������������������������������������������������
Sub-total, net of tax����������������������������������������������������
Net deferred losses on hedging instruments
Deferred losses arising during the year������������������������
Reclassification adjustments����������������������������������������
Sub-total, before tax���������������������������������������������������
Tax benefit������������������������������������������������������������������
Sub-total, net of tax����������������������������������������������������

¥302
531
833
(64)
769

(9)
(101)
(110)
41
(69)

Thousands of
U.S. dollars
2012$3,674
6,461
10,135
(779)
9,356

(109)
(1,229)(1,338)499(839)

Foreign currency translation adjustments
Adjustments during the year���������������������������������������
Reclassification adjustments����������������������������������������
Sub-total, before tax���������������������������������������������������Tax (expense) or benefit�����������������������������������������������
Sub-total, net of tax����������������������������������������������������

(925)
–
(925)
–
(925)

(11,254)–(11,254)–(11,254)

Total other comprehensive income (loss)�������������������������

¥(225)$(2,737)

Tax effects and amounts reclassified to net income in the period that were recognized in other comprehensive income in the current or previous periods (reclassification adjustments) are required to be disclosed effective from the year ended
March 31, 2012.

13. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock option plans for 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 of eight to twenty years
from the date of grant.
Options to purchase 234,200 shares of the Company were authorized andgranted at an exercise price of ¥1 for the year ended March 31, 2012. The options
under the plans have an exercise period of twenty years from the date of grant,with restriction on exercise up to three years after the date of grant. No options topurchase shares of the Company were authorized and granted for the year ended
March 31, 2011.

Shareholders of Tokyo Electron Device Limited, a domestic listed subsidiary, haveapproved annual stock option plans for directors and selected employees since theyear ended March 31, 2005.
A summary of stock options outstanding and exercisable as of March 31, 2012
and 2011 is as follows:
2012

Tokyo Electron Limited

Number ofshares

Weighted-average exercise
price
Yen
U.S. dollars

Outstanding at the
beginning of year�������� 1,296,800 ¥  5,086 $   61.88
Granted������������������������
234,200
1
0.01
111,100
1
0.01
Exercised�����������������������
586,600
6,786
82.56
Expired (forfeited)���������
Outstanding at theend of year�����������������
833,300
3,139
38.19
Exercisable at theend of year�����������������
599,100
4,365
53.11
Tokyo Electron Device
Limited2012

Number ofsharesOutstanding at the
beginning of year��������
Granted������������������������
Exercised�����������������������
Expired (forfeited)���������
Outstanding at theend of year�����������������
Exercisable at theend of year�����������������

Weighted-average exercise
price
Yen
U.S. dollars

2011
Weightedaverage
Number of exercise pricesharesYen

1,779,100–
67,100415,200¥  5,720–
1
8,625

1,296,800

5,086

1,120,500

5,886

2011
Weightedaverage
Number of exercise pricesharesYen

650 ¥308,698 $3,755.91
–
–
–
–
–
–
–
–
–

650
–
–
–

¥308,698
–
–
–

650

308,698

3,755.91

650

308,698650

308,698

3,755.91

650

308,698

14. Leases
As mentioned in note 2 (m), effective from the year ended March 31, 2009, theCompany and its domestic subsidiaries adopted “Accounting Standard for Lease
Transactions” and “Guidance on Accounting Standard for Lease Transactions.” Aspermitted 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 acquired on or before March 31, 2008 including acquisition cost, accumulated depreciation, obligation under finance leases, anddepreciation expense of finance leases that do not transfer ownership of leased
property to the lessee on an “as if capitalized” basis for the years ended March
31, 2012 and 2011, are as follows:
Leased assets not recorded in the consolidated balance sheets:
Millions of yen
2012
2011

Acquisition cost����������������������������������
Accumulated depreciation������������������
Net leased property�����������������������������

¥286
216
¥ 70

¥947
690
¥257

Thousands of
U.S. dollars
2012$3,4802,628$  852Future minimum lease payments:
Millions of yen
2012
2011

Due within one year����������������������������
Due over one year�������������������������������
Total���������������������������������������������������

¥48
22
¥70

¥139
118
¥257

Thousands of
U.S. dollars
2012

$584
268
$852

Lease payments relating to finance leases accounted for as operating leases
amounted to ¥97 million ($1,180 thousand) and ¥158 million, which approximated the corresponding depreciation on the respective leased property computedby the straight-line method over the lease terms, for the years ended March 31,
2012 and 2011, respectively.
Future minimum lease payments on non-cancelable operating leases:
Millions of yen
2012
2011

Due within one year����������������������������
Due over one year�������������������������������
Total���������������������������������������������������

¥2,013
2,905¥4,918¥1,984
4,361¥6,345

Thousands of
U.S. dollars
2012$24,492
35,345$59,837

TOKYO ELECTRON Annual Report 2012

PAGE

32

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Corporate Data

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Fair Value of Financial Instruments
Policy for Financial Instruments
Tokyo Electron limits its fund management to short-term bank deposits andlow-risk financial instruments, and obtains funds by utilizing bank-loans or liquidating trade-receivables.
Trade receivables, which consist of notes and accounts receivable, are exposedto credit risk in the event of non-performance by the counterparties. Execution
and management of credit risk, maturity and receivable balance are conductedpursuant 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 low risk financial instruments 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 theseinvestment securities are monitored on a regular basis.
Short-term borrowings and trade payables, which consist of notes and accounts
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 16 for detailed discussion on derivative financial instruments.
Fair Value of Financial Instruments
Carrying amount and estimated fair value of financial instruments as of March
31, 2012 and 2011, are set out below. Fair value of financial instruments which ispractically difficult to estimate are excluded (see note 4).
2012:

AssetsCash and cash equivalents�������������������������������������������
Short-term investments�����������������������������������������������
Trade notes and accounts receivable, net of   allowance for doubtful accounts   (¥1,376 million)���������������������������������������������������������
Investment securities���������������������������������������������������
Liabilities
Short-term borrowings������������������������������������������������
Trade notes and accounts payable�������������������������������
Derivatives (see note 16)
Hedge accounting not applied�������������������������������������
Hedge accounting applied�������������������������������������������

Millions of yen
Carrying
Estimatedamountfair value 1¥158,776
88,849¥158,776
88,638148,930
14,699148,930
14,6994,403
58,243

4,403
58,243

(400)
(153)

(400)
(153)

2011:

AssetsCash and cash equivalents�������������������������������������������
Short-term investments�����������������������������������������������
Trade notes and accounts receivable, net of   allowance for doubtful accounts   (¥1,154 million)���������������������������������������������������������
Investment securities���������������������������������������������������
Liabilities
Short-term borrowings������������������������������������������������
Trade notes and accounts payable�������������������������������
Derivatives (see note 16)
Hedge accounting not applied�������������������������������������
Hedge accounting applied�������������������������������������������

2012:

AssetsCash and cash equivalents�������������������������������������������
Short-term investments�����������������������������������������������
Trade notes and accounts receivable, net of   allowance for doubtful accounts   ($16,742 thousand)���������������������������������������������������
Investment securities���������������������������������������������������
Liabilities
Short-term borrowings������������������������������������������������
Trade notes and accounts payable�������������������������������
Derivatives (see note 16)
Hedge accounting not applied�������������������������������������
Hedge accounting applied�������������������������������������������

Millions of yen
Carrying
Estimatedamountfair value 1¥165,051
120,000¥165,051
120,000

135,231
14,445

135,231
14,445

7,996
63,766

7,996
63,766

327
(44)

327
(44)

Thousands of U.S. dollars
Carrying
Estimatedamountfair value 1$1,931,817
1,081,020$1,931,817
1,078,452

1,812,021
178,842

1,812,021
178,842

53,572
708,639

53,572
708,639

Note: 1. Fair value calculation of financial instruments		Cash and cash equivalents, trade notes and accounts receivable, short-term investments,
short-term borrowings and trade notes and accounts payable		 The carrying amounts approximate fair value because of the short maturity of these
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 16 for detailed discussion on derivative financial instruments.
2. Maturities of financial assets and securities are as follows:
2012:
Cash and cash equivalents�����������������������������������������������������������
Short-term investments����������������������������������������������������������������
Trade notes and accounts receivable��������������������������������������������
2011:
Cash and cash equivalents�����������������������������������������������������������
Short-term investments����������������������������������������������������������������
Trade notes and accounts receivable��������������������������������������������
2012:
Cash and cash equivalents�����������������������������������������������������������
Short-term investments����������������������������������������������������������������
Trade notes and accounts receivable��������������������������������������������

Millions of yen
After 1 through5 years

Within 1 year

¥158,776
88,849150,306¥–––Millions of yen
After 1 throughWithin 1 year
5 years¥165,051
120,000
136,385¥–––

Thousands of U.S. dollars
After 1 throughWithin 1 year
5 years$1,931,817
1,081,020
1,828,763$–––

3. Repayment schedule of short-term borrowings and capital lease obligations is as follows:(4,866)(1,862)(4,866)(1,862)

Receivables and payables derived from derivative transactions are stated on a net basis. The figuresin parentheses represent net payables.

2012:
Short-term borrowings������������������������������������������
Capital lease obligations����������������������������������������
2011:
Short-term borrowings������������������������������������������
Capital lease obligations����������������������������������������
2012:
Short-term borrowings������������������������������������������
Capital lease obligations����������������������������������������

Within 1 year

Millions of yen
After 1 through2 years

After 2 through5 years¥4,403
335

¥–
267

¥–
42

Within 1 year

Millions of yen
After 1 through2 years

After 2 through5 years¥7,996
127

¥–
103

¥–
64

Thousands of U.S. dollars
After 1 throughAfter 2 throughWithin 1 year
2 years
5 years$53,572
4,076

$–
3,249

$–
511

TOKYO ELECTRON Annual Report 2012

PAGE

33

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Derivative Financial Instruments

18. Segment Information

2. Derivative financial instruments designated as hedging instruments

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 foreign exchange contracts in order tohedge such risks, but do not enter into such 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 theinternal management rule for derivatives and the assessment of effectiveness ofhedging activities is reported on a semi-annual basis to the Corporate Director in
charge of Finance.
The estimated fair values of the derivative financial instruments as of March 31,
2012 and 2011 are as follows:
1. Derivative financial instruments not designated as hedging instruments
Millions of yen
2012:

Contract
AmountSell U.S. dollars���������������������������������������
Sell Korean won��������������������������������������
Buy U.S. dollars���������������������������������������
Total�������������������������������������������������������

¥ 9,874701
5,804¥16,379

Fair value

Unrealized
gains (losses)¥(464)
23
41¥(400)¥(464)
23
41¥(400)

2012: Hedge accounting

Millions of yen
Contract
AmountFair value

Thousands of U.S. dollars
Contract
AmountFair value

Sell U.S. dollars�����������������
Sell Korean won����������������
Sell Chinese yuan��������������
Buy U.S. dollars�����������������
Buy EURO�������������������������
Total���������������������������������

¥ 6,879
85
192
4,325
195
¥11,676$ 83,696
1,034
2,336
52,622
2,373$142,061

2011: Hedge accounting

Millions of yen
Contract
AmountFair value

Sell U.S. dollars�����������������
Sell Korean won����������������
Buy U.S. dollars�����������������
Total���������������������������������

¥ 6,41137
4,099¥10,547

2011:

Sell U.S. dollars���������������������������������������
Sell Korean won��������������������������������������
Buy U.S. dollars���������������������������������������
Total�������������������������������������������������������

¥ 7,405
1,235
4,763¥13,4032012:

Contract
amountSell U.S. dollars���������������������������������������
Sell Korean won��������������������������������������
Buy U.S. dollars���������������������������������������
Total�������������������������������������������������������

$120,136
8,529
70,617$199,282

Fair value¥(72)350
49¥327¥(72)
350
49¥327

Thousands of U.S. dollars
Fair value$(5,645)280
499$(4,866)

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

¥(54)
11
(1)
¥(44)

Contract amountMillions of yen
2012
2011

Unrealized
gains (losses)

Unrealized
gains (losses)$(5,645)280
499$(4,866)$(2,203)
(85)
12
207
207
$(1,862)

The contract amounts of forward foreign exchange contracts, entered into tohedge receivables and payables denominated in foreign currencies that have beentranslated by the corresponding contracted rates, are as follows:

Millions of yen
Contract
amount¥(181)(7)
1
17
17¥(153)

Sell U.S. dollars�����������������������������������
Sell Chinese yuan��������������������������������
Buy U.S. dollars�����������������������������������
Total���������������������������������������������������

¥   589,854
65¥9,977

¥ 90
–
62
¥152

Thousands of
U.S. dollars
2012$    705
119,893
791$121,389

Note:	The fair value of these derivative financial instruments, which is based on the quoted foreignexchange rates, is included in the carrying value of hedged assets and liabilities.

17. Other Income (Expenses)
Reversal of allowance for doubtful accounts of ¥1,892 million for the year
ended March 31, 2011 is related to the subsequent collection of specificaccounts receivable.
Expenses for plant relocation of ¥1,839 million were recognized as a result of
the transfer of etch system business for the year ended March 31, 2011.
Loss from natural disasters of ¥936 million ($11,388 thousand) and ¥1,114
million for the years ended March 31, 2012 and 2011, respectively, represents
losses relating to the Great East Japan Earthquake which occurred on March 11,
2011, which mainly consists of repair costs for damaged facilities and fixed costs
during the inactive period and repair costs for damaged facilities.
Loss on business restructuring of ¥849 million ($10,330 thousand) for the year
ended March 31, 2012 consists of devaluation of inventories, loss on impairmentof property, plant and equipment and loss on disposal of inventories and property,
plant and equipment.

General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo
Electron. For each of the components, discrete financial information is available
and its operating result is regularly reviewed by 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 and services
based on business units (BUs), and Tokyo Electron identifies as a reportable segment, “Semiconductor Production Equipment (SPE),” “Flat Panel Display and Photovoltaic Cell (FPD/PV) Production Equipment,” and “Electronic Components andComputer Networks.”
Products of the SPE segment consist of coaters/developers, plasma etch systems,
thermal processing systems, single wafer deposition systems, cleaning systems usedin wafer processing, wafer probers used in the wafer 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 thin film 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 reportable segment net sales, segment profit,
segment assets and other items
The accounting policies applied in each reportable segment are generally consistent with those 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 to each reportable segment,
while costs associated with those assets have been allocated to reportable segments on a systematic basis.

TOKYO ELECTRON Annual Report 2012

PAGE

34

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information about reportable segment net sales, segment profit, segment assets and other items
Reportable segment information as of and for the year ended March 31, 2012 and 2011 are as follows:
Millions of yen
Reportable Segment
Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Net sales
Sales to external customers�����������������������������������������������������������������������������
Intersegment sales or transfers������������������������������������������������������������������������
Total���������������������������������������������������������������������������������������������������������������
Segment profit������������������������������������������������������������������������������������������������
Segment assets�����������������������������������������������������������������������������������������������

¥477,873–
477,873
89,020262,789¥69,889–
69,8892,271
21,295

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

11,282
13,518

687
672

2012:

Eliminations andCorporate

Consolidated¥633,091
15,997649,088
95,430332,402¥–(15,997)(15,997)(34,828)451,209¥633,091–
633,091
60,602
783,611

12,70914,633

11,48928,572

24,19843,205

Eliminations andCorporate

Consolidated

Other

Total

¥84,868
1,432
86,3002,312
46,391¥   461
14,56515,026
1,827
1,927

570
407

170
36
Millions of yen

Reportable Segment
Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Net sales
Sales to external customers�����������������������������������������������������������������������������
Intersegment sales or transfers������������������������������������������������������������������������
Total���������������������������������������������������������������������������������������������������������������
Segment profit������������������������������������������������������������������������������������������������
Segment assets�����������������������������������������������������������������������������������������������

¥511,332
0511,332
120,846
239,707¥66,721–66,721
6,641
42,812

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

7,369
13,182

543
553

2011:

Other

Total

¥90,216
1,100
91,316
2,907
50,255¥   453
14,90815,361
1,916
2,094¥668,772
16,008684,730
132,310
334,868¥–(16,008)(16,008)(32,731)474,337¥668,722–
668,722
99,579809,205

456
774

354
28

8,722
14,537

8,985
26,723

17,70741,260

Corporate DataTOKYO ELECTRON Annual Report 2012

PAGE

35

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Thousands of U.S. dollars
Reportable Segment

2012:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Eliminations andCorporate

Consolidated

Net sales
Sales to external customers�����������������������������������������������������������������������������
Intersegment sales or transfers������������������������������������������������������������������������
Total���������������������������������������������������������������������������������������������������������������
Segment profit������������������������������������������������������������������������������������������������
Segment assets�����������������������������������������������������������������������������������������������

$5,814,247–
5,814,247
1,083,100
3,197,335$850,335–
850,335
27,631
259,095$1,032,583
17,423
1,050,006
28,130564,436$5,609177,211
182,820
22,22923,446$7,702,774
194,634
7,897,408
1,161,090
4,044,312$–(194,634)(194,634)(423,750)
5,489,828$7,702,774–
7,702,774
737,340
9,534,140

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

137,267
164,473

8,359
8,176

6,935
4,952

2,068
438

154,629
178,039

139,786
347,633

294,415525,672

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 ¥34,828 million ($423,750 thousand) and ¥32,731 million for the years ended March 31, 2012 and 2011, respectively, includes corporate expenses
not allocated to any reportable segments. The corporate expenses mainly consist of research and development costs of ¥26,071 million ($317,204) and ¥22,719 million for the years ended March 31,
2012 and 2011, respectively, pertaining to fundamental research and element research, not allocated to any of the reportable segments.
		 (2)	“Eliminations and Corporate” segment assets totaling ¥451,209 million ($5,489,828 thousand) and ¥474,337 million as of March 31, 2012 and 2011, respectively, consist mainly of cash and cash
equivalents, short-term investments and buildings not allocated to any of the reportable segments.
3.	“Eliminations and Corporate” capital expenditures totaling ¥28,572 million ($347,633 thousand) and ¥26,723 million for the years ended March 31, 2012 and 2011, respectively, consist mainly of capital
expenditures for buildings not allocated to any of the reportable segments.
4. Reported segment profit is reconciled to Income before income taxes and minority interests in the consolidated statements of income.

Other Information(1) Domestic and overseas net sales by destination for the years ended March 31, 2012 and 2011 are as follows:
Net sales

Millions of yen
2012
2011

Thousands of
U.S. dollars
2012Japan�������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
United States of America�������������������������������������������������������������������������������������������������������������������������������������������������������������������
Korea�������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Taiwan�����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Other�������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

¥171,364
114,951
114,218
86,882
145,676¥633,091$2,084,974
1,398,601
1,389,682
1,057,087
1,772,430$7,702,774¥182,165
103,013106,374
169,276
107,894¥668,722

Note:	Sales are classified in countries or regions based on location of customers.

(2) Net property, plant and equipment by location as of March 31, 2012 and 2011 are as follows:
2012:

Japan

Property, plant and equipment¥107,874

2011:

Japan

Property, plant and equipment¥97,775

Millions of yen
Other¥19,011
Millions of yen
Other¥14,777

Thousands of U.S. dollars
Other

Total

Japan

¥126,885$1,312,495

Total¥112,552$231,306

Total$1,543,801

Corporate DataTOKYO ELECTRON Annual Report 2012

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36

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Sectionn FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn INDEPENDENT AUDITORS’ REPORTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(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:
Name of customer

Samsung Electronics Co., Ltd.
Intel Corporation

Related reportable segment

Semiconductor production equipment and FPD/PV production equipment
Semiconductor production equipment

Name of customer

Samsung Electronics Co., Ltd.

Related reportable segment

Semiconductor production equipment and FPD/PV production equipment

Millions of yen
2012

Thousands of
U.S. dollars
2012¥116,919
90,399$1,422,545
1,099,878

Millions of yen
2011¥101,074

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

19. Subsequent Event
Grant of stock options under stock option plans
On May 15, 2012, the Company’s board of directors decided to submit a resolution to the shareholders’ meeting for approval of the issuance of stock subscription
rights to directors and selected employees of Tokyo Electron. The issuance of stock
subscription rights is intended to enable the grant of stock options. Under thesestock option plans, option to purchase up to 53,800 shares of the Company at an
exercise price of ¥1 ($0.01), will be granted to directors of the Company as ofMarch 31, 2012 (excluding outside directors and directors who resigned on June22, 2012), and options to purchase up to 77,000 shares of the Company at an

exercise price of ¥1 ($0.01), will be granted to certain executive officers of theCompany as of March 31, 2012, certain directors of the Company who resigned
on June 22, 2012, certain directors and executive officers of domestic subsidiaries
and certain chairmen, presidents, and vice chairmen of overseas subsidiaries as ofMarch 31, 2012, who were determined by a resolution 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 annual general meeting of theshareholders of the Company on June 22, 2012.

Corporate DataTOKYO ELECTRON Annual Report 2012

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37

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Section

Corporate Datan FINANCIAL REVIEWn CONSOLIDATED ELEVEN-YEAR SUMMARYn CONSOLIDATED BALANCE SHEETSn CONSOLIDATED STATEMENTS OF INCOME
n CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEn INDEPENDENT AUDITORS’ REPORTn CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
n CONSOLIDATED STATEMENTS OF CASH FLOWSn NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITORS’ REPORTTo the Board of Directorsof Tokyo Electron Limited:
We have audited the accompanying consolidated financial statements of Tokyo Electron Limited and its consolidated subsidiaries, which comprise the consolidated balance sheets as at March 31, 2012 and 2011, and the consolidated statements of income, statements of comprehensive income, statements of changes in net assets andstatements of cash flows for the years then ended, and a summary of significant accounting policies and otherexplanatory information.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position ofTokyo Electron Limited and its consolidated subsidiaries as at March 31, 2012 and 2011, and their financial performance and cash flows for the years then ended in accordance with accounting principles generally accepted inJapan.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatements, whether due to fraud or error.

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2012 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.

Auditor’s Responsibility
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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of therisks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances,while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.

June 22, 2012
Tokyo, Japan

TOKYO ELECTRON Annual Report 2012

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38

CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Sectionn GROUP COMPANIESCorporate Datan INVESTOR INFORMATIONGROUP COMPANIESAs of March 31, 2012, the Tokyo Electron Group was made up of the parent company and its 30 consolidated subsidiaries.
Company

Company

Main business

Main business

EUROPE

JAPAN

Consolidated subsidiaries

Consolidated subsidiaries
Tokyo Electron Yamanashi Limited

Manufacture and development

Tokyo Electron Europe Limited

Sales and field support

Tokyo Electron Kyushu Limited

Manufacture and development

Tokyo Electron Israel Limited

Field support

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 Korea Limited

Sales and field support

Tokyo Electron Software Technologies Limited

Development

Tokyo Electron Korea Solution Limited

Field solutions

Tokyo Electron PV Limited

Development

Tokyo Electron Taiwan Limited

Sales and field support

Tokyo Electron FE Limited

Field solutions

Tokyo Electron (Kunshan) Limited

Manufacture

Tokyo Electron Device Limited

Sales

Tokyo Electron (Shanghai) Limited

Sales and field support

Tokyo Electron BP Limited

Logistics, leasing, facility management, etc.

Tokyo Electron (Shanghai) Logistic Center Limited

Logistics

Tokyo Electron Agency Limited

Nonlife insuranceTokyo Electron Device Asia Pacific Limited

Sales

Pan Electron Limited

Sales

Tokyo Electron Device Singapore Pte. Ltd.

Sales

Tokyo Electron India Private Limited

Sales and field support

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

Holding company

Tokyo Electron America, Inc.

Sales and field support

Timbre Technologies, Inc.

Development

TEL Technology Center, America, LLC

Development

TEL Epion Inc.

Development

TEL Venture Capital, Inc.

Identification and evaluation of new technologies

ASIA
Consolidated subsidiaries

TOKYO ELECTRON Annual Report 2012

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CONTENTS

Highlights

Top Message

Segment Information

FeatureCorporate GovernanceCorporate Citizenship

R&D/Intellectual Property

Financial Sectionn GROUP COMPANIESCorporate Datan INVESTOR INFORMATIONINVESTOR INFORMATION(As of March 31, 2012)

Corporate Name and Head Office:Independent Auditors:

Tokyo Electron Limited

KPMG AZSA LLC

Akasaka Biz Tower

Administrator of Shareholders’ Register:

3-1 Akasaka 5-chome, Minato-ku,

Principal Shareholders:Number ofshares held
(thousands)

Votingshare
ratio (%)

Sumitomo Mitsui Trust Bank, Limited

The Master Trust Bank of Japan, Ltd. (trust account)

19,501

10.88

8-4 Izumi 2-chome, Suginami-ku, Tokyo 168-0063, Japan

Japan Trustee Services Bank, Ltd. (trust account)

15,183

8.47

Established:

Tel (toll free): 0120-782-031 (available only in Japan)

Tokyo Broadcasting System Holdings, Inc.

7,727

4.31

November 11, 1963

For Further Information, Contact:

SSBT OD05 OMNIBUS ACCOUNT - TREATY CLIENTS

4,262

2.37

State Street Bank and Trust Company 505225

4,175

2.33

Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension

3,849

2.14

The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account

2,948

1.64

JPMorgan Securities Japan Co., Ltd.

2,908

1.62

Trust & Custody Services Bank, Ltd. (Investment trust account)

2,714

1.51

Mellon Bank Treaty Clients Omnibus

2,366

1.32

Tokyo 107-6325, Japan

Annual General Meeting of Shareholders:

Investor Relations

June

Tokyo Electron Limited

Common Stock:

Akasaka Biz Tower

Stock trading unit

3-1 Akasaka 5-chome, Minato-ku,

100 shares

Authorized

300,000,000 shares

Issued and outstanding

180,610,911 shares

Number of shareholders

42,414

Tokyo 107-6325, Japan
Tel: +81-3-5561-7000

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(1,446,079 shares).

URL:
http://www.tel.com

Common Stock Listed on:Distribution of Ownership Among Shareholders:

The Tokyo Stock Exchange 1st Section (#8035)

Other Japanese corporations
5.27%

Treasury stock
0.80%
Foreign institutions and others
42.75%

Stock Price and Trading Volume(Yen)

(Thousands of shares)

10,000Stock price

8,000Japanese individuals andothers
9.62%

6,000

4,000

2,000

120,000

Trading volume

60,00000FY2008FY2009FY2010FY2011FY2012

2012
3/31

Japanese financial institutions andsecurities companies
41.56%