Medium-term Management Plan
Progress and TEL Initiatives
July 7, 2016
Toshiki Kawai
Representative Director, President & CEOFY2016 Highlights
Net Sales and Gross Profit Margin(Billion Yen)
800

600

Operating Income and Operating Margin(Billion Yen)
250

Net sales
Gross profit margin

612.1

613.1

39.6%

400

Operating Income

663.9

Operating margin
200

40.2%

150

116.7
88.1

100

33.0%

17.6%

200
50

32.2

14.4%

5.3%
0

0

FY2014FY2015FY2016FY2014FY2015FY2016

 Increased sales and profit YoY. Achieved sales of ¥663.9B and highest-ever gross profit
margin of 40.2%
 Since the 2008 global financial crisis, improved operating income to over ¥100.0B.
Substantially improved operating margin to 17.6%, up 3.2 pts YoY
CORP IR / July 7, 2016

2

FY2016 Highlights
 Since the 2008 global financial crisis, improved operating income to over ¥100B
 Achieved +8.3% sales increase YoY, GPM of 40.2%, OPM of 17.6% and ROEof 13.0%. Strong progress towards Medium-term Plan targets
 Made steady progress in certification of equipment applications within Mediumterm Plan’s SPE focus areas (etching, cleaning and ALD systems)
 Implemented reorganization to strengthen product development ability andresponsiveness to customers

 Announced new shareholder return policy, cancelled 15.4 million shares oftreasury stock, paid highest-ever annual DPS of ¥237
 Announced that we are building a proactive governance structure withemphasis on linkage to Medium-term Plan
CORP IR / July 7, 2016

3

FY2017 Consolidated Financial Estimates(Billion Yen)

1st Half

2nd Half

Full year

YoY changes

Net Sales

330.0

384.0

714.0

+7.5%

Sales bydivision

304.0
26.0

361.0
23.0

665.0
49.0

+8.5%

49.0

75.0

124.0

+6.2%

14.8%

19.5%

17.4%

-0.2pts

Ordinary Income

49.0

75.0

124.0

＋3.9％

Income before income taxes

39.0

75.0

114.0

+7.1%

Net income attributable toowners of parent

29.0

56.0

85.0

+9.1%

SPE
FPD

Operating Income+9.7%

SPE: Semiconductor Production Equipment
FPD: Flat Panel Display Production Equipment

Forecasting further YoY increases in sales and profits
CORP IR / July 7, 2016

4

Dividend Forecast
Dividend per share
(Yen)

260

300

237
200

Year-end
171

143
100

• FY2017 DPS(E): ¥260
• DPS expected to set
new record high for thethird consecutive year

Interim
890(FY) 2012

2013

2014

2015

2016

2017

Estimate
CORP IR / July 7, 2016

5

Current Progress with Medium-term Financial Target
Medium-term financial target
FY2015FY2016

WFE market size

$31.9B$31.5B

$30B

$37B

Sales

¥613.1B¥663.9B

¥720B

¥900B

Operating margin

14.4%

17.6%

20%

25%

ROE

11.8%

13.0%

15%

20%

CORP IR / July 7, 20166

Three Focus Areas for New Growth Opportunities
Create strong nextProductgeneration products
competitivenessResponsiveness Increased
to customers profitability
Become the best and sole
strategic partner

CORP IR / July 7, 2016

Pursue operational
efficiency

7

Organizational Reforms to Strengthen TEL

1

Unification ofdevelopment divisions

Implemented (Jan. 2016)

2

Establishment of
new account structure

Implemented (Jan. 2016)

3

Reorganization ofbusiness units

Started in Jul. 2016

Optimized organization for further growth
CORP IR / July 7, 20168

Unification of Development Divisions – Create Strong
Next-generation Products Reinforce proposal ability with an eye to markets
 Integrate our diverse technologies– Improve performance of individual products– Create solutions for patterning, integration, etc.

 Optimize the use of resources
CORP IR / July 7, 2016

9

Establishment of New Account Structure
Background Overseas sales ratio of 80%, consolidation among semiconductor
manufacturers
 Technology diversification
Optimization of device manufacturing processes, as well as improving performanceof individual products

Actions

Purposes

CORP IR / July 7, 2016

 Assign5 regional GM, account GM and account technology GM for7each customer,
0 technology marketing that creates customer needs
 Pursue00 Rapidly identify latent customer needs and provide solutions thatexceed customer expectations
 Become the best and sole strategic partner by further enhancing
the great trust customers place in us
10

Reorganization of Business Units Reorganized business units in accordance with 4
strategic markets (deposition, coat & clean, etch, test)– Structure to maximize technological synergies realized with aneye to strategic markets– Make effective use of resources– Further speed up decision-making

CORP IR / July 7, 201611

SPE Product Line-up

Single wafer
cleaning system
Coater/developers

CELLESTA™-i

Plasma etchsystemTactras™ Vigus™

Thermalprocessing
systemTELINDY PLUS™

ALD system
NT333™

Single wafer
CVD system
Triase+™EX-II™ TiN

CLEAN TRACK™
LITHIUS Pro™ Z

Multi-cell
test system
Cellcia™

Wide range of products that solve customers’
tough technological issues

CORP IR / July 7, 2016

12

FPD Production Equipment Market Again Approaching$10 Billion
FPD Production Equipment Market($B)

FPD plasma etch/ash system
Impressio™ 1800 PICP™

14
14
12
12
10
10
88
66
44
22
00
2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: IHS Technology

Forecast

Inkjet printing system for OLED panel
manufacturing
Elius™ 2500

Capture opportunities in the rapidly growing
OLED market with new products
CORP IR / July 7, 201613

Summary Unified development divisions– Create strong next-generation products– Respond to diverse requirements by taking advantage of an extensive product line-up

 Established new account structure– Become the best and sole strategic partner by further enhancing the great trust customers
place in us

 Reorganized business units– Focusing on 4 strategic markets, established a structure that will maximize technological synergies

 Expand revenues in field solutions business FPD business: Aim for further growth through providing solutions in highvalue-added areas– Ultra-high resolution, low power consumption, large size
CORP IR / July 7, 201614

SPE R&D Strategy
Sadao Sasaki
Representative Director, Executive Vice President & General Manager,
Development & Production Division

Contents
 Leading-edge Technology Requirements and Business Opportunities
for TEL– Technological Requirements for Next-generation Leading-edge Devices from the
Perspective of Trends in Final Products– SPE Business Focus Areas

 SPE R&D Strategy– Strategy for Strengthening R&D Ability– Growth Strategy for Business Focus Areas (Deposition, Cleaning Systems)– IoT Technology R&D

CORP IR / July 7, 201616

Requirements for Next-generation Devices for Final Products
MobileServerIndustry &Automotive

Pursuit of convenience anduser experience

Expansion of use in IoT era

Overall society converting todigital data
Network sophistication

High performance, low power
requirement, functional
diversification

Accelerating 3D integration
Introduction of next-generation
memory technology

Low power consumption,high reliability devices

Requirements for continuous miniaturization and devices withhigh quality and reliability
CORP IR / July 7, 201617

Manufacturing Technology Requirements for
Semiconductor Devices
NAND

DRAM

STT-MRAM

XPointLogic

2D NAND

DRAM

3D NAND

Logic

Built-in memory capacity
driving demand

Acceleration of introduction of
SSD at data centers

Further miniaturization andchanges in structureHigh aspect, thin film
controllability, new materials
Achievement of ultimate
miniaturization

Both precision in fine processing
and high productivity
Innovative cost reductions

Taking on challenges in patterningtechnology, new structures
Pursuing defect control technology

Grasp of customer needs and rapid provision of equipment, process solutions
CORP IR / July 7, 201618

SPE Business Focus Areas
CY2015 CY2016 CY2017 CY2018 CY2019 CY2020
Logic/Foundry

16/14nm

DRAM

20nm
48 Layer

3D NAND
Coater/developer

Etching system
Deposition system

Cleaning system

10nm
1Xnm

7nm
1Ynm

64 Layer

1Znm
96 Layer

Maintain 85%+ market share. Further expand technological differentiation
with leading-edge immersion and EUV
Expand applications in 3D NAND processes, expand PORs in patterning
processes with new technologies
Improve position in ALD products and expand market share in new products,
establish volume production process for STT-MRAM*
Expand sales of batch system for 3D NAND, increase share in single wafer
clean through pattern collapse prevention technology

Common technology Defect control and removal technology, make systems intelligent
CORP IR / July 7, 2016

*STT-MRAM (Spin Transfer Torque-Magnetoresistive Random Access Memory): Magnetic memory that shows promise for low power consumption

19

SPE R&D Strategy

CORP IR / July 7, 201620

Unification of R&D Resources Selection and concentration of company-wide R&D resources
in SPE R&D
FY2016

BU R&D

64% of total

FY2017

Corporate R&D
SPE fundamental R&D
Non-SPE

BU R&D and corporate R&D

92% of total

Global
R&D

Cross-BU R&D
Patterning
GlobalConsortia
R&D
Collaboration*Allocation ratio of R&D engineering staff
CORP IR / July 7, 201621

3D NAND Key Process Technologies and TEL’s Solutions
TactrasTM

Plasma dry etch
• Word line isolation• Channel hole
• Multi-level contact

Lithography• Word line isolation• Channel hole
• Multiple contact• Staircase

Multi-level contact

Chemical dry etch
• Source line pre-clean
CertasTM

Thermal process (batch deposition)• Block oxide (high-k)• Charge trap (ALD SiN)
• Channel Si• Cap Si

Word line
Staircase
EXPEDIUSTM-i

Wet etch• Replacement word line
CELLESTATM-i

Wet clean• Bevel clean
CORP IR / July 7, 2016

LITHIUS ProTM Z

ChannelWord line isolation (Slit)
Source line

Single wafer deposition• Word line barrier• Multi-level contact barrier• Source line barrier

TELINDY PLUSTM

Atomic layer deposition• Core oxide

NT333TM

Triase+TM
22

SPE Business Strategy: Strategic Collaboration in
Patterning
Collaboration with customers

Consortia
New
technologies

Capture next-generation POR through joint
evaluation and by providing integrated
solutions that draw on our broad product rangeNewmaterials
Leading-edge
lithography＋

TEL’s R&D locations
Coater/Developer

Etching system

Chemical etchingsystemCORP IR / July 7, 2016

Deposition
systemCleaning
systemPatterning Solution Project

TEL Technology Center America

23

SPE R&D Strategy (Deposition, Cleaning)

CORP IR / July 7, 201624

SPE Business Strategy: Expansion of Deposition
System Line-up
Thermal processing Single wafer
systemdeposition system
TELINDY PLUS™

Triase+™

Large batch type
Applicable to various
film deposition

Single wafer typeHigh coverage ability

ALD system
NT333™

Single wafer
Sputtering system for thedeposition system next-generation devices
Triase+™

Semi-batch typeHigh productivity SiO2 ALD

Single wafer typeHigh precision
metal deposition

EXIM™

Single wafer type
New PVD applicable to multilayer,
laminated film
Won “Semiconductor of the year 2015”

Product line-up responds to high coverage and productivity required inminiaturization and 3D structure
CORP IR / July 7, 201625

SPE Business Strategy: Cleaning Systems
 Single wafer wet cleaning system will contribute to improved yieldfor customers through TEL’s strengths in areas– Pattern collapse prevention technology– BEOL polymer removal/metal loss reduction– High precision back-side bevel cleaning Fulfill high technological needs with dry cleaning

Single wafer cleaning system
CELLESTA™

 Realize higher share by accelerating introduction of
new technologies for further miniaturization– Strengthen back-side bevel cleaning technology– Microscopic particle control/removal
Market share

CY2014

CY2015

CY2019 Target

Cleaning system

25%

24%

>35%

CORP IR / July 7, 201626

IoT R&D Strategy (Making Equipment Intelligent)

CORP IR / July 7, 201627

Providing New Added-value
Application of big data and AI through IoT
Use IoT to analyze diverse data
Combine with expert knowledge

Subsystem

Sensors

Contents

Knowledge

Learns on its own while controlling
optimally and safely
Develop intelligent equipment
CORP IR / July 7, 201628

R&D Initiatives

High growthHigh efficiency
High profit

Optimal, safe
equipment control

Self-diagnosis
ability
Learning ability
Autonomous
control ability

Business value
Higher reliability, lower support
requirements with self-diagnosis
Streamlined spare parts stocks
through parts lifespan prediction
Improved response speed andavoidance of damage throughpre-fault detection
Higher yield through optimal
stability control for wafer production
Less downtime, higher utilization
rate through PM optimization

Continuously build high profit structure by achieving high efficiency
through incorporation of the newest technology
29
CORP IR / July 7, 2016

Making SPE Intelligent

R&D of autonomous production systems
CORP IR / July 7, 201630

Summary TEL will grow substantially in consideration of the everincreasing technological demand for SPEs
 Strategically strengthen collaboration with customers andconsortia to create innovative technology. Aim for growthwith existing product enhancement and cross-BU synergies– Promote technological development of patterning solutions– Make SPE intelligent

 Aim to grow our share in etching, deposition, and cleaning
through the unification of R&D resources

CORP IR / July 7, 201631

Environment Around the Leading-edge Semiconductor
Industry: TEL’s Patterning Strategies
Akihisa Sekiguchi, PhD
Vice President & General Manager
Advanced Semiconductor Technology Division

Contents
 Technical Challenges in Patterning– Sustainability of Device Scaling and Migration to 3D structure– Extendibility of Immersion 193 nm (ArF) Exposure Technology and EPE (edge placement
error)

 Technical Approaches– Unit Process Solution– Integrated Patterning Solution (co-optimization of multiple unit processes)

 Next Generation Process– Control Techniques in Atomic Scale: ALD (atomic layer deposition) and ALE（atomic layer
etch)

CORP IR / July 7, 201633

Environment of the Leading-edge Semiconductor Industry:
Sustainability of Device Scaling and Migration to 3D Structure
FIN FET

Nanowire FET(Future)Planar

Source: Intel(22 nm node)

Source: Intel(65 nm node)

2005

2012
22 nm node
193i litho – Multiple masks

Future≤ 7 nm node
193i litho – Multiple masks
EUV litho
Memory-like gridded DR

65 nm node
193 nm litho – Single mask

Migrating to 3D structure with CD scaling makes process more difficult, but sustains Moore’s law
CORP IR / July 7, 201634

Environment of the Leading-edge Semiconductor Industry:from Immersion 193 nm (ArF) to EUV
Integrated Patterning
(LE)3
SAQP

(LE)2
SADP

High NA
RET

3,000

EUV
SAQP

Resolution (nm)365 nm
248 nm
193 nm

193i

180
100

130

110

38 nm hp
193i /1.35 NA

300
90
65

45
32

Resolution
wavelength
Wavelength

22
RET : resolution enhancement technique

10
1990

1993

1996

1999

2002

2005

2008

2011

Si atoms per resolution

Lithography Enabled Scaling

1,000

13.5 nm

14
2014

10
2017

30
2020

Lithography has already migrated from single exposure of immersion 193 nm to integrated patterning
CORP IR / July 7, 201635

Technical Challenges: Resolution and EPE

Cut

Cut

Cut

EPE (edge placement error)

Source: Intel

Precision of edge placement needs to be at the nm scale, which is more critical than resolution
CORP IR / July 7, 201636

Progress in Conventional Process: Precision in Cutting and Shrinking

Hole shrinking techniqueLine cutting techniqueContinuous improvement of etching and thin film formation is key in patterning
CORP IR / July 7, 201637

Evolution of Self-aligned Technology:
Necessity of New Integration and Module Development
SAMP

SAB

SAC

(self-aligned
multiple patterning)(self-aligned block)(self-aligned contact)

SAMP requires ALD,
which can control
deposition thickness at
the nm scale

SAB is enabled by taking
advantage of different etchselectivity between different
combinations (complex
material combination)

ALD and ALE are
indispensable to SAC,
which is now dominant
in MOL contact

Innovative solutions can be found by combining a variety of our equipment and processes
CORP IR / July 7, 201638

Evolution of Unit Process Technology: Atomic Level Controllability

ALD and ALE require both deposition and etch process/equipment technologies
CORP IR / July 7, 201639

Summary of Patterning Technology
 Scaling will still be important inlogic devices
 Process will become more complex
 Integrated solutions have become
indispensable in addition tocontinuous improvement in unit
process

Exposure

Coat
Develop

Deposition
Dry EtchAnneal Our key strength is the variety in
our product lineup – deposition,etch, clean, coat
CORP IR / July 7, 2016

Surface
Planarization
Wet Clean

40Etching System: Business Strategies
Yoshinobu Mitano
Vice President & General Manager, ES BU

Current Situation of Etching Market and TEL
 Expansion in etching market continues due to growth in
3D NAND and patterning processes

 Sales in 3D NAND expected to be double those ofprevious year
 Leveraging our technological advantage, we have seen
good progress in the first year of the Medium-term Plan
CORP IR / July 7, 201642

Technologies Sought for Leading-edge Logic Devices
Demand for Advanced Device

FIN FET (FEOL)SAC etch (MEOL)• Low damage/CD uniformity• High selectivity• Vertical form
Source: IntelKey Technology/Solution• Low electron temperatures• Radical control

RLSA plasma• ALE technology
CORP IR / July 7, 2016

ALE concept43Etching Technologies Demanded for Cutting-edge Memory
Demand for Advanced Device
DRAM

3D NAND•

High selectivity to mask•

Vertical etching•

Productivity

Key Technology/Solution

DC superposition

CORP IR / July 7, 2016•

TEL’s unique DC superposition
technology•

Dynamic processing•

Process control at the wafer edge
44Etching Equipment Market and Business Opportunities
Etching Equipment Market($M)

Main applications and target devices

8,000<200mmOthers

6,000

HARC process*

DRAM

Interconnect/contact
process

3D NAND

Patterning process

Logic

4,000

2,000

Gate process
0

CY20142015

2016(E) 2017(E) 2018(E) 2019(E)Dry etch total market size: Gartner, “Forecast: Semiconductor Wafer-Level Manufacturing
Equipment, Worldwide, 1Q16 Update” 14 April 2016
Based on sales revenue
Graph made by TEL based on Gartner’s research*By application ratios are based on TEL estimates

CORP IR / July 7, 2016

*HARC (High Aspect Ratio Contact) process: A process for forming holes that requires advanced
processing technology

The Gartner Report described herein, (the "Gartner Report") represents data, research opinion or viewpoints published, as part of a syndicated subscription service,
by Gartner, Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of thisenterprise report) and the opinions expressed in the Gartner Report are subject to change without notice.

45

HARC Processing for DRAM/3D NAND
 Market needs– Further HARC vertical processing through miniaturization (DRAM) and stacking (3D NAND)
needed3D NAND

DRAM

Multi-level
Contact

Channel

CY2016

CY2017

CY2018CY2019DRAM

20~25nm18~20nm17~18nm16~17nm

3D NAND~48Layers~64Layers~96Layers~128Layers

Slit TEL actions and results– In DRAM processing, achieved vertical processing of 18nm and beyond– In 3D NAND, made progress with slit processing, in addition to multi-layer contact processing– Improved productivity through improved processing performance at wafer edge (increased number ofchips in yield)
CORP IR / July 7, 201646

BEOL/Contact Processing
ALE Concept Market needs

Initial state

Higher selectivity

Gas absorption

Both necessary

Mask
Contact formationof narrow dimensions

Repeated necessary
number of times+ + + TEL actions and results– Realized high-selectivity ALE through optimization ofelectricity supply system– Higher productivity through improvements to gas supply
systemCORP IR / July 7, 2016

Desorption

Activation
47

Patterning for Logic/DRAM
 Market needs
40nm

20nm

10/7nmSinglepatterning

DoublepatterningMultipatterning

PR

Ox

Evolution of multi patterningtechnology

Simplify process and raise
productivity by combining
multiple etching steps

 TEL’s initiatives and results– Logic: Utilize the strengths in our oxide etching to handle expanding patterning processes– DRAM: Realize productivity merits through process simplification and leveraging
equipment adoption in logic customers
CORP IR / July 7, 201648

Summary Achieve Medium-term Plan target (raise profitabilityon 10 pt increase in share) through stable position inlogic interconnect/contact process, our initiative torealize HARC/patterning market needs

Market Share

CY2014

CY2015

CY2019 Target

Etching system

26%

19%

>36%

CORP IR / July 7, 201649

Field Solution Business Strategies
Kiyoshi Sunohara
Senior Vice President & General Manager, FS BU

FY2016 Highlights and Revenue Plan
Field Solutions Sales>¥200.0B

250.0

200.0

185.0

170.0

85.0

80.0

Used equipment
and modification

77.0

150.0

106.4
100.0
93.0

105.0

115.0

parts and services

50.0

FY2016 Highlights

 Grew sales ¥15.0B YoY
 Began supplying remanufactured
equipment
 Introduced new TELeMetrics™
service– 50 fabs remotely connected Installed base of 59,000 units

0.0
FY2012

2013

2014

2015

2016

2020
TargetIncreased earnings in both the used equipment/modificationand parts/service segments
CORP IR / July 7, 2016

51

IoT Expanding Business Opportunities
Chips for iPhone 6S
Leading-edge
equipment(Front)- Processor/DRAM- NAND Flash- LTE Modem
Others(Back)

Upgraded previous
generationequipment- Power amplifier- MEMS- Display controller- Sensor
Others

Source: iFixit website

Customer needs driven by IoT

 Used equipment/modification– Fast delivery/low price– Compatibility with new
applications– Upgrades based on changes in(technological) needs

 Parts/services– Stable operation of equipment– Reduced running costs– Long life support for equipment

Upgrades to leading-edge technology being sought for all
generations of equipment
CORP IR / July 7, 201652

A Business Model Utilizing Makers’ Strengths
Assembly at
plant

Used equipment/modification
1. Reliable equipment supply structure■ Remanufactured equipment model

New and used parts

In addition to our existing used equipment supply, upgrade andresale business, supply remanufactured equipment made withnew and used parts

TEL-certified usedequipment

・Leading-edge abilities
・Upgrade kit

2. Upgrades that meet customers’ needs■ Increased capabilities and life-span extension ofequipment already in place

New equipment

With the rise of diverse device needs due to IoT, there is demand
for reuse of equipment already in place through life-span
extension. We provide upgrades that address these needs
CORP IR / July 7, 2016

R&D

Equipment already in place
53

A Business Model Utilizing Makers’ Strengths
CustomerParts/services
1. TELeMetrics™ Service

・Predictive maintenance・Improved throughput
・Chamber-to-chamber matching
・Fewer defects

TEL service center

Equipment
data

Customer
Equipment
data

TELeMetrics

Supply high value-added services through real time
monitoring of operational status of customer equipment

Customer

Customer

Equipment
data

Equipment
data

2. Growing share through annual parts contracts
In addition to increasing the number of installed units, supply
Largest installed base in the industry
contracts that meet customer needs by combining(Units)Installed baseparts-based service, consumables and repairs
80,000>59,000 units

60,000High valueadded
services

Parts
supplyComprehensive
servicecontracts

40,00020,0000
CY2013

CORP IR / July 7, 2016

>63,000 units

CY2016>1,000units/year
increase CY2020(E)54Summary We are driving our business through a business modelthat utilizes makers’ strengths in response to diverse
technological needs being expanded by IoT
 We will achieve sales growth and increased profitability
by expanding a broad range of businesses, including
services, parts, used equipment and upgrades

CORP IR / July 7, 2016

55

FPD Business Strategy
Tsuguhiko Matsuura
Vice President & General Manager, FPD BUDisplay Trend
Business opportunities in technological inflection around OLED
Conventional

Advanced display

Notebook

Major end
products

Displaytechnology
Requiredfeatures

MonitorTV
Smartphone,tablet

OLED TV*4K, 8K TV

Flexible*a- Si LCD

LTPS, metal oxide, OLED

Large screen, low cost

High resolution, flexible large
screen TVs (＞65”, 8K)*Source: LG Display website

CORP IR / July 7, 2016

57

FPD Production Equipment Market and Medium-term Plan
 Increase share and profitability in market that has begun to grow again
 FY2020 target: sales ¥60.0B, operating margin over 20％(FY2016 sales ¥44.6B, segment profit margin* 10％)（$B） FPD Production Equipment Market
12

OthersCell, module processes, etc.

10Grow sales in leading-edge
sectors where we candifferentiate

8

OLED
OLED-specific manufacturing.
Emitting layer deposition, encapsulation, etc.

TFT Array**
Substrate fabrication process.
Essential manufacturing processcommon to both LCD and OLED•

Inkjet OLED printing
system

•G10.5 compatible etchingsystem andcoater/developers•

High performance
PICP™*** etching system

6
4

2
0

CY2015

CY2019(E)Source: IHS Technology, Display Supply Demand Equipment Tracker Data Tables Q1 2016

* Segment profit margin is based on profit margin before income tax** TFT Array: Substrate that realizes display images*** PICP:
sourceCORP
IRPlasma/ July 7,
2016for producing extremely uniform high density plasma on substrate58

Opportunity - Metal Oxide/LTPS
Sophistication of LCD/OLED etching technology, increased
number of processes
TFT

a-Si

Metal oxide

LTPS

Application

LCD TV
MonitorTablet
OLED TV

Smartphone(LCD, OLED)

Number of
masks

5

6~8

9 ~13

Dry etchprocesses

3a-Si, SiNx

3
SiO, SiNx~11
SiO, Metal

Representationof structure

CORP IR / July 7, 2016

59

PICP™ Etching System
Our proprietary high precision plasma technology. Currently
growing share in LTPS LCD/OLED

Miniaturization of TFT
Reduced diameter of contact holes
Thick film/miniaturization ofinterconnect
Increased size of substrate
CORP IR / July 7, 2016

Merits of PICP™ etching system
Increased precision in etching process
Suppression of process changes duringcontinuous processing
Underlayer loss suppression(uniformity, selectivity)60

Opportunity – Growth of Large Panel TV Market/G10.5
Substrate Size
Expect to capture high share in rapidly growing G10.5 market
on G10 results and differentiated technology (large area
plasma suppression, air floating coater)
TFT Array equipment market（$B）(by generation)

Possible to make 65 inch TV with eight panels
“65

4
≧G10
G8
G6
＜G6

3
2

3,370 mm5

1

0
CY2015

CY2019Source: IHS Technology, Display Supply Demand Equipment Tracker Data Tables Q1 2016

CORP IR / July 7, 2016

2,940 mm61

Opportunity – Growth of OLED TV Market
Market launch of inkjet printing system for start after 2018
Forecast for OLED area demand
25

Million m2

20

Inkjet printing system
for manufacturing OLED panels EliusTM2500

OthersSmart Phone
TV

15
10
5
0

Material utilization efficiency
far higher than evaporation method

Source: IHS Technology, Display Long Term Demand Forecast Tracker 1Q16

CORP IR / July 7, 201662

Summary
 Increase share and profitability in market that has
begun to grow again.
FY2020 target: sales ¥60.0B, operating margin over 20％

 For leading-edge production processes, focus on areas
where we have technological superiority– High performance PICP™ etching system– G10.5 compatible etching system and coater/developer– Inkjet printing system for OLED TV
CORP IR / July 7, 201663

Medium-term Management Plan: Financial Progress
Tetsuro Hori
Representative Director, Executive Vice President & General Manager
Corporate Administration Division

Financial Model
Net Sales(Billion Yen)FY2016 (Actual)

FY2017 (Estimate)

WFE $31B

WFE $31B

FY2020 (Medium-term plan)

WFE $30B

WFE $37B

663.9

714.0

720.0

900.0

613.0
44.6

665.0
49.0

660.0
60.0

840.0
60.0

Gross profit

267.2

280.0

305.0

395.0

Gross profit margin

40.2%

39.2%

42%

44%

SG&A expenses

150.4

156.0

160.0

170.0

SG&A expense ratio

22.6%

21.8%

22%

19%

Operating income

116.7

124.0

145.0

225.0

Operating margin

17.6%

17.4%

20%

25%

Net income attributable toowners parent

77.8

85.0

100.0

155.0

ROE

13%

-

15%

20%

SPE
FPD

CORP IR / July 7, 201665

Our Initiatives as Seen From Our Financial Model
Comparison of FY2017 (estimate) and¥720B sales Model
Net Sales and Gross Profit Margin

 Challenge: Net sales are around target level, but grossmargin is still 3 pts short of FY2020 target

 Response:
1. Supply markets with equipment and services that areeven more differentiated. Plan to increase profitability
by providing high added-value
2. Aim to reduce cost of sales ratio by more quickly
achieving the equipment performance demanded bycustomers and further raising quality
3. Lower outsourcing costs by reducing delivery time
CORP IR / July 7, 2016

(Billion Yen)

Net Sales

800

663.9

714.0

Gross Profit Margin

720.0

600

40.2%
400

42.0%
39.2%

200

0

FY2016FY2017(E)FY2020（Target）

66

Control of SG&A Expenses
 Progress: Level of SG&A expenses is as planned

 Going forward:

Net Sales per Employee(Million Yen)

1. Pursue greater efficiency through unification of
R&D divisions

80

62.5
56.5

60

2. Rebalance SG&A expenses, reallocate to R&D
expenses

49.8
40– Increase productivity by strengthening IT systems
20– Balance sales growth and inventory control
for space saving

0

FY2014FY2015FY2016– Aim to expand sales in excess of staff increases
CORP IR / July 7, 2016

67

Increasing Efficiency of R&D
 Strengthen R&D across the business units that integrate leading-edge
technologies in each product Focus resources on strategic products– R&D expenses for focus areas ¥54.0B（Increase by +¥11.0B, 26% vs. FY2015)(Billion Yen)100

R&D Expense

71.3
50

0

CORP IR / July 7, 2016

28.3

76.2

80.0

27.2

26.0
Focus areas (etching, deposition, cleaning)

43.0

49.0

54.0

FY2015FY2016FY2017(E)+¥11.0B, +26%
（vs. FY2015）68

Assets and Capital Efficiency (Sales ¥900B Model) Accounts Receivable Turnover– Current approx. 60 days: Appropriate

EPS and ROE
(Yen)
600
EPS

ROE

461
400

 Inventory Turnover– Current 107 days→

Target 85 days

20%

401

11.8%

13.0%

200

 ROE
– Current 13%→

Target 20%

0FY2015FY2016FY2020（Target）

ROE = Net income attributable to owners of parent /Average total number of shares outstanding in eachfiscal year (excluding the treasury stock)

CORP IR / July 7, 201669

Summary Making progress towards achieving our FY2020
financial model Key to achieving profit margin target is further
improving competitive strength of products andraising gross profit margin through higher quality

 Progress in raising R&D and operational efficiency

Pursue global standard profitability
Aim to further enhance our corporate value
CORP IR / July 7, 201670

 Disclaimer regarding forward-looking statement
Forecast of TEL’s performance and future prospects and other sort of information published are madebased on information available at the time of publication. Actual performance and results may differ
significantly from the forecast described here due to changes in various external and internal factors,
including the economic situation, semiconductor/FPD market conditions, intensification of sales
competition, safety and product quality management, and intellectual property-related risks.

 Processing of numbers
For the amount listed, because fractions are rounded down, there may be the cases where the total for
certain account titles does not correspond to the sum of the respective figures for account titles.
Percentages are calculated using full amounts, before rounding.

 Exchange Risk
In principle, export sales of Tokyo Electron’s mainstay semiconductor and FPD panel production
equipment are denominated in yen. While some settlements are denominated in dollars, exchange risk
is hedged as forward exchange contracts are made individually at the time of booking. Accordingly, theeffect of exchange rates on profits is negligible.
FPD: Flat Panel Display

CORP IR / July 7, 2016

71