&Q A

I n t e r v i e w w i t h P re s i d e n t Te t s u ro H i g a s h i

Where is the market heading over the next five years?
Broadband technology, a part of the IT revolution, will become increasingly pervasive. It
will enable extremely high-speed delivery of images and sound that will be more realistic
than anything to date. Various applications will develop around broadband, including
digital consumer appliances. This in turn will create an urgent need for intelligent
semiconductors and LCD panels. These industries, and in turn the production equipment
they require, will post double-digit growth over the mid- to long-term, despite inevitable
short-term downturns. It’s a market with a very bright future.

Given this outlook, what are Tokyo Electron’s strengths and approaches toachieving growth?
Tokyo Electron supplies the equipment for producing advanced semiconductors andLCDs. Through our Computer Network and Electronic Components divisions, we are alsoa leading distributor, using our technological expertise to market superior semiconductor
chips and systems from around the world for mobile and Internet-related applications. In
other words, all of Tokyo Electron’s operations are involved in fundamental segments ofthe IT revolution. We intend to grow by maintaining a leading market share in many ofthese segments and acquiring leadership in others.
The key to success as a supplier of semiconductor
production equipment is process integration capabilities. This entails supplying comprehensive solutions for
multiple adjoining processes using a number of ourproducts, or even incorporating those of othercompanies. Few competitors can match our processintegration capabilities because of the breadth of ourproduct lineup.
Advanced Process Control technology adds value
to process integration. Customers have always managed yield. Process control capability
incorporated in equipment and between equipment will support stable and higher yields.
The ability to deliver integrated process control capability will be a key factor differentiating suppliers of semiconductor production equipment. Few companies in the world cando this. We intend to expand sales by devoting even more effort to this area.

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Do the organizational innovations implemented in April 2001 reflect the direction TokyoElectron is taking in its business?
Litho-Cell Group
Coater/developer

Etch System

Formerly, the Semiconductor Production
Equipment division was organized into productspecific business units. Under the current reorgaTest & Integrated Process Control Groupnization, with the exception of LCD production
equipment, the division has been broadly divided
Single Wafer
Oxidation/diffusion
Cleaning
Deposition System
LP-CVD System
Systeminto three groups: the Litho-Cell Group, the Test &Thin Film & Cleaning Group
Integrated Process Control Group and the Thin
Film & Cleaning Group. This reorganization is significant in two major ways. First, itclarifies our core competencies in semiconductor production equipment. Second, it
defines a matrix for implementation of key process integration that provides substantial
value to the market, which we believe to be strategically important.

A megatrend in the semiconductor industry is the shift to 300mm wafers, which has
started at several chip manufacturers. What is the status of Tokyo Electron’s 300mm
equipment?
Currently, the 200mm equipment market is contracting,influenced by the global slowdown in capital investment. Bookings for Tokyo Electron’s 300mm equipment,
however, are firm. We have already readied our lineup of300mm equipment, with the result that 300mm orders
now account for nearly 20 percent of total SPE orders.
We expect that number to further increase during thecurrent fiscal year.
A key strength in winning orders is that ouroutstanding support system assists customers inmaking the shift to the 300mm platform. We have created the world’s largest applicationlaboratory, our new Process Technology Center in Nirasaki, Japan, for 300mm equipment,
an advanced facility where 300mm production concepts are in actual use. The Center
enables us to work in close cooperation with customers to determine their particularneeds for 300mm equipment. The shift toward 300mm provides a valuable opportunity tofurther increase the market share of Tokyo Electron’s products.

6TOKYO ELECTRON LIMITEDWill attaining leadership in additional market segments require external acquisitionof technologies?
There are three ways to obtain new technology. We can develop it ourselves, but if it is a
crucial technology related to our core business and we
decide that acquisition is faster, we’ll take that route.
The third way is strategic alliances, which we typicallyemploy to complement our own core technologies. A
good example is the partnership we formed last yearwith NuTool of the United States, which supplies
innovative copper electroplating technology forinterconnects.

How does Tokyo Electron handle the well-known upward and downward swings in thesemiconductor production equipment market?
The cyclical nature of our main market is not going to disappear, and we must ensure wehave a highly efficient and flexible organization to handle it. Right now, we are executing
a three-year project that will cut the lead time from order to delivery in half. While thisproject will not insulate us against the current downswing, its completion will result in thecreation of a structure that promotes highly efficient use of assets.
We have turned the difficult environment to our advantage so far. Companies thathave successfully met the technological and management challenges posed by thecyclicality of the market have generated strong growth and, thus, the industry hasdeveloped. Tough times engender innovation: Mainstream technology tends to become
outdated, and new technologies come to the forefront. In such a period of change, weaggressively innovate our technology and approaches to management.
Without a doubt, 300mm equipment will come to the forefront. Also, demand will
increase for equipment designed to be scalable and adaptable to changes in the volume
and variety of products, such as System LSIs. We will continue improving our 300mm
equipment while promoting new-concept production equipment that radically shortens
production time. The latter includes Telius™, a 300mm etcher, and TELFORMULA™,
which offers ultra-high-speed thermal processing for both mini and mega fabs. Tokyo
Electron does not intend to scale back R&D investment during the current downswing.

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What directions will the Computer Network and Electronic Components
divisions take?
We will further focus on growth sectors. The Computer Network division is emphasizingcore broadband technologies such as storage area networks and Internet technologies.
The Electronic Components division is concentrating on high-value-added products
such as communications-related devices and System LSIs. In these businesses, Tokyo
Electron is not simply a distributor, but functions as a group with a technological
specialty. Customers hold this characteristic in high regard. We will make the most ofthese unique businesses as we successfully strengthen our accumulated engineeringand design capabilities.

What management tasks lie ahead?
While there are many things I would like to accomplish, I have recently started to thinkthat we need to be truly globalized for further growth. Our globalization program over thepast several years has been a key factor in increasing
earnings. Up to this point, globalization for Tokyo
Electron has meant expanding our network of operating bases outward from Japan. The process must
become centripetal in order to incorporate the best
global practices into management. In this light, forexample, certain functions of headquarters could bediffused overseas. Now is the time for framing specificconcepts toward our second phase of globalization.
We will also strengthen technical support in Southeast
Asian countries, including China, which is poised to become a large growth market.
Recently, Tokyo Electron has been receiving awards from best-of-class customers
worldwide in recognition of our excellence as a supplier, indicating the broad
acceptance we have received for the quality of our products and support. This kind ofrecognition both affirms our success at raising corporate value and striving toward
global excellence, and inspires us to aim even higher.

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