Chapter 3

Value Creation by the Value Chain
Procurement
ResearchandandDevelopment Manufacturing

Initiatives in the Value Chain

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Tokyo Electron is building a superior business model that takes advantage of its characteristics and is continuing to create new value
through sustainability initiatives and the development of value chains in its business activities.

Research andDevelopment

Procurement andManufacturing

P. 29

Installation and
Maintenance Services

Sales

P. 31

P. 33

P. 35

Overview

Overview

Overview

Overview

 Development of unique technologies for Establishment of stable production capabilities

 Be the sole strategic partner for customers

 Deploying the Best Technical Service with highcreating high-value-added, next-generation
products that contribute to technologicalinnovation in semiconductors

by building a sustainable supply chain Efficient manufacturing of high-quality,

high-reliability, safe andenvironment-friendly products

 Continuous development that looks into the

future based on the prompt comprehension ofmarket and technological trends, as well as
customer needs

by providing the Best Products and BestTechnical Service

added value in a prompt and appropriate manner Proposals on optimal solutions that contributeto the creation of value for our customers

 Strengthening of our global support structure

to provide advanced field solutions that solve
customers’ issues

 Creation of value through partnerships with

suppliers

Differentiation Points

Differentiation Points

Differentiation Points

Differentiation Points

 Promotion and optimization of development

 Stable procurement and production leveling Accurate comprehension and prompt provision Field engineers who are highly specialized andthrough close collaboration among the
Corporate Innovation Division, businessdivisions and development sites in Japanand overseas

through collaboration based on relationships
of mutual trust with suppliers World-class manufacturing operations throughthe use of our manufacturing know-how,knowledge and the equipment data we haveaccumulated over many years

 Development of leading-edge technologies

through various types of collaboration withconsortiums, academia and suppliers in Japanand overseas

 Initiatives to preserve the global environment

throughout the supply chain Pursuit of development efficiency and new

Value Created Innovative, high-value-added and unique High-quality and high-reliability products

technologies and solutions that cover multiple
semiconductor manufacturing processes

incorporating leading-edge technologies

 Shortening of production lead times by Improvement in equipment productivity, such

optimizing the production plan and increasing
the efficiency of manufacturing operations,etc.

as higher throughput*, a higher utilization rateand smaller space requirements

 Equipment technology that increases

environmental performance Ability to suggest solutions by taking advantage

of a wide range of product lineup and to satisfy
a broader range of customer needs with usedequipment and re-engineered equipment

 Continuous initiatives to improvethrough support services that extend the life
cycles of equipment, etc.

 Providing highly efficient and high-quality

services through the use of AI and digitaltechnologies, the promotion of knowledge
management, etc.

Value Created

Value Created High-value-added products incorporating Comprehensive services that include everythingfrom equipment delivery to maintenanceinnovative technologies by simultaneous
parallel evaluation of four technology nodes

 Products that address a variety of applications,as well as used equipment andre-engineered equipment

 Contribution toward the long-term steady

operation of equipment across many generations

 High-quality technical services that contribute Responsiveness to customers through close Safety-first operation

possess broad knowledge

 Initiatives to reduce environmental impact

customer satisfaction

value creation by promoting digitaltransformation (DX)

Value Createdof technologies and solutions, etc. needed byour customers through the development of
global operations

to improving customers’ productivity

collaboration throughout the entire Group* Throughput: Ability to process wafers over a unit of time

Sustainability Initiatives in the Value Chain
� Environment P. 37
� Continuous Improvement of Business Operations
� Compliance P. 60

27 TOKYO ELECTRON Integrated Report 2022

P. 46

� Human Rights P. 41
� Human Resources P. 47
� Engagement with Capital Markets

P. 61

� Supply Chain Management P. 43
� Corporate Governance P. 49
� Evaluation from Third-party Institutions

P. 61

� Safety P. 44
� Risk Management P. 57
� Participation in Global Initiatives

� Quality P. 45
� Information Security

P. 59

P. 62

TOKYO ELECTRON Integrated Report 2022

28

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Initiatives in the Value Chain

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Research and Development
Main Research and Development Initiatives
Tokyo Electron will continue to create highly unique technologies through balanced basic and applied
R&D as well as through utilizing in-house and outside knowledge, while always remaining conscious of
the most current customer needs.
various types of basic and elemental R&D toward the next
growth phase. Additionally, we are strengthening our R&D
capabilities and continuing to develop technologies that will help
customers create value through collaboration between our
major domestic development sites and R&D sites worldwide as
well as through alliances with outside consortiums, research
institutes, academia and suppliers.

We are creating innovative and unique technologies for
manufacturing leading-edge semiconductors and flat panel
displays (FPDs) by ascertaining technological and market trends
as well as customer needs early on by leveraging global
marketing activity networks and sharing that information
throughout all relevant departments. Through development
portfolio management, we are formulating short-term as well as
medium- to long-term development strategies and progressing

Key Themes for Medium- to Long-term Value Creation
 Timely development of high-value-added technologies and products through promotion of Shift Left*
 Creating innovative and unique technologies for manufacturing leading-edge semiconductors and FPDs
 Increasing investment in human resources and development* Shift Left: To improve efficiency by investing resources such as technology, personnel and money into the early processes of product development. Refer to “Shift Left” in the “Tokyo
Electron Sustainability Report 2022” for details www.tel.com/sustainability/report/

Management Resources to Be Invested
R&D investment
Over five years, beginningin fiscal 2023
More than1

Human resources possessing
knowledge in a variety of
specialized fields related to

R&D sites

12

semiconductor and FPD
production equipment(6 in Japan and 6 overseas)

trillion yen

Primary Management Indicators
R&D expenses

Number of
new product releases

Global patentapplication rate** The percentage of invention applications that resulted in applications filed in multiple countries

Sustainability Initiatives
� Initiatives related to product environment P. 38 Medium- and Long-term Environmental Goals
� Future-oriented development of environmental technologies through partnerships with suppliers P. 41

E-COMPASS

� Structure to promote innovative development that takes advantage of global diversity P. 48 Diversity and Inclusion
� Development efficiency improvement through the promotion of DX P. 30 Promotion of Digital Transformation (DX)

Risk Management Initiatives
Main Risks
Research andDevelopment

Declining productcompetitivenessIntellectual
Property
RightsDeclining productcompetitivenessRestrictions on the production
and sale of products andoccurrence of liability for damage

Human
Resources

Diminished productdevelopment capability or
customer support quality

29 TOKYO ELECTRON Integrated Report 2022

Initiatives
� Establish the Corporate Innovation Division and build a Group-wide development framework that integrates innovativetechnology development with the technologies of each development division� Provide highly competitive next-generation products ahead of competitors by collaborating with research institutions

and sharing a technology roadmap spanning multiple generations with leading-edge customers� Advance the intellectual property strategy, business strategy and R&D strategy in an integrated manner to build an

appropriate intellectual property portfolio� Make continuous improvements to work environments and promote diverse work styles as well as health andproductivity management (e.g., sharing our visions by management, establishing training plans for human resource whowill lead the future, visualizing career paths for employees and offering attractive remuneration and benefits)

Strengthening Research and Development Capabilities
For our medium- to long-term growth, it is extremely
important to continuously create the high-value-added nextgeneration products that are necessary for technologicalinnovation in semiconductors.
Development sites in Japan and overseas, business divisions
and the Corporate Innovation Division maintain their respective
individuality, collaborating in necessary areas while promoting
technological development and integration. We have a multistructured development system that promotes advancement
and evolution in the process from basic element development tomass-produced products.
Each development site and business division is engaged in thedevelopment of semiconductor and FPD production equipmentwith innovative technologies and an eye on future generations.
They also promote R&D related to peripheral technologies forthese production equipment.
The Corporate Innovation Division strives for the creation offurther high-value addition by working closely with eachdevelopment site to develop cross-function initiatives in eachproduct area as well as promoting and optimizing R&D while
maintaining a bird’s eye view on the entire development
structure. In addition, the division is also engaged in a search forpotential growth areas, as well as in R&D of fundamental
technologies toward creating value in the future.

Collaboration with Consortiums and Academia
We have focused on collaborative efforts with domestic andinternational consortiums and academic institutions (universities)
to enhance our research and development capabilities and tocreate leading-edge technologies for a very long time.
Today, we continue our engagement in a wide range of areasfrom applications to product development. In the area of EUV andhigh-NA EUV1 lithography processes, this is achieved throughcollaboration with imec located in Belgium. Furthermore, we
participate in a global research hub for hardware development of
next-generation AI in the U.S. state of New York, and have formeda partnership with BRIDG, which is a non-profit public-private
partnership located in the U.S. state of Florida, as well. At our
research center in TEL Technology Center, America, advanced
research and development in the areas of front-end, back-end2,
and advanced packaging process areas are being carried out daily.
Additionally, we collaborate with the National Institute ofAdvanced Industrial Science and Technology (AIST), one of Japan’slargest public research institutions. There we leverage AIST’s worldclass research environment and personnel to enhance our own
development by conducting MRAM3 and 2D material-related research.
We do this to address the needs in the field of semiconductor

technology development, which is becoming increasingly diverse.
1 EUV and high-NA EUV: Extreme Ultraviolet. Ultraviolet radiation (ultraviolet rays) in
the wavelength range of 1 to 100 nm. High-NA EUV refers to next-generation EUV,an exposure technology that shortens the resolvable line width by increasing thenumerical aperture (NA).
2 Front-end/Back-end: In semiconductor device production, the beginning sectionof the manufacturing process where the device element is formed is called thefront-end (FEOL), and the latter section is called the back-end (BEOL) where thewiring is traditionally accomplished.
3 MRAM: Magneto-resistive Random Access Memory(As of March 31, 2022)
Tokyo Electron Development Sites
Consortiums

TEL Magnetic
Solutions
ImecTokyo Electron Technology Solutions4Tokyo Electron Kyushu5
Tokyo Electron Miyagi

TEL
Technology
Center Korea

CEA-Leti

TEL Technology
Center, America
SUNY Poly/
NY CREATESBRIDGNational Institute of Advanced
Industrial Science and Technology

IME

TEL Manufacturingand Engineering ofAmerica6

TEL Technology Center, Taiwan

4 Tohoku Office, Hosaka Office, Fujii Office
5 Koshi Office, Ozu Office
6 Chaska Office, Chelmsford Office

Promotion of Digital Transformation (DX)We have positioned DX as an important means for continuing
to provide new value to customers and are developing
company-wide initiatives to do so. In R&D, we have begun
operation of remote support services that apply AR1 technology
while also promoting initiatives to search for new materials andoptimize processes at overwhelming speeds by utilizing
materials informatics2.
Furthermore, in addition to the “Advanced Data Planning
Department” that supports DX activities in productcompetitiveness and customer responsiveness, we established the“Digital Transformation Promotion Department” in January 2022
which is responsible for planning and supporting DX activities in
productivity improvement and management foundation, further
strengthening DX promotion throughout the entire Group.
We plan to continue the utilization of things such as AI in solving

a variety of issues and developing functions, and to advance thedevelopment of production equipment that is equipped with
innovative functions such as analyzing its own operating
conditions and improving functions and operating efficiency.
1 AR: Augmented Reality
2 Materials Informatics: Approach to materials exploration using academic
papers, internal and external materials databases, machine learning and actual
experimental data.

Development Activities
Equipment
software

DigitaltransformationAI
applications

TOKYO ELECTRON Integrated Report 2022

30

Value Creation by the Value Chain

Chapter 3

Research
Procurement
andandDevelopment Manufacturing

Initiatives in the Value Chain

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Procurement and Manufacturing
Main Procurement and Manufacturing Initiatives
Along with striving to build a sustainable supply chain, we have established a system for manufacturinghigh-quality products more efficiently.
We are aiming for constant innovation in production based on
the themes of safety, high quality and high reliability, and are
putting together manufacturing operations that are ecofriendly. Besides working toward a vertical transfer from productdevelopment to mass production via further improvements toefficiency, we are also promoting the creation of manufacturingcore systems that can respond swiftly to market fluctuations, aswell as strengthening and leveling of production capacity.

To ensure stable and sustainable procurement, we carry out
sustainability and BCP* assessments throughout the supply
chain based on industry codes of conduct, as well as shareknowledge with our suppliers regarding safety, quality, theenvironment and compliance. We value fair and transparent
relationships with our suppliers and aim to grow alongside themand contribute to society on a global level through firm
relationships based on trust.
* BCP: Business Continuity Plan

Key Themes for Medium- to Long-term Value Creation
 Creating production capabilities and manufacturing core systems appropriate for the market size
 Optimizing management resource allocation to truncate the transition period from product development to mass production
 Streamlining manufacturing operations with consideration toward the operating margin and ROE

Manufacturing core systems
based on the latest digitaltechnology

Firm trust-based relationshipwith our suppliersPrimary Management Indicators
Direct and indirect
manufacturing costs

Production lead times

Procurement stockout
rate

Sustainability Initiatives
� Quality control in manufacturing P. 45 Quality
� Promoting sound supply chain management based on industry codes of conduct P. 43 Supply Chain Management
� I nitiatives for reducing CO2 emissions and introducing renewable energy at plants and offices
P. 38

Medium- and Long-term Environmental Goals

� Shortening of production lead times and leveling P. 46 Continuous Improvement of Business Operations

Risk Management Initiatives
Main Risks
Delays in the supply of products

SafetyOccurrence of safety-related
problems and liability for damages,
and a decline in credibility

Quality

Occurrence of costs forcountermeasures of a productdefect and a decline in credibility

Environmental
Issues

Initiatives
� Formulate business continuity plans, develop alternate production capabilities, promote the seismic reinforcement ofProcurement,
Productionand Supply

Costs such as for developing
new products or changing
specifications, and declining productcompetitiveness and diminishedpublic confidence in the Company

31 TOKYO ELECTRON Integrated Report 2022

We are rapidly developing various initiatives to respond todelays in the procurement of parts and materials needed for
production, price increases, and resulting supply chain
disruptions caused by recent global shortages of semiconductors
and electronic components.
The Corporate Production Division is working with eachmanufacturing site and promoting the optimization of
procurement and parts inventories throughout the Group by
regularly conducting supply chain BCP assessments, improving
commercial distribution management through the further
enhancement of supplier maps and other tools, strengthening
supplementary parts systems between manufacturing sites andexamining procurement processes. In addition, we are working
to adjust sales plans with production, procurement andinventory plans by sharing both short-term and medium-termorder forecasts between sales and manufacturing divisions, aswell as working to ensure stable procurement and bothproduction and start-up process leveling. Through these efforts,
we are striving to improve safety, quality and efficiency ofequipment production and start-up.
Based on the belief that smooth communication with
suppliers is important, we hold production update briefings, TEL
Partners Day and other events on a regular basis to create
opportunities to sharemarket trends, ourmanagement policy andbusiness policies, andsustainability initiatives
with our suppliers.

Past TEL Partners Day

World-class Manufacturing Operations

Management Resources to Be Invested
Many years of know-how(people and products)
in semiconductor/FPD
manufacturing

Sustainable Procurement Strategies

plants, level production, enhance the backup capabilities for information systems, use multiple sources of importantparts, and maintain appropriate inventory levels
� Share forecasts based on demand projections with suppliers and build a system for the stable supply of products� Based on the “Safety First” approach, place the highest priority on the safety and health of all people, implement

inherently safe design with an awareness of risk reduction at the product development stage, promote safety training,and establish an accident reporting system� Establish a quality assurance system and a world-class service system� Monitor the quality status of suppliers, conduct audits and provide support for improvement� Resolve technical issues from the product development and design stage� Investigate the cause of any defects and implement measures to prevent the same or similar defects from occurring� To achieve industry-leading medium- to long-term environmental goals that include the net zero target, implement

measures such as reducing greenhouse gas emissions from the use of our products, increasing the rate of renewable energy
usage at plants and offices, reducing overall power consumption, reviewing packaging materials, and promoting a modal shift.
� Provide technologies, etc., that contribute to higher performance and energy efficiency of semiconductor devices
through implementation of our E-COMPASS initiative

We are constantly striving to innovate in production andfurther improve profitability at manufacturing sites while
engaging in the strategic development of world-classmanufacturing operations through the use of our manufacturingknow-how, knowledge and the equipment data we haveaccumulated over many years.
In assembly, adjustment, inspections and other processes, we
are working to improve product quality by having implemented
in-process quality control consisting of thorough screening,
simulation verification and so on to prevent non-conforming
products from making it through to subsequent processes. We
are also proactively investing in things such as new plantbuildings and manufacturing facilities to increase production
capacity while promoting production leveling.
Furthermore, we are working to improve IT infrastructure bybuilding a manufacturing core system through beginning
operations of ERP1 and MES2 that utilize the latest digitaltechnologies, and the introduction of PLM3 and other measures.
Through the use of data aggregated through these efforts ineach business operation, we can quickly collect data needed forbusiness decisions, make production schedules more reasonable

and more efficient, visualize delivery dates for parts and more. In
addition, we are thoroughly implementing infection prevention
measures at all manufacturing sites as we deal with the impact
from COVID-19 infections and working to maximize operation
rates in production activities.
1 ERP: Enterprise Resource Planning. Refer to Continuous Improvement of Business
Operations on p. 46
2 MES: Manufacturing Execution System
3 PLM: Product Lifecycle Management

Manufacturing Core System Development

BOM4

PLM

BOP5

Design Digitalization

4 BOM: Bill of Materials
5 BOP: Bill of Process

Information Sharing
Closed-Loop
Management
Procurement Planning
Digitalization

ERP

MES

Manufacturing Digitalization

Initiatives to Reduce Environmental Impact
We are developing a variety of initiatives at our plants andoffices as well as in logistics and the supply chain withconsideration of the environment.
At plants and offices, we are working to further improveenergy consumption efficiency through a variety of measures
such as energy-saving clean room operation, setting office air
conditioning at appropriate temperatures, introducing devices
that offer superior energy-saving performance, and promoting
the introduction of renewable energy (electricity) globally toachieve our medium- and long-term environmental goals1.
In logistics, we are working to transition between methods oftransportation by promoting a modal shift2 in transportation in
Japan and overseas. We are also striving to reduce CO2 emissions
and reduce environmental impact by adopting packaging madewith reinforced cardboard.
In addition to these initiatives, we are actively working
toward the preservation of the global environment throughout
our entire supply chain in partnership with our suppliers throughthe development of E-COMPASS3 activities.
1 Refer to Medium- and Long-term Environmental Goals on p. 38
2 Modal shift: Transitioning from transportation by car and air to rail and ship, whichhave lower environmental impacts
3 Refer to E-COMPASS on p. 41

TOKYO ELECTRON Integrated Report 2022

32

Value Creation by the Value Chain

Chapter 3

Research
Procurement
andandDevelopment Manufacturing

Initiatives in the Value Chain

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Sales
Main Sales Initiatives
We propose optimal solutions that contribute to the creation of value for our customers in order to be
the sole strategic partner.
Since our company’s inception, improvement of customer
satisfaction has been a significant management theme. We willbuild strong, trust-based relationships with our customers byproviding the Best Products and Best Technical Service in order
to be their sole strategic partner.
We help customers manufacture leading-edge devices bygrasping the latest technological trends and customer needs in an
accurate and timely manner, as well as developing innovativetechnologies for future generations. In addition, by leveraging ourstrengths as a semiconductor production equipment manufacturer
with a diverse product lineup and the experience and high level ofquality we have cultivated over many years, we propose optimal
solutions that contribute to the creation of value for our customers.
Moreover, by focusing on sales of used equipment and reengineered equipment, we can meet a wider range of customer
needs and help maximize their return on investment.

Development of Global Operations
We established the Customer Collaboration Group and areworking to further strengthen our customer support capabilities
in order to be the sole strategic partner for our customers. The
Customer Collaboration Group is made up of two divisions: our
Account Sales Division, which targets major semiconductor
manufacturers, who have been our traditional customers, todevelop new technologies with an eye to the needs of nextgeneration leading-edge technologies in memory, logic, foundry,etc.; and our Global Sales Division, which responds to the needsof more than 100 customers in Japan and overseas who deal inproducts for the rapidly growing Chinese market as well as theindustrial IoT market.

These two divisions work closely with business units,development and manufacturing divisions, service divisions andoverseas subsidiaries to develop global operations throughout
our entire Group (=One-TEL) and promptly provide customers
with the technologies, services and solutions they require.
Account Sales Division

Development
andmanufacturing
divisionsCustomers
Global Sales Division

Key Themes for Medium- to Long-term Value Creation
 Improving our responsiveness to customers and customer satisfaction
 Increasing mutual profits by providing the Best Products and Best Technical Service
 Improving our position among our major customers

Management Resources to Be Invested
A global sales and service system
in which the Account Sales Division,
the Global Sales Division,business units and overseas
subsidiaries coordinate with
one another

Broad-ranging knowledge
and comprehensive
technologicalcapabilities born fromour diverse productlineupMutual trust with customers
build through many years of
performance records

Primary Management Indicators
Market share ofmajor customers
and products

Customersatisfaction

Operating margin

Proposing Customer Solutions Leveraging a Wide Range of
Product Lineup
To solve customers’ issues and contribute to the manufacture ofhighly competitive devices, we offer proposals that leverage ourwide range of product lineup, including equipment for key
processes such as deposition, coater/developer, etch andcleaning. We simultaneously strive to help optimize
manufacturing processes and enhance the productivity andquality of development and manufacturing processes by
providing optimal solutions that include remote support systems
and software for maximizing equipment utilization rate.
Furthermore, through continuous improvements toperformance of our mass production equipment, we areproactively working to meet customer demands for the
production of multiple generations of products.
We are also responding to satisfy the market’s diversifying
needs by providing products for the IoT market, which include
power devices, image sensors and communication devices, aswell as used equipment and re-engineered equipment.

Cleaning
Deposition

Etch

Coater/Developer

Sustainability Initiatives
� Initiatives for improvement of customer satisfaction P. 34 Initiatives for Improvement of Customer Satisfaction
� Ongoing efforts to ensure customer safety P. 44 Safety�R educing CO2 emissions from product usage by addressing Medium-term Environmental Goals
P. 38

Medium- and Long-term Environmental Goals

� Improvement of operational efficiency in sales activities P. 46 Continuous Improvement of Business Operations

Risk Management Initiatives
Main Risks
MarketFluctuations

Sales opportunity losses due toinability to supply customers
with products in a timely manner

Initiatives
� Periodically review market conditions and orders received at the Board of Directors and other important meetings, andappropriately adjust capital investments, personnel/inventory planning and other aspects of business� The Account Sales Division and the Global Sales Division strengthen the sales framework and customer base by grasping

investment trends of customers and responding to a wide range of customer needs� Carefully monitor the international situation as well as the diplomatic and security measures and industrial policy trends

Geopolitics

Restrictions on business activities

Information
Security

Diminished public confidence
in the Company or liability fordamagesin each country and region� Anticipate the impact of macroeconomic fluctuations and regulations related to product imports/exports or

technological development on the Company’s business and consider countermeasures in advance33 TOKYO ELECTRON Integrated Report 2022

� Launch a dedicated security organization and establish an information security system that conforms to international

standards by having security assessments conducted by external experts, etc.

Initiatives for Improvement of Customer Satisfaction
We are working to build a solid relationship of mutual trust withcustomers by further enhancing customer satisfaction, which wehave valued highly since our founding.
In the semiconductor production equipment industry, with
rapid technological innovation, we co-create future technology
roadmaps with our customers, semiconductor manufacturers, topromote the concurrent evaluation of technologies up to four
generations in the future and accelerate the technologicaldevelopment of Shift Left. This allows us to offer highly
competitive products that help improve the yield rate of devices
and maximize equipment utilization rate.
Further, at customer sites around the world, we arecontinuously implementing customer-oriented initiatives suchas having our engineers quickly get installed equipment
operating at maximum performance, proposing solutions to any
technical issues identified and providing feedback on nextgeneration equipment.
In addition to these activities, we conduct a unique customer
satisfaction survey every year and promote ongoing
improvements to our business practices.
In fiscal 2022 the results of our activities were highly
evaluated and we received best awards from many of ourcustomers. We will continue to provide the Best Products andBest Technical Service and further improve customer satisfactionin order to be the sole strategic partner for our customers.

� Establish globally standardized rules and regulations for information management and implement response guidelines

TOKYO ELECTRON Integrated Report 2022

34

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Initiatives in the Value Chain

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Installation and Maintenance Services
Main Installation and Maintenance Service Initiatives
We have established a global support system to provide the Best Technical Service with high added
value in a prompt and appropriate manner.
For installation and equipment maintenance, we take advantage
of a cumulative number of equipment installations ofapproximately 82,000 units to offer the Best Technical Service
with high added value. We make full use of leading-edge AI,
digital technology and knowledge management* tools, andpromote enhanced efficiency for our services to support thestable operation of various generations of equipment for a wide
variety of applications.
By refining the skills of the front-line engineers who interact
with customers, we work hard to accurately identify customer

needs and provide timely feedback to our development andmanufacturing operations. In addition, we are deploying aspects
such as support services that extend the life cycle of equipment
as part of our efforts to reduce environmental impact. We arealso promoting the further improvement of the quality of ourservices through the provision of advanced field solutions, suchas Total Support Center (TSC) and remote maintenance services.
* Knowledge management: Management approach to promote internal company
sharing of tacit knowledge held by individuals, in order to encourage innovationand to improve overall productivity

Key Themes for Medium- to Long-term Value Creation
 Contributing to solving customer issues through the provision of high-value-added service
 Maximizing service revenues through expanded sales of comprehensive contract-based services* Addressing new customer needs with equipment for power devices, re-engineered equipment and other measures* Comprehensive contract-based services: Comprehensive services primarily for post-warranty maintenance (maintenance work, performance maintenance, provision of spare parts etc.)

Management Resources to Be Invested
Service support infrastructure at

Service database and remotesupport system

77 sites located in
18 countries and regions

Approximatelythat utilizes AI,
knowledge management etc.

4,700

field engineers with highly
specialized andbroad knowledgeof the world

Primary Management Indicators
Net sales forfield solutions business

Man-hours for installationand maintenanceservices, etc.

Profitability offield solutions business

Sustainability Initiatives
� Improving the efficiency of start-up operations and maintenance services P. 46 Continuous Improvement of Business Operations
� Safety initiatives for installation and maintenance services P. 44 Safety
� Provision of high-quality services P. 45 Quality
� Effective utilization of diverse talent P. 47

Human Resources

Risk Management Initiatives
Main Risks
Quality

Occurrence of costs forcountermeasures of a productdefect and a decline in credibility

Human
Resources

Diminished productdevelopment capability or
customer support quality

Novel
Coronavirus(COVID-19)

Slows the Company’s businessactivities or the deterioration of
global economic conditions

35 TOKYO ELECTRON Integrated Report 2022

Initiatives
� Establish a quality assurance system and a world-class service system� Resolve technical issues from the product development and design stage� Investigate the cause of any defects and implement measures to prevent the same or similar defects from occurring� Monitor the quality status of suppliers, conduct audits and provide support for improvement

� Make continuous improvements to work environments and promote diverse work styles as well as health andproductivity management (e.g., sharing our visions by management, establishing training plans for human resource whowill lead the future, visualizing career paths for employees and offering attractive remuneration and benefits)� Establish an Emergency Task Force headed by the CEO� Restrict travel to high infection-risk countries and regions, maintain supply chains and thoroughly implement infection

prevention measures at plants and offices

Enhancing Front-line Engineers
We believe it is essential to accurately ascertain valuable
information related to matters such as customer needs andequipment operation status through installation andmaintenance services in markets where our equipment isdelivered, as well as to provide timey feedback with regard to
related operations to assist in equipment development,
improvements to functionality and service quality development.
In order to efficiently conduct these activities, we arepromoting a human resources development program whereengineers from overseas subsidiaries who are in contact withcustomers in the field acquire knowledge and skills by
undergoing training in Japan, thus further strengthening thefoundation of our front line. We are also working to promoteseamless communication by strengthening cooperation
between engineers at overseas subsidiaries, Japanese engineers
stationed overseas, development and manufacturing divisions
and business units.

Initiatives to Reduce Environmental Impact
As part of our efforts to reduce the environmental impact of ourservices, we are also deploying LEAP*, a support service that
extends the life cycle of our equipment.
Support for semiconductor manufacturing equipment, which
consists of tens of thousands of parts, typically ends seven toeight years after discontinuation of production. The main reason
for this is due to the discontinuation of parts or the difficulty inmaintaining safety and quality. This has led to the promotion of
replacement with newer equipment and the discarding of older
equipment. In response to customer needs and in consideration

Promotion of High-value-added Services
We have built a global support system, establishing Total Support
Centers (TSCs) in Japan, the United States, China and Europe.
Service CRM1 centrally manages customers’ equipment records(support/trouble history) as a database through knowledge
management. We strive to resolve the various issues ofcustomers and support the stable operation of equipment
through the use of TELeMetricsTM, a remote maintenance service,and smart glasses2 with our unique functions as well as bydeploying Service CRM at each TSC site.
In addition, in order to further promote the improved
productivity of our services, we ascertain each field engineer’s
actual work status through work orders to optimize personnel
assignment and increase efficiency.
Furthermore, we are placing more emphasis than ever ondeveloping advanced equipment diagnostic capabilities thatutilize equipment output data. Going forward, we plan to utilize
these functions to support comprehensive contract-based
services, particularly those with billing based on performance(Pay for Performance contracts).

We are making efforts to strengthen a management system
for service operations in each country and region so that we canrespond in a flexible and rapid manner to changes in the businessenvironment and promote efficient operations.

Customers
Providing the Best Products & Best Technical Service

Overseas subsidiaries
Engineers atoverseassubsidiaries

Customer feedback

Engineers
assignedoverseas

Seamlesscollaboration

Development andmanufacturing divisions

Professional
technical support

Business Unit

Product development in line with customer needsof SDGs, we began redesigning discontinued parts, and bystrengthening and restructuring our support system, including
repairs, we are now able to provide extended life cycle support
for equipment to more than 15 years after discontinuation.
Through these new support services, we are working to reduce
equipment disposal and contribute to the continuous use of
equipment over a long period of time. In addition, we also offer are-engineered equipment for 200mm wafers based on theprevious generation of equipment.
*LEAP: Lifecycle Extension and Availability Program

We will strive to provide high-value-added services throughthe continuous promotion of these initiatives.
1 Service CRM: Service Customer Relationship Management
2 Smart glasses: Glasses-style wearable devices that can display images and digital
information

Customers

Field engineer dispatched

Total Support Center

Dispatch

TELeMetricsTM

Technical support engineers

Equipment records
Service database
Response

Technical advice

TOKYO ELECTRON Integrated Report 2022

36

Value Creation by the Value Chain

Chapter 3

Research
Procurement
andandDevelopment Manufacturing

Sustainability Initiatives in the Value Chain

Environment

Conference Name

Medium- and Long-term Environmental Goals
In order to further strengthen our initiatives toward theenvironment in our products, plants and offices, we have set thefollowing medium- and long-term environmental goals.
Medium-term Environmental Goals (Fiscal 2031)

with this certification, we have identified environmental impact
assessments and useful environmental aspects and are
executing a standardized group format for environmental
management programs and internal audit checklists. In fiscal
2022, as part of environmental management across the entire
Group, we established a total of approximately 100
environmental goals for different levels and carried out these
improvement activities. Any issues identified through these
activities are reviewed by the Global Environment Council andreported to the Manufacturing Companies Presidents’ Council.
We were once again free from environmental incidents,
accidents, violations and legal proceedings in fiscal 2022.

ParticipantsMeeting
Frequency

Function

Global Environment Council

Appointed members by the executives at
headquarters and the Group companies

Set individual goals related to environmental issues,monitor progress, work to achieve our goals

Twice annually

TEL Corporate Environment Council

The GM in charge of the environment anddepartment heads, etc.

The promotion of environmental activities across the entire
Group, set company-wide goals

Appropriately

Council for the Regular Reporting ofEnvironmental Activities(Since fiscal 2022)

CEO, corporate directors in charge of theenvironment

Report on matters discussed at the Global Environment
Council and the TEL Corporate Environment Council andreview items for approval

Quarterly

Manufacturing Companies Presidents’Council*

Corporate directors in charge of theenvironment, etc.

Monitor and supervise progress related to environmental
issuesQuarterly

CO2 emissions reduction goals
Products

30% reduction

Plants and offices

70% reduction
Total emissions(compared tofiscal 2019)

Per wafer(compared tofiscal 2019)100%
A rate ofrenewable energy usage

Long-term Environmental Goals (2050)
As a leading corporation in environmental management, Tokyo
Electron works actively to conserve the global environment. We
will realize net zero* by proactively promoting the reduction ofenvironmental burden of both our facilities and products.
We strive to contribute to the development of a dream-inspiring
society by providing evolutionary manufacturing technologies
that effectively reduces the power consumption ofelectronic products.
* Reducing greenhouse gas emissions to net zero-Own emissions (Scope 1, 2): by 2040
-Emissions other than own (Scope 3): by 2050

* At the Manufacturing Companies Presidents’ Council, information is shared on business affairs and issues regarding environment, safety, quality, supply chain management, etc.

CO2 Emissions across the Value Chain
Based on our environmental slogan “Technology for Eco Life,” weaim to resolve environmental problems through leading
technology and reliable services, understand the environmental
impact generated throughout our entire value chain, andpromote business activities to reduce that impact.
Our total CO2 emissions of Scope 1 and Scope 2 is 90 kilotons,

Upstream
Scope 3 upstream

while Scope 3 as the sum of upstream and downstream activities
accounts for a total of 29,020 kilotons, approximately 99.7% of
the total. Of this, CO2 emissions when using products is 28,254
kilotons, about 97% of the total. This is why we consider thedevelopment of products with low CO2 emissions during
operation to be important.

Downstream

498 kilotons

Not from our Group90 kilotons

Scope1, 2

Own emissions

28,522 kilotons

Scope 3 downstream Not from our Group

Fuel- andenergy-related activities ............

15 kilotons
Capital goods .............................. 172 kilotons
Purchased goods
and services ...............................

282 kilotons

Employee commuting .................

12 kilotons

Scope 1: Direct greenhouse gas (GHG)
emissions from use of fuel and gas we
owned or controlled
Direct emissions from fueland gas use
Scope 1 ..............................................

16 kilotons

End-of-life treatment ofsold products ......................................

Use of sold products ......

3 kilotons

28,254 kilotons

Indirect emissions from electricity use
and heat purchase
Scope 2 .............................................
kilotons

74

Business travel .....................................
Waste generated in operations .....
Upstream transportationand distribution .............................

1 kiloton
1 kiloton

15 kilotons

37 TOKYO ELECTRON Integrated Report 2022

Downstream transportationand distribution .......................

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Tokyo Electron is merging business activities with a variety of sustainability initiatives, focusing on the environment, society andgovernance to help create new value.

Environmental Management System
Environmental measures are growing even more crucial. We
have established the Environment Promotion Department at ourheadquarters, headed by a corporate director in charge of theenvironment, which oversees multiple meetings to promote
efforts to address medium- to long-term environmental issues
across the entire Group. The details are shown in the table below.
To continuously promote our environmental activities, webegan operation of an environmental management system
based on ISO 14001 since fiscal 1998, primarily at our
manufacturing subsidiaries. In March 2017, the entire Groupobtained ISO 14001 certification together, which had previously
been obtained at each plant and office in Japan. In accordanceSales

265 kilotons

Scope 2: Indirect GHG emissions from use ofelectricity, steam and heat we purchased
Scope 3*: Emissions from corporate value
chains (excluding Scope 1 and 2 emissions),
such as product transportation, employee
business travel and major outsourced
production processes* Scope 3 is divided into upstream activities,
which include emissions associated withpurchased or procured products andservices, and downstream activities, which
include emissions associated with soldproducts and services

fiscal 2022 were reduced by 11% compared to the base year.
We have started to introduce renewable energy (electricity)
at plants and offices in Japan, the United States and China. As aresult, the ratio of company-wide renewable energy use in fiscal
2022 was 60%, and CO2 emissions were reduced by 49% fromthe base year. In fiscal 2023, we plan to complete theintroduction of renewable energy at all of our manufacturing
sites in Japan, as well as at other overseas plants and offices.
Through these efforts, we expect to achieve a 90% of renewableenergy usage and a 74% reduction in CO2 emissions for fiscal
2023. We will continue to develop activities that contribute to
the achievement of our medium-term environmental goals by
fiscal 2031 for our products, plants and offices.
In January 2022, we applied for SBT* certification of ourgreenhouse gas emission reduction goals, and we plan to receive
certification within fiscal 2023. We are working together as one on
initiatives to achieve the long-term environmental goals by 2050.
* SBT: Science Based Targets. The Paris Agreement aims to limit global warming towell below 2°C, preferably to 1.5°C, compared to pre-industrial levels. SBT is aninternational initiative to certify greenhouse gas emission reduction targets set bycompanies for the next five to 15 years, consistent with the levels required by theParis Agreement.

Reduction in CO2 Emissions through the Introduction of
Renewable Energy
Total CO2 emissions for Scope 1 and 2 (kilotons)
Rate of renewable energy usage (%)

174

In fiscal 2022, we identified CO2 emissions during the use of
our reference products and set a roadmap for each product withgoals for fiscal 2031. In addition to the status of electricity,
process gases and chemicals, water and other resources used in
the production and use of each product, factors such as theeffects of plans to reduce their use and the reduction effects ofproductivity improvements were also considered in setting thisroadmap. The CO2 emissions per wafer for products shipped in

Initiatives to Reduce Water Consumption
With the growing importance of water resource preservation, we
use WRI Aqueduct1 and freshwater resource quantity indicators
to conduct water risk assessments in Japan and overseas. In
addition, we confirm the status of water resource use in the
supply chain, rainwater and wastewater management and goal
setting with suppliers once a year.
We have established an annual sustainability goal of
maintaining the same water consumption level of the base year
(fiscal 2012 for plants and offices in Japan and a fiscal year of theirchoosing for each overseas operation). Our ongoing efforts toachieve these goals include reusing pure water from ourmanufacturing operations, installing water-saving devices,
watering lawns with rainwater and implementing theintermittent operation of cafeteria faucets.

100
90

60
90
45
25
2

2019.32022.32023.32031.3

During fiscal 2022, as a consequence of the operation of newbuildings and an increase in water consumption associated withproduct development and evaluation, water consumption
amounted to 1,417,000 m³, up 1% year-on-year. However, water
consumption per net sales was down 29% year-on-year.
Moreover, in terms of our goals at each plant and office in Japanand overseas, we achieved 7 of the 14 goals.
In recognition of these efforts, we were selected as aprestigious A List company in the CDP2 Water Security Categoryof the survey in December 2021.
1 WRI Aqueduct: A water risk assessment tool developed by the World
Resources Institute2 CDP: An international environmental non-profit organization (NPO) founded in
the United Kingdom that conducts surveys on climate change and water security
measures on private companies and municipalities and publishes the results

TOKYO ELECTRON Integrated Report 2022

38

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Initiatives Related to Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)• Risk Management
Based on the TCFD recommendations, we examine the risks andWe utilize enterprise risk management1 to identify a wide range
opportunities that climate change poses to our business andtake various response measures as we endeavor to makeof risks arising in business activities, and classify “Environmental
ongoing disclosures.
Issues” including climate change as a key risk having high impact
In fiscal 2022, in addition to the previous fiscal year’s study,
and probability of manifestation. We formulate and execute
we examined the 1.5°C scenario, which limits the average global
measures to minimize this risk, monitor the effect of said
temperature increase to less than 1.5°C above pre-industrial levels.
measures and work to understand the status of risk control, andimplement the PDCA cycle for management.
Short-, medium- and long-term company-wide risk
Status of Initiatives Related to Recommendations of the
management initiatives that related divisions and councils
TCFD• Governancerecommend are deployed to the facilities and divisions of theGroup companies after approval by the Manufacturing
We have established the Environment Promotion Department
Companies Presidents’ Council, which includes the corporate
and the Corporate Sustainability Management Department at
director in charge of the environment.
our headquarters, and the entire Group is pursuing initiatives for
For Scope 1 and 2 CO2 emissions, in addition to implementing
the TCFD recommendations.
Under the supervision of the CEO, the corporate director andmeasures to reduce CO2 emissions at our key manufacturingexecutive officer in charge of the environment and sustainabilitysites in Japan with high emissions, we are pursuing the adoption
give reports to the Board of Directors on our responses toof renewable energy on a global scale. For Scope 3 emissions, weclimate change-related risks and opportunities and progressrecognize the importance of providing products that generate
toward our goals, and conduct reviews.
fewer CO2 emissions because about 97% of the emissions in ourAt the Global Environmental Council, comprised of members
entire value chain are generated during use of products after
appointed by executives of headquarters and the Groupsale, so we are focusing on development of a range ofcompanies, goals are set, progress is monitored and theenvironmental technologies.
achievement of these goals is promoted.
We also formulate business continuity plans (BCPs) in• Strategy
anticipation of natural disasters caused by abnormal weather
We are conducting analysis that takes into account the following
and other factors, and take measures with our suppliers topoints in order to identify medium- to long-term risks andensure that business operations can be maintained.
• Metrics and Targets
opportunities that climate change poses for our business.
- Location of plants and offices
We are pursuing the following initiatives for the development of- Occurrence of natural disasters caused by climate change anda data-driven society and preservation of the global
status of damages
environment.
- Demands from customers, industries, and investors• With our semiconductor production equipment technology, we- Government policies and regulations and taxation
will contribute to enhancing the performance and reducing- Technological trends relating to renewable energy andpower consumption for semiconductor devices being usedenergy savingaround the world- Climate change scenarios predicted by external agencies and• Initiatives for our medium- and long-term environmental goals2
research results
In order to achieve our long-term environmental goals of
realizing net zero by 2050, we have established the following
Under the 1.5 ˚C scenario we identified transition risks
medium-term environmental goals and are carrying out
including rising energy costs associated with fuel and energy
various activities
taxes, and under the 4 ˚C scenario we identified physical risks- Reducing our emissions: a 70% reduction in total CO2
such as the impact of abnormal weather. Also, on theemissions for plants and offices (by fiscal 2031, compared toopportunity side we identified proactive initiatives to address
fiscal 2019), a rate of 100% renewable energy usage at plants
climate change through R&D. In response to these risks andand offices (by fiscal 2031), and reducing energy
opportunities, we will implement the findings from our scenario
consumption by 1% year-on-year at each plant and officeanalysis into our business strategies and establish medium- and(per-unit basis)long-term environmental goals, while also pursuing the adoption- Reducing other emissions: a 30% reduction in CO2 emissionsof renewable energy and the reduction of greenhouse gas
per wafer when using products (by fiscal 2031, compared toemissions strategies across the entire supply chain.
fiscal 2019)
We will increase our resilience (responsiveness to climate- Reducing the volume of water resources used3 and thechange) as a company by periodically reviewing the identified
environmental burden of logistics4, etc.
risks and opportunities and our responses thereto, and ensure• We launched “E-COMPASS5” in June 2021 as an initiative to buildthat response measures are implemented.
sustainable supply chains, and are promoting technologicalinnovations for semiconductors, and reducing environmental impacts

39 TOKYO ELECTRON Integrated Report 2022

Anticipated Risks and Opportunities of Climate Change Impact and Our Response
Timeline: Short-term = five years or less; medium-term = 2030; long-term = 2050
Scenarios used: 1.5˚C scenario (1.5˚C temperature increase), 4˚C scenario (4˚C temperature increase)
Scope: The entire Group as well as the entire value chain including upstream and downstream
Type(Scenario)

Timeline of Risk
Manifestation

Anticipated Risks and Opportunities

Our Response• P romote energy-saving and adopt renewable energy at plants and• Increased energy costs due to taxes levied on fuelShort- tomedium-termand energy: Assuming our greenhouse gas (GHG6)
emissions and use of renewable energy remain at
fiscal 2022 levels, if a carbon tax7 were applied, we
estimate our energy costs would increase by 700
million yen/year by fiscal 2026 (assuming a carbon
tax of 8,625 yen per ton of CO2) and 2.1 billion yen/year by fiscal 2041 (assuming a carbon tax of 23,575
yen per ton of CO2)

• R educed reputation among investors, NGOs andTransition Risks(1.5˚C Scenario)

local communities if a response to climate change
and other environmental issues is delayed

offices in order to achieve the medium-term environmental goals.
Furthermore, as a result of adopting renewable energy, the increased
burden from fiscal 2022 levels due to the introduction of a carbon
tax will be reduced by 800 million yen for fiscal 2026 and 2.2 billion
yen for fiscal 2041 compared to the amounts originally estimated infiscal 2021

• T hrough the activities of our supply chain initiative, “E-COMPASS,”
we are promoting energy-saving and the adoption of renewableenergy in the supply chain•W e publish the progress of efforts to achieve the medium-term

environmental goals in the Integrated Report and Sustainability Report• B y expressing our approval of the TCFD and utilizing its framework,
we are conducting risk management and promoting information
disclosures•D evelop semiconductor production equipment technology that
Medium- tolong-term•D ecreased net sales if we are unable to meetcustomers’ requirements and demands to address
the environment

contributes to enhanced performance of semiconductor devices andlower power consumption• R &D for future technology markets• P roduct development to achieve the medium-term environmental

goals (reduce per-wafer emissions of CO2 when products are in use)

• P romote our business continuity plans (BCPs) and business
continuity management (BCM)

Short- tolong-term
Physical Risks(4˚C Scenario)• Impacts on us, our suppliers and customers fromabnormal weather (net sales decrease as a resultof supply chain disruptions, operation stoppages,
production/shipping delays, and other factors)•D eploy procurement BCPs to suppliers, and implement BCP
assessments• P eriodic implementation of training, drills, etc.
•M aintain a database of suppliers’ production sites• E nroll in insurance in preparation for disasters resulting fromabnormal weather

Opportunities(Common)Medium- tolong-term• Increased costs associated with increased air-conditioner
and chiller usage due to higher temperatures• P romote energy saving at plants and offices• A dopt the use of renewable energy from our own power generation

Short- tolong-term•H igher productivity due to environment-related• P romote energy saving and adopt renewable energy at plants and• A ccelerated drive to create new value, including•D evelop semiconductor production equipment technology that

operations streamlining, thus reducing energy costs

innovation toward development of lowGHG products and services, and equipment
and technologies that contribute toward the
manufacture of low-power consumption devices

Medium- tolong-term• E ngaging in proactive initiatives for climate change

offices in order to achieve the medium-term environmental goals

contributes to enhanced performance of semiconductor devices andlower power consumption•G lobally promote the latest in research and development with afocus on the future of semiconductors and electronics to continually
supply the high-value-added Best Products with innovativetechnology in a timely mannerand creating added-value in products and services
supplied to the market to gain superiority andbusiness opportunities•D evelop technology to achieve reduced per-wafer emissions of CO2• S ecuring a competitive advantage and contributing• T hrough the activities of our supply chain initiative, “E-COMPASS,”

to improved corporate value by building resilience(responsiveness to climate change) into global operations

when products are in use

address climate change as it pertains to supply chains, respond toenvironmental regulations and innovate environmental technology

1 Refer to Risk Management on p. 57
2 Refer to Medium- and Long-term Environmental Goals on p. 38
3 Refer to Initiatives to Reduce Water Consumption on p. 38
4 Refer to “Logistics Initiatives” in the “Tokyo Electron Sustainability Report 2022” www.tel.com/sustainability/report/
5 Refer to E-COMPASS on p. 41
6 GHG: Greenhouse Gas
7 Carbon tax: We referred to the International Energy Agency (IEA) Net Zero Emissions by 2050 Scenario for the increase in tax associated with GHG emissions. 1 U.S. dollar
was converted as 115 yen

TOKYO ELECTRON Integrated Report 2022

40

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

E-COMPASSIn June 2021, we introduced E-COMPASS (Environmental CoCreation by Material, Process and Subcomponent Solutions) as a
new initiative for building sustainable supply chains. Under thisinitiative, we share goals such as reducing the environmental
burden of procurement and logistics, eliminating
environmentally hazardous materials, and proactive
environmental R&D for equipment with our suppliers,
developing activities accordingly. Furthermore, we will also
openly seek proposals on reducing environmental burden in
relation to the environmental performance of our equipment,
manufacturing processes and procurement and logistics, by
proactively adopting superior technology and initiatives we arepromoting to achieve these goals.
In fiscal 2022, we held the E-COMPASS briefing session for
suppliers where, in addition to informing them of the status of
our initiatives, we also shared measures for mutual growththrough co-creation with our suppliers. We also conducted the“E-COMPASS Survey” to confirm matters including the state ofsuppliers’ environmentally conscious product development andthe status of their products’ compliance with environmental
laws and regulations. Based on these results, we will discuss

response measures with our suppliers and aim to further
enhance the green performance of the industry as a whole.
We believe that reinforcing partnerships with our suppliers
and leadership in the industry are key to the development of adata-driven society and preservation of the global environment.
By utilizing every management resource at our disposal topromote E-COMPASS, we will actively endeavor to preserve theglobal environment throughout the entire supply chain.

Environmental Co-Creation by Material, Process and Subcomponent Solutions

Semiconductors

Production equipment

Business activities

Pursuing higher device
performance and lower
power consumption

Achieving both highprocess performance andenvironmental performanceof the equipment

Reduction of CO2 emissions
in all business activities

Human Rights
Approach to Human Rights
We at Tokyo Electron are conscious of our corporate social
responsibility, and we recognize that it is important to conduct
ourselves with a strong sense of integrity. Based on thisrecognition, we have firmly upheld human rights since ourfounding, as reflected in the spirit of our Corporate Philosophy
and Management Policies. For us, respecting human rights
means a significant undertaking, not only to fulfill our
responsibility for eliminating adverse impacts on people caused
through business activities but also to respect those people who
support our business activities, and contribute to the realizationof a sustainable, dream-inspiring society. We incorporate theconcept of respect into every aspect of our business activities,
and strive to nurture a dynamic corporate culture where each
person can realize their full potential.

Human Rights Initiatives
Our Human Rights Policy1, summarizing our approach to humanrights specifies five focus areas: Freedom, Equality & NonDiscrimination; Freely Chosen Employment; Product Safety &Workplace Health and Safety; Freedom of Association; andAppropriate Working Hours & Breaks/Holidays/Vacations. In
preparing the Human Rights Policy, we referred to the United
Nations’ Guiding Principles on Business and Human Rights andthe International Bill of Human Rights and the ILO Declaration on
Fundamental Principles and Rights at Work referred to therein,
the Ten Principles of the United Nations Global Compact, and the
RBA Code of Conduct2.
We ensure that our executives and employees, as well as
suppliers, are fully aware of this content. Specifically, we publish
the Human Rights Policy on our website and also implement
online training targeting all of our executives and employees.

Initiatives which Align with the United Nations’ Guiding Principles on Business and Human Rights

Commitment

Assessment

Remediation

ReportCommitment to respecting
human rights•H uman Rights Policy publication•A wareness and implementation•E ducation

Assessment of human rights risks inbusiness and supply chains• Human rights risk assessment• Human rights impact assessment

Actions to reduce risks based on
assessment results• Feedback sheet publication• Program development and review
according to issues

Regular disclosure of information• Publication of the Integrated
Report and Sustainability Report• Postings on the website

41 TOKYO ELECTRON Integrated Report 2022

We identify human rights risks and conduct human rights due
diligence to develop remediation actions every year. In fiscal
2022, we unified the survey contents with reference to the RBA
auditing standards, and surveyed 12 companies out of the entire
Group in Japan and overseas, including the head office, andapproximately 650 business partners involved in materials,
staffing, customs services, packaging, etc.
Consequently, potential/actual risks (Priority/Major/Minor)
turned out to be 17% of our Group companies and 18% of
suppliers, with labor- and health and safety-related risks
comprising the majority of the risk breakdown.
In the area of labor, items including the formulation ofpolicies and procedures pertaining to thorough management ofworking hours and the employment of student workers, interns
and trainees were identified as risks. In the area of health andsafety, items including the implementation of evacuation drills
for all workers and deployment of trained emergency response
personnel were identified as risks.
With regard to these identified risks and their impact, inside
our Group companies we are conducting checks at each of oursites based on feedback sheets, and implementing a remediation
program to review the execution of working hours management,
formulate various policies and procedures, carry out evacuation
drill initiatives, and address ethics and management systems. To
our suppliers, using feedback sheets we provide reports on thepotential/actual risks identified in the survey and are working on
remediation activities to reduce these risks.
In addition, the percentage of companies where no potential/
actual risks are considered to exist (conformance) was 80% for
our Group companies and 73% for our suppliers.
Furthermore, we recognize the importance of having highly
effective grievance mechanisms related to human rights and areworking to establish reporting systems3 for employees andsuppliers in Japan and abroad, and to further strengthen theoperation of those mechanisms. By adopting highly justified andfair grievance mechanisms, we are identifying adverse humanrights impacts at an early stage and building mechanisms to help
remediate them.
Going forward, in addition to proactively deploying humanrights-related initiatives and further enhancing their efficacy andtransparency, we will work to reduce human rights risks in ourcompanies and in our supply chain.
1H uman Rights Policy:
www.tel.com/sustainability/management-foundation/human-rights.html
2 RBA Code of Conduct: A set of standards established by the RBA (Responsible
Business Alliance) for supply chains in the electronics industry for a safe labor
environment, to ensure that workers are treated with respect and dignity,
and that companies take responsibility for environmental impact in the
manufacturing process.
3 Refer to Compliance on p. 60

Percentages of Conformance and Potential/Actual Risks (Priority/Major/Minor)4
Ethics 1%
Health and Safety 48%

Ethics 1%
Health and Safety 51%

Management Systems 1%
Labor 50%

Breakdownof Potential/
Actual Risks

Major 6%
Priority 1%
N/A 3%

Minor 10%

Management Systems 4%
Labor 44%

Breakdownof Potential/
Actual Risks

Major 6%
Priority 1%
N/A 9%

Minor 11%

Internal

Suppliers

Conformance 80%

Conformance 73%

4 Our classifications and definitions of conformance as well as potential/actual risks based on RBA auditing standards are as follows.
Priority: Issues considered particularly serious, which are at significant risk and require immediate priority remediation
Major: High-urgency issues which are at significant risk and require immediate remediation
Minor: Minor issues and risks recognized in each area which require remediation
Conformance: No issues were recognized in each area and requirements are being met
N/A: Indicates that “listed options do not resemble actual circumstances, or that the question is not applicable.”

TOKYO ELECTRON Integrated Report 2022

42

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Supply Chain Management

SafetyPrinciples and System of Supply Chain Management
To build a supply chain that is sound and sustainable, Tokyo
Electron has formulated a procurement policy based on the laws,
regulations and social norms of each country, as well as the RBA
Code of Conduct, and together with its suppliers, isimplementing activities based on this policy. To identify issues inthe supply chain from a variety of perspectives, we also value
ongoing communication with diverse suppliers, including
materials suppliers that handle parts and raw materials, staffing
suppliers that provide services and logistics suppliers that handle
physical distribution operations. Under the leadership of theCEO, any identified issues are shared with relevant divisions andefforts are made to implement concrete measures for improvement.
We will continue to strive to create value in the supply chain
by working to build relationships of trust with our suppliers, who
support our business as partners, and by working together to
conduct operations in compliance with global standards.
Initiatives in the Supply Chain• Sustainability Operations
To keep track of our suppliers’ engagement in sustainability, we
have conducted a sustainability assessment in areas such aslabor, health and safety, the environment and ethics since fiscal
2014. We analyze the assessment results, provide feedback to
suppliers, and together, promote initiatives for improvement as
required. In fiscal 2019, we completely revised the content of thesurvey based on audit standards stipulated by the RBA, and in
addition to materials1 suppliers, included staffing2 and logistics3
suppliers in the scope of surveys.
In fiscal 2022, we confirmed surveys and conducted that
suppliers had implemented measures to prevent any
reoccurrence of cases of false reporting that were identified in
the previous year’s assessment and making efforts for
improvement, including establishing committees to oversee
these measures.
To ensure that all people in our supply chain can work of theirown free will, we have expressly stipulated our zero-tolerance
policy for forced labor and bonded labor, and havecommunicated this to our major suppliers.

• Responsible Procurement of Minerals (Conflict Minerals)
We see taking action against conflict minerals (3TG4) obtained
through illegal exploitation, which lead to human rights
violations and poor working conditions, as our corporate social
responsibility. Our resolute goal is to eliminate the use of raw
materials made from these conflict minerals, as well as any parts
or components containing them.
In alignment with this way of thinking, we conduct surveys on
potential conflict materials using the CMRT⁵ and referring to theOECD6 Due Diligence Guidance for Responsible Supply Chains ofMinerals from Conflict-Affected and High-Risk Areas. In fiscal
2022, we conducted our eighth annual survey on potential
conflict minerals. As a result, we were able to identify 243 RMAP7
conformant smelters, providing us confidence that 3TG sourced
from these smelters were conflict-free. In addition, none of thematerials we procured were found to contain 3TG involved in conflict.
4 3TG: Tantalum, tin, tungsten and gold
5 CMRT: Conflict Minerals Reporting Template. Survey format for reporting conflictmaterials, provided by the Responsible Minerals Initiative (RMI), which has
established international guidelines on conflict minerals.
6 OECD: Organisation for Economic Co-operation and Development
7 RMAP: Responsible Minerals Assurance Process. A program promoted and led by
the RMI for auditing smelters/refiners to validate that they do not use conflictminerals.

• Procurement BCP
As part of our business continuity plans (BCPs), we collaborate
with suppliers on ongoing disaster preparation.
We maintain a database of suppliers’ production sites so that
if a crisis arises, we can promptly identify impacted suppliers andquickly collaborate in recovery efforts. During fiscal 2022,
approximately 24,000 supplier sites were registered, and we
conducted 11 post-disaster impact surveys. In addition, we
conduct BCP assessments on our suppliers and analyze their
responses to provide them with feedback so that they canpromote improvements in areas of concern.

1M aterials suppliers: Surveys have been conducted since fiscal 2014 for suppliers
accounting for more than 80% of our procurement spend.
2 S taffing suppliers: Surveys have been conducted since fiscal 2019 on 100% of
employment agencies and contracting companies (internal contractors).
3 L ogistics suppliers: Surveys have been conducted since fiscal 2019 on 100% of
customs-related operators.

Supply Chain Sustainability Process

Plan

Do

Check

Act

Formulation of supply chain
policies

Notification of requests toour suppliers and appeal forsustainability activities

Implementation of supply chain
sustainability assessment andanalysis of response

Provision of feedback basedon the results and requests for
improvements to suppliers

43 TOKYO ELECTRON Integrated Report 2022

Approach to Safety
Under the “Safety First” slogan, everyone at Tokyo Electron, fromtop management to on-site personnel, is actively andcontinuously improving safety and promoting health, giving
safety and health the highest
priority when carrying out
various types of operations
such as development,
manufacturing, transportation,
installation and maintenance.

safety education is added as necessary.
Also, to ensure the concept of safe equipment design
permeates from design, manufacture and service operations, wehold a semiannual safe equipment design seminar at our
manufacturing sites in Japan, inviting an external guest to speak.
We also promote our initiatives to prevent incidents, byproviding our suppliers and customers with safety informationas circumstances demand. As a result of having maintained ahigh priority on creating safe work environments, TCIR* has been
maintained at less than the Company’s goal of 0.50, with 0.30 infiscal 2022.

Safe Design of Equipment
Taking the entire product life cycle into consideration, we carryout product risk assessments as early as possible in thedevelopment phase. We implement safe equipment design1 to
reduce the risks posed to humans by incorporating theassessment results in the design. We conduct global surveys of
increasingly strict laws and regulations and conduct compliancechecks through third-party assessment bodies to ensure
conformity with international safety standards, SEMI S22, and CE
Marking3 on the equipment we ship. We have also established asystem to comply with safety regulations of the regions where
our equipment is delivered while working with overseas companies.

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

1 Safe equipment design: A design concept that eliminates the cause of themachine’s harm to humans through the safety design of the machine
2 SEMI S2: This is a set of environmental, health and safety guidelines forsemiconductor production equipment. It is used mainly by the leading
manufacturers of semiconductor equipment in the United States and Europe, notonly for semiconductors but also as safe procurement guidelines for electric andelectronic device manufacturing equipment around the world.
3 CE marking: When exporting into the European Union, CE marking defines rules
for displaying a CE mark as proof that the equipment is safe and complies with
EU-defined rules (directives)

Incident Reporting System
In the event of an incident, we operate the TEL Incident Report
System (TIRS) to quickly share information with all parties
involved and follow up with the relevant department to confirm
the incident response as well as to implement measures toprevent reoccurrence. Through the operation of this system, we
will continue to strive for speedy information sharing andincident response.
Safety Education
To help create a safe workplace, we have put in place two
education programs globally.
Basic safety education is basic safety training targeting all
employees. It is provided as introductory training for new hires,and thereafter, employees are required to take refresher training
once every three years. Advanced safety education is a more
specialized type of safety training targeted at workers on
production lines and in cleanrooms. Those who are eligible forthis training are required to take refresher training every year. For
overseas transferees, the laws and regulations in their previous
and future places of employment are compared, and additional

TCIR

0.30

New Incident Prevention Initiatives
We are deploying the following new activities with the aim ofcreating a safer working environment.
• Safety Education Using VR (Virtual Reality)
We are striving to increase danger awareness and prevent
incidents by implementing safety education using realistic
simulated experiences such as falling from a high place, falling
down stairs, electric shock and incidents caused by getting
trapped between objects. We are also building a system thatallows multiple people to take courses at the same time bydeveloping our own interactive VR system.
• Pocket-edition Work Safety Rules
We have turned basic rules for work safety into pamphlets thesize of a business card and distributed them to all employees
involved in the work. The pamphlets are made from materials
that can be viewed even in clean rooms and are available inJapanese, English, Korean and Chinese.
• Shortening Equipment Start-up TimeWe are promoting the development of safer equipment andworking to shorten the time from installation to operation. By
reducing work times and types of work, we are aiming to
reduce the frequency of mistakes and incidents at sites.

TOKYO ELECTRON Integrated Report 2022

44

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Quality
Initiatives for Quality Improvement
In order to help each of our employees correctly understand andimplement quality assurance activities, we realize theimportance of clearly defining the ideal form of quality assurance(goals), along with creating an environment and culture forwidely disseminating it. From the ideal form, we established “OurApproach to Quality” and “Quality Policy” and communicate theimportance of quality to our employees at various opportunities
to increase their quality awareness. We are establishing rules forwhat has to be done in quality assurance activities as well as
correctly implementing those rules. In addition, to ensure that
Approach to Quality
We define our approach to quality in the following way: “TheTokyo Electron Group seeks to provide the highest-quality
products and services. This pursuit of quality begins at
development and continues through all manufacturing,
installation, maintenance, sales and support processes. Our
employees must work to deliver quality products, quality
services and innovative solutions that enable customer success.”
We strive to implement this policy.

Quality Policy
1. Quality Focus
Focusing on quality to satisfy customers, meetproduction schedules and reduce required
maintenance even with temporary cost increases.
2. Quality Design and Assurance
Building quality into products and assuring inprocess quality control, from the design anddevelopment phase throughout every process.
3. Quality and Trust
When a quality-related problem occurs, working as ateam to perform thorough root cause analyses andresolve problems as quickly as possible.
4. Continual Improvement
Ensuring customer satisfaction and trust by
establishing quality goals and performance indicatorsand by implementing continual improvement using
the PDCA cycle.
5. Stakeholder Communication
Listening to stakeholder expectations, providing
timely product quality information and making
adjustments as needed.

45 TOKYO ELECTRON Integrated Report 2022

our employees are always aware of their roles and purposes andperform their work, we are striving to make the rules
comprehensive, reassess and deploy our quality education fromtime to time and visualize appropriate quality information. Basedon these foundations, we help our employees mutually enhanceawareness about quality in a variety of situations so that theirefforts lead to the improvement and growth of our businessprocesses, enabling us to provide product quality and services
that surpass customer expectations.

We strive to implement self-process assurance systems bycarrying out strict quality-related risk management anddevelopment/design inspections beginning at the development
stage, and also by ensuring thorough verification of customers’
operations using simulations. We have also built an importantcomponent traceability system to strengthen our information
environment. Specifically, to prevent various types of nonconformance, we built a system that allows One Platform1 toview information such as past problems, adjustment values usedduring manufacturing and assembly and important component
inspection information from suppliers, and have successfully
strengthened our risk management (FMEA2).
By thoroughly implementing these self-process assurance
system and prevention measures, it creates time for employees
to focus on high-value-added business operations and promotes
initiatives for Shift Left (front-loading).
1 One Platform: A platform that makes it possible to easily view multiple different
systems as seamless information sources, in order to effectively and efficiently
achieve traceability.
2 FMEA: Failure mode and effects analysis. A method to identify, prevent andmitigate risks in advance.

Customer
Investments

Creation ofvalue-added
operations bysolving issues atthe early stage ofdevelopment

Development
quality

We are introducing a new enterprise system (ERP1) to further
improve productivity and quality. The new ERP, being operated
across operational and national boundaries, is aimed at creating
the following five benefits: (1) compliance with the new revenue
recognition standards2 in Japan; (2) management decision-making
with quick response to change; (3) large improvements in business
operation efficiency; (4) utilization of globally integrated
information with an eye toward digital transformation; and (5)realization of ultimate work style reform.
In fiscal 2022, we started with introduction of the new ERP at
headquarters, and we completed (1) compliance with the newrevenue recognition standards. From fiscal 2023 onward, we willtake full advantage of the knowledge gained in the process of

Scheduler(Plan)(Opportunities
and Forecast)Accelerated issue
identification

Detailed
designContinuous Improvement of Business Operations

Sales
CRM

Front-loading
development style

Conceptual
designaudits by internal auditors as well as third-party organizations.
In addition, the Quality Assurance Division is in charge ofdetermining shipping risks of evaluation machines and reviewing
the transition to mass production in the development process.
To ensure the stable supply of parts in the mass production
process, we employ methods such as using a statistical method
to control process abnormalities as well as making strict
equipment shipping judgments to prevent defects from leaking
into the market. We promote the realization of self-processassurance and maintenance and improvement of product quality
in the upstream processes, providing high-quality and highvalue-added products and services leading to the continuous
improvement of customer satisfaction.

introducing the system at headquarters, and gradually introduce
the system at manufacturing sites in Japan and at overseas
subsidiaries. In addition, with the aim of realizing a globally
integrated system, we will work with our partner companies toimprove operations, increase efficiency, and develop functions tofurther enhance system performance.
1E
 RP: Enterprise Resource Planning. A system that integrates the core business
operations of an enterprise, such as accounting, personnel, production, logistics
and sales, for better efficiency and centralized information.
2 New revenue recognition standards: New Accounting Standard for Revenue
Recognition that establishes rules for calculating sales in financial statements,
and which became applicable to listed companies, etc. from April 2021

Overviewof the New Enterprise System
新基幹システム概要

Shift Left (Front-loading) Initiatives
Man-hours

Quality Management
We have established the TEL Manual (TM) and TEL Guidelines(TG) based on our company-wide quality policy for each major
business category, including development, design,
manufacturing and services, and are deploying them to theentire Group, including manufacturing sites, as well as suppliers.
Each of our manufacturing sites has established a quality
management system based on the TM and TG and have acquired
the international standard ISO 9001:2015. With the Quality
Assurance Division as the core, we are striving to continuously
improve our quality management system by setting annual
quality goals based on the results of the previous fiscal year andassessing degree of achievement based on periodic reviews, aswell as by effectively operating the PDCA cycle through repeated

Opportunities

Product
Lifecycle
Management■ IT System

Supply Chain
Management(Procurement)(Design)

Forecast

Production
Planning

Production
Preparation

Manufacturing
Execution
SystemWarehouse
Management
System(Manufacturing)

DesignBooking

Procurement

Manufacturing

Global Trade
Management■ Key Processes

Service CRM(Field-support)(Export)(Warehouse)

DeliveryStart-up

Technical
Acceptance

Sales

Warranty

Post-sale

ERP (Sales, Inventory, Accounting)

Prototypeevaluation

Full-scale
production

Supplier
qualityTime

Operation
streamlining

TOKYO ELECTRON Integrated Report 2022

46

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Human Resources
Employees Both Create and Fulfill Company Values
Tokyo Electron operates in 77 sites in 18 countries and regions. We
believe it is important for human resources with different cultural
backgrounds, experiences and attributes to share values and work
together as one toward value creation. In addition to
implementing a common global job-based human resource
system (GTC: Global TEL Career-paths) and this system, we arealso focusing on global human resource management to promote
career advancement under a common platform without biases
against any country or the Group companies affiliation. This
allows us to respond to changes in business environments andallocate resources in an agile and optimal manner.
We believe that each of the 15,634 employees who work at
our company maintaining a high level of engagement anddemonstrating their full potential will lead directly to our growth
as a company. By sharing with our employees the direction
toward which management is aiming and providing platforms
for direct dialogue through the employee meetings anddiscussions held at each site, we are striving to build mutual trust
between the organization and individuals. Furthermore, torealize our Corporate Philosophy, we established TEL Values,
which delineate Tokyo Electron’s values, the mindset that each
employee must possess and the codes of conduct to be passed
on to the future. The TEL Values—pride, challenge, ownership,
teamwork and awareness—are being put into practice by our
employees all over the world.
We believe that our corporate growth is enabled by people,
and our employees both create and fulfill company values. Basedon this approach, we practice motivation-oriented
management. We actively invest in our employees andimplement important measures such as below while also
providing many opportunities for employees to challengethemselves to achieve high-level goals by making the most of
their individual potential.

Practicing Motivation-oriented Management
Important Measures• Formulating a new Vision and promoting TSV (TEL’s Shared Value)•S etting world-class financial targets in the new Medium-termManagement Plan•M
 aking plans to invest more than 1 trillion yen in research anddevelopment in 5 years•E xecuting ESG initiatives aimed at continuous corporate valueenhancement•O ffering opportunities to gain global work experience and acquire wideranging knowledge•O perating a shared global human resource system• I ntroducing a performance-linked conpensation system•D eveloping human resource education program using TEL UNIVERSITY•S haring the CEO mission and having active dialogue with employees• Increasing opportunities for meetings between employees and the GM ofeach department

Human Resource Development Concept at TEL UNIVERSITY
We have established TEL UNIVERSITY as an in-house educational
establishment, helping employees to independently build theircareers and realize their personal goals for their growth anddevelopment. We are promoting the following initiatives andfocusing on the development of human resources who are
essential to our development.
• Provision of Global and On-demand Learning Opportunities
Since each employee’s growth is different, we are implementing
on-demand education1 that allows employees to learn when theywant according to their own needs. In addition to group training,
we are proactively utilizing e-learning programs and providing acommon platform from learning from any location in the world.
• Support for Career Development
We are expanding our education programs to help employees
quickly acquire basic skills. We also provide information and tools

47 TOKYO ELECTRON Integrated Report 2022

Five Perspectives for Motivation-oriented Management• Awareness that our company and work contributes to society

Diversity and Inclusion
At Tokyo Electron, diversity and inclusion are management pillars
that lead to the continuous generation of innovation andincreased corporate value. We are actively promoting them withthe strong commitment of our management. We have taken on
gender, nationality and generation as major themes and set thefollowing goals based on the characteristics of each region. We
are implementing various initiatives at each Group company.
• In terms of succession planning, we conduct a diversityconscious talent pipeline (plan for developing humanresources), and are implementing initiatives to achieve the goalof increasing the ratio of female managers1 to 8.0% globally and5.0% in Japan by fiscal 2027 (as of March 31, 2022: globally 5.5%
and in Japan 2.6%)• Taking into consideration that many of our employees areengineers, we actively invest in the use of recruiters and branding
to hire female engineers at a level that is equal to or greaterthan the general ratio of female engineers2 in each region• We create an organizational structure where even those fromoutside of Japan can take on corporate roles through the use oftechnology and shared global human resources systems• We organize events such as “Diversity and Inclusion Day” andother events with internal promotion leaders and external
experts, create networking opportunities for employees withsimilar characteristics and experience, and hold roundtablediscussions regarding careers before and after taking
maternity/paternity leave and childcare leave

Diversity and Inclusion Day
Diversity and Inclusion Day, an online event with simultaneous
streaming for Group companies worldwide, was held in
February 2022.
In his opening speech, the CEO stated, “We need toincorporate all wisdom and diverse ideas to maximize the growthpotential of the entire Group. In order to do this, it is essential topromote diversity and inclusion.” In addition, members from the U.S.
including the president of Tokyo Electron America spoke about theimportance of diversity and inclusion at a talk session. From Japan,
two outside directors participated in a panel discussion regarding
the roles of the company in a rapidly changing global society.
Through this event, the importance of embracing and making
the most of diversity was once again confirmed.
1 Include experts in the number of managers
2 The ratio of females majoring in science or engineering

Ratio of Female Managers
8.0

(%)

5.0

5.5

2027.3(goal)

2022.3(%)

2.6
2022.32027.3(goal)
GlobalJapan• Dreams and expectations of the Company’s future• Opportunities to take on challenges• Fair evaluations that recognize employee efforts and globallycompetitive rewards• Workplace with open atmosphere and positive communication

so that employees can gain a more concrete image of their own
learning, experience and career development.
• Leader Programs
In order to nurture the next generation of leaders to support our
future, we identify and systematically nurture staff to take on
the role of realizing medium- to long-term corporate valueenhancement. We provide next-generation management
candidates with opportunities to build networks throughparticipation in events such as external training, to develop a
broader perspective, and to receive 360-degree feedback2. In
addition, management, including outside directors, conduct
systematic assignment considerations and reviews.

Employee Engagement
Improving employee engagement is essential to maximize
corporate performance and achieve sustainable growth.
Recognizing that employees both create and fulfill company
values for us, we have been regularly conducting engagement
surveys since fiscal 2016 to assess the current state of
employee engagement and identify issues. Based on the resultsof the surveys, we make improvements to foster a better
workplace environment and culture by increasing
opportunities for dialogue between management andemployees as well as continuously communicating messages
that emphasize safety, quality, and compliance. These
initiatives resulted in an increase in the overall employee
engagement score of 12 points from fiscal 2016 to fiscal 2021. In
addition, the retention rate* in fiscal 2022 was 96%, a high leveleven on a global scale.
We will continue these initiatives, such as clarifying career paths
and improving operational efficiency through digital transformation,
since we believe that improving employee engagement is importantto providing increase value to our stakeholders.

Regular Engagement Survey Process

Up 12 points
Reviewingofcircumstances

Improvementofmeasures

Planningformeasures

Fostering abetter workplaceenvironmentand culture
Confirmationofeffects

Implementationofmeasures・Opportunities for dialogue between
management and employees
・Communication of messages
emphasizing safety, quality andcompliance* Retention rate is calculated using data on turnover rate.

1 On-demand education: Education programs that allow employees to learn at theirown convenience, anywhere, anytime
2 360-degree feedback: Process for collecting feedback from the subordinates,
peers and supervisors of employees, as well as self-evaluations by the employees
themselves

TOKYO ELECTRON Integrated Report 2022

48

Value Creation by the Value Chain

Chapter 3

Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Corporate Governance Framework

Corporate GovernanceCorporate Governance System
Basic Stance
We regard building corporate governance structures as important
for achieving success in global competition and realizing
sustainable growth. To that end, we have built a structure for
utilizing to the maximum the worldwide resources we possess andhave worked to incorporate a wide range of opinions to strengthen
our management foundation and technology base, establishing agovernance structure capable of ensuring that we attain globallevel earnings power. We established the Corporate Governance
Guidelines* and outlined the corporate governance structures that
we have developed and reinforced ahead of other companies.
* Corporate Governance Guidelines: www.tel.com/about/cg/

Further Development of Corporate Governance
We use the Audit & Supervisory Board System, which consists ofa Board of Directors and an Audit & Supervisory Board, and haveachieved effective governance based on the supervision ofmanagement by the Audit & Supervisory Board.
In April 2022, we transited to the Prime Market of the Tokyo
Stock Exchange and took the following actions reinforcing
corporate governance to respond to the expectations of capital
markets including compliance with the Corporate Governance
Code and to enhance corporate value even further.

(1)	Changed the composition of the Board of Directors to three
inside directors and three outside directors(2)	Appointed a majority of outside directors to the Nomination
Committee and the Compensation Committee, including
their respective chairpersons(3)	Introduced a Corporate Officer system, under which
corporate officers, as the highest decision-making body on
the executive side of the Group, are responsible for the entire
Group management and business execution(4)	Established the Corporate Officers Meeting and appropriately
delegated authority from the Board of Directors to the
executive side to conduct prompt decision-making and agile
operational execution(5)	Corporate officers attend Board of Directors meetings andapply the details of Board deliberations to business execution
in an appropriate and speedy manner
By establishing a Board of Directors that performs its
supervisory functions and a robust business execution system inthe semiconductor production equipment industry, where
technological innovation is rapid and market changes are active,
we will further promote growth-oriented group management on
global basis, expand short-, medium- and long-term profit andachieve continuous corporate value enhancement.

Changes in Corporate Governance (Since CY1998)
1998

1999

2000

2002

2003

2016

2017

2018

2019

2020

Board of Directors

Audit & Supervisory Board

Composition: 	Three inside directors and three outside directors
	Corporate officers also attend meetings to give
explanations and reports, etc.
Chairperson:
Inside director (non-executive)
Number of Meetings: 12 in fiscal 2022

Composition: 	Two full-time Audit & Supervisory Board members andthree outside Audit & Supervisory Board members
Chairperson:
Full-time Audit & Supervisory Board member
Number of Meeting: 9 in fiscal 2022

Nomination Committee

Compensation Committee

Composition:
One inside director and two outside directors
Chairperson:
Outside director
Number of Meetings: 12 in fiscal 2022
Deliberation Topics: 	Appointment and dismissal of corporate directors
and the CEO, candidates of independent outside
directors, status of successor development,
other topics

Composition:
One inside director and two outside directors
Chairperson:
Outside director
Number of Meetings: 10 in fiscal 2022
Deliberation Topics: 	Policies concerning determination of individualcompensation for corporate directors and others
and the details of compensation, compensation ofindividual remuneration, etc. of representative
directors, other topics

Shareholders’ Meeting
Appointment or Dismissal of Audit &Supervisory Board Members

Appointment or Dismissal of Corporate Directors

Management& Supervision

Nomination
Committee
Compensation
Committee

Appointment
or Dismissal

Audit

ReportBoard of Directors

Audit

ReportCooperate

Audit &
Supervisory Board

Independent Auditors

Audit

Proposal & ReportSupervision

Cooperate

Cooperate
ReportBusiness Execution
CSS(Corporate Senior Staff)

Representative Director,
President & CEO

ReportGlobal Audit Center

2021

2022

Four of Twelve
Directors(One-third)

Three ofSix Directors(One-half)Business Ethics Committee

Two

Risk Management Committee

Audit

Corporate Officers Meeting
OutsideDirectors(Ratio)

One

Two

Three

Sustainability Committee
Diversity(Female & Foreign
Nationals)

One

Two

Three

Audit

Information Security Committee
Term of Office
Executive
Changed from Officer System
Two Years
Introduced
to One Year

Corporate
Directors &Executive Officers

Export Trade Control Committee

Corporate
Officer System
Introduced

Business Execution Organization (All Division/All TEL Group companies)
Discretionary Committees

Nomination
Committee
Established

Nomination
Committee

Chairperson:
Outside Director

Compensation Compensation
Committee
Committee
EstablishedDirector
Compensation

Stock Option
SystemIntroduced

Majority ofMembersare Outside
Directors

Chairperson:
Outside Director

Disclosure ofCompensationof Individual
Representative
Directors

Stock-based Clawback Policies,
Compensation Stock Ownership
System for
Guidelines
Outside Directors
Introduced
Introduced

Medium-term
Performance-linked
Compensation
System Introduced

Evaluating theEffectivenessof the Board of
Directors

Start of
Evaluation(Self-evaluation)

Majority ofMembersare Outside
Directors

Involvement ofThird-party
Organizations

Corporate Officers Meeting

Committees on the Executive SideThe highest decision-making body on the executive side; established inJune 2022
Composition: 	Six corporate officers
	Inside directors who are not corporate officers andinside Audit & Supervisory Board members also
participate
Chairperson:
CEO
Meeting Frequency: Once a month in principle● Business Ethics Committee

CSS (Corporate Senior Staff)
Sustainabilityrelated
Disclosures

Environmental
and Social
Report Issued

Sustainability
Report Issued

Integrated
Report Issued

49 TOKYO ELECTRON Integrated Report 2022

Reviews progress management and implementation of management
plans from a global perspective
Composition:	Executive officers, management executives ofoverseas subsidiaries and others
Meeting Frequency: Once a quarter

Investigates the revision and revocation of the Code of Ethics andverifies the status of practice in accordance with the Code of Ethics
Proposes and supports training and educational programs relating tobusiness ethics● Sustainability Committee

Sets annual sustainability goals (short, medium, and long term) and
implements measures to achieve them
Implements company-wide projects (the environment, human rights,
RBA, etc.)● Risk Management Committee

Performs and shares information on company-wide risk management
Promotes initiatives to address individual risk items in collaboration
with risk owners

TOKYO ELECTRON Integrated Report 2022

50

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Establishment of the Director Compensation System
Basic Policy on Director Compensation
The entire Group emphasizes the following points in its basic
policies on compensation for corporate directors and Audit &Supervisory Board members.
(1) Levels and plans for compensation to secure highly competentmanagement personnel with global competitiveness(2) High linkage with business performance in the short term andmedium-and-long term increase of corporate value aimed atsustainable growth(3) Securement of transparency and fairness in the decision
process of compensation and appropriateness of compensation
Overview of Compensation
The table below provides an overview of the composition ofcompensation and policies and decision-making for each typeof compensation.
Role of the Compensation Committee
To secure transparency and fairness in management and theappropriateness of compensation, the Compensation
Committee, which is chaired by an independent outside director,
utilizes advice from an external expert who attends all meetings,
compares compensation levels with companies in Japan andoverseas and analyzes the latest trends and best practices inJapan and overseas (such as reflecting ESG in compensation). The
committee then proposes to the Board of Directors acompensation system that is the most appropriate for the Groupand individual compensation amounts for the representative
directors based on the basic policies on compensation.

RecipientType of Compensation

Fixed Basic Compensation
Cash Bonuses

AnnualStock
PerformanceCompensationlinked
based Stock
Compensation
Options

InsideDirectors

○

○

○

○

－

－

○

Performance
Share(Stock-based
Compensation)○

Restricted
NonStock Units
performance(Stock-based
linkedCompensation Compensation)－

Medium-term
Performancelinked
Compensatin

Audit &
Outside Supervisory
Directors
Board
Members

－

－

○

－

－

－

Overview of Compensation

・Determine within the limit of total fixed basic compensation, which has been resolved at the
Meeting of Shareholders
・For executive directors, amounts are determined according to the scale of job responsibilities bymaking reference to the job grade frameworks of external expert organizations
・Amount is linked to business performance in the relevant fiscal year to raise awareness ofenhancing performance in each fiscal year・Consists of cash bonuses and stock compensation-based stock options; the composition ratio is
approximately 1:1
・Specific amounts and the number of stock options granted are commensurate with the corporate
business performance and the results of individual performance evaluations in the relevant fiscal
year(Indicators of the corporate business performance)
Net income attributable to owners of parent and consolidated ROE are adopted, andthe results of comparisons of operating margin and operating margin growth ratio withcompetitors are reflected on the amount of payment(Individual performance evaluation items)
Contribution to short- and medium-term management strategy targets including ESG・ Profit-sharing type compensation paid commensurate with business performance in each fiscal
year, therefore no policy is in place for the payout proportion of fixed basic compensation
・ Stock compensation-based stock options are subject to a three-year exercise restriction period
to motivate recipients to share a shareholder perspective while contributing to increasing
corporate value over the medium to long term・Paid to motivate recipients to contribute to medium- to long-term businessperformance improvement
・If the payout rate is 100%, the payment amount is set at about 30% to 100% of the fixed basic
compensation, commensurate with the scale of job responsibilities
・The number of shares delivered is determined depending on the level of achievement of
performance goals for the covered period (three fiscal years)
・Consolidated operating margin and consolidated ROE have been adopted as the indicators forevaluating business performance
・The remuneration system is designed to be more consistent with the expected role of giving advice
to management from the perspective for increasing corporate value over the medium to long term
・Standard amounts are set at about 50% to 60% of the fixed basic compensation to ensure anadequate balance between cash compensation and stock-based compensation
・Provided in the form of share delivery after the covered period (three fiscal years) has passed

Advanced Initiatives Relating to Director Compensation⚫Shareholding Guidelines
We have established the Shareholding Guidelines (effective July 1,2021) to further ensure that management’s interests align withthose of stakeholders in pursuit of sustainable enhancement ofcorporate value. We have set targets for management to holdcompany shares equal to the following within five years after theeffective date of the guidelines or appointment.
CEO
Inside Directors
Corporate Officers
Outside Directors
Executive Officers

51 TOKYO ELECTRON Integrated Report 2022

3 times
Fixed basic compensation(annual amount)

2 times
1 time1 time⚫Clawback Policy
We have enacted a clawback policy (effective July 1, 2021)
whereby we can demand a refund of annual performance-linked
compensation and medium-term performance-linked
compensation if financial figures are found to be in need of majorcorrection due primarily to the willful misconduct of an executive
director or corporate officer.
The amount of compensation subject to refund is the excess
portion of the performance-linked compensation received in thefiscal year in which such misconduct was found as well as thethree preceding fiscal years.

Evaluating the Effectiveness of the Board of Directors
Overview of Evaluations of EffectivenessTo further enhance our governance and the effectiveness of theBoard of Directors, we have conducted annual evaluations of theeffectiveness of the Board since fiscal 2016 and have disclosed
summaries of the results. Since fiscal 2019, we have used external
experts as a third-party organization to verify the status ofinitiatives relating to issues identified in the preceding fiscal year,
identify future issues and work toward continuous improvement.
Evaluation of the Effectiveness of the Board of Directors for
Fiscal 2022
⚫Scope of Evaluation
Board of Directors Overall (including details of the activities of
the Nomination Committee and Compensation Committee)⚫Process
Survey administered to all
corporate directors and Audit &Supervisory Board members

Interviews of all corporate directors
and Audit & Supervisory Board
members by external experts

Report by external experts

Meetings for exchanges of opinions
by outside directors and outside
Audit & Supervisory Board members

Deliberations at internal meetings

Discussion and self-evaluation by the Board of Directors⚫Evaluation Items
The main evaluation items for evaluating effectiveness are
as follows.
• Overall effectiveness of Governance System and the Board of Directors-Roles and functions of the Board of Directors-Size and composition of the Board of Directors-Operational status of the Board of Directors• Composition, roles and operational status of the Nomination
Committee• Composition, roles and operational status of the Compensation
Committee• Further support to outside directors• Roles of Audit & Supervisory Board members• Relationship with investors and shareholders⚫ Fiscal 2022 Initiatives• Reinforcement of continuous deliberation concerning mediumto long-term management strategies
Two off-site meetings were held for in-depth discussions on
growth strategies, the Medium-term Management Plan, thefuture governance system and other issues.
• Promoting diversity and developing and appointing global
human resources
Initiatives and the status of disclosure regarding human capitalare reported to the Board of Directors, and with respect todiversity, the Board discusses, sets and discloses targets for theratio of female managers and implement specific measures.
• Reinforcement of the internal audit system and collaboration
between the Internal Audit Department and the Board of Directors
The status of implementation of internal audits is reported to

the Board of Directors. Also, risk-based audits are conductedpursuant to the audit map.
• Enhancement of information sharing by the Nomination
Committee and the Compensation Committee with the Boardof Directors
The status of activities of the Compensation Committee,
discussion points concerning review of compensation systems,
the status of progress of successor development plan and othermatters are reported to the Board of Directors.
⚫Overview of Fiscal 2022 Evaluation Results
We recognize that the Board of Directors appropriately performs its
roles and obligations, generally with a high level of effectiveness, andthe Board, including the Nomination Committee and theCompensation Committee, functions effectively (the analysis andevaluation by external experts resulted in a similarly high evaluation).
⚫Future Initiatives
Based on the results of the most recent evaluation, we willcontinuously take action regarding the following items and work
to enhance effectiveness even further.
(1) Measures to enhance the effectiveness of the Board of Directors in the
60th fiscal year
-Clarify the division of roles and decision-making authority and ensure
appropriate checks and balances between the executive side and theBoard of Directors-Conduct appropriate operations of the newly established Corporate
Officers Meeting to ensure effectiveness(2) Continuous deliberation by the Board of Directors to achieve growth overthe medium to long term and continuously enhance corporate value-After clarifying specific timeframes (short, medium and long term),
organize targets and strategic themes and risk issues (deepen discussion
relating to medium- to long-term growth strategies)-Continuously address diversity and inclusion(3) Investigate optimal information sharing among members of the Board of
Directors and with the voluntary committees-Ideal state of information sharing on the activities of the Nomination
Committee with the Board of Directors-Establish venues for exchanges of opinions among outside directors andoutside Audit & Supervisory Board members

Main Topics for the Board of Directors and Off-site Meetings
in Fiscal 2022
CEO・Reports on status of business execution by CEO (each meeting)・Sharing of CEO missions
・Market environments over the medium to long term and our growthplans
Medium- to
Long-term ・New Medium-term Management Plan and future growth strategies
Growth・Expansion and reinforcement of development and production facilities
Strategies
in Japan and overseas
・Business innovation projects

Risks

・Improvement of risk management processes
・Legal affairs and compliance
・Procurement risks

・Future governance system and decision-making processes
・Action policies concerning sustainability and diversity
・Reports on investment in human capital and intellectual property
activities
・Reports on internal audits
Governance ・Status of investment targets and cross-shareholdings and status of
IR activities
・Status of the activities of the Compensation Committee
・Status of progress of successor development plan・Closed session on evaluation of representative directors(corporate directors, excluding representative directors, and Audit &Supervisory Board members; once a year)

TOKYO ELECTRON Integrated Report 2022

52

Value Creation by the Value Chain

Chapter 3

Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Skills Matrix
We define “Product Competitiveness,” “Customer
Responsiveness,” “Higher Productivity” and “Management
Foundation,” which supports our overall business activities, as
material issues.
We will address priority themes relating to each material issue

Directors, Audit & Supervisory Board Members and Corporate Officers (As of July 1, 2022)
and achieve expansion of medium- to long-term profit andcontinuous corporate value enhancement by each corporate
director and Audit & Supervisory Board member demonstrating
their skills in global business, governance, sustainability and inparticular, the areas listed below.

Directors

Expected Skills
Name

Corporate
Directors

Corporate
Management

Semiconductor/
FPD

Sales/
MarketingToshiki Kawai

●

●

●

●

Sadao Sasaki

●

●

●

●

●

●

●

●

●

Yoshikazu Nunokawa
Michio Sasaki

Outside●Makiko Eda

Outside●Sachiko Ichikawa

Outside●Finance,
Accounting/Engagement with
Capital Markets●

Kazushi Tahara
Kyosuke Wagai

OutsideMasataka Hama

OutsideRyota Miura

OutsideLegal Affairs/
RiskManagement

Toshiki Kawai

Sadao Sasaki

Yoshikazu Nunokawa

Representative Director
President & CEO
Corporate Officer

Representative Director
Senior Executive Vice President
Corporate Officer
President & Representative Director,
Tokyo Electron Technology Solutions
Ltd.

Corporate Director
Chairman of the Board of Directors

Michio Sasaki

Makiko Eda

Sachiko Ichikawa

Outside Director
Director and Vice President,
SHIFT Inc.
Outside Director,
ZUIKO CORPORATION

Outside Director
Chief Representative Officer,World Economic Forum Japan
Outside Director,
FUJIFILM Holdings Corporation

Outside Director
Partner, Tanabe & Partners
Outside Director, OLYMPUS CORPORATION
Statutory Auditor,
The Board Director Training Institute of Japan

●

●

●

Yoshiteru Harada
Audit &
Supervisory
Board
Members

Manufacturing/
Development

●

●

●

●

●

●

●
●

●

●

●
●

Audit & Supervisory Board Members* Definition of Expected Skills
Corporate Management
Semiconductor/FPD
Manufacturing/Development
Sales/Marketing

Experience of corporate management (experience serving as a representative director or chairman/president)
Knowledge of semiconductor/FPD-related industries
Knowledge/experience in manufacturing and development at Tokyo Electron and other manufactures
Knowledge/experience in sales and marketing at Tokyo Electron and other manufactures

Finance, Accounting/Engagement with Capital Markets

Knowledge in financial accounting and M&A, or knowledge/experience in engagement with capital markets

Legal Affairs/Risk Management

Knowledge in legal affairs, compliance and risk management

Yoshiteru Harada

Kazushi Tahara

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Kyosuke Wagai

Masataka Hama

Ryota Miura

Outside Audit & Supervisory Board
MemberRepresentative, Wagai CPA OfficeOutside Audit & Supervisory Board Member,
Mochida Pharmaceutical Co., Ltd.

Outside Audit & Supervisory Board
MemberOutside Director,
Nissay Asset Management Corporation

Outside Audit & Supervisory Board Member
Partner, Miura & Partners Legal Profession Corporation
Corporate Auditor, TECHMATRIX CORPORATION
Outside Director, Eisai Co., Ltd.

Tatsuya Nagakubo

Seisu Ikeda

Yoshinobu Mitano

Takeshi Okubo

Corporate Officer

Corporate Officer

Corporate Officer

Corporate Officer

Diversity of Board Members
Expected Skills of Corporate Directors and Audit & Supervisory Board Members

Independence and Diversity of Corporate Directors(Unit: persons)

6

Corporate Management

6

Semiconductor/FPD
Manufacturing/Development

5

Sales/Marketing
Finance, Accounting/Engagement with Capital Markets
Legal Affairs/Risk Management

5

53 TOKYO ELECTRON Integrated Report 2022

6
4

Independent Outside Directors

3/6
2/6

Female Corporate Directors(Unit: persons)

Corporate Officers

TOKYO ELECTRON Integrated Report 2022

54

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Messages from Outside Directors

Michio Sasaki

Makiko Eda

Independent Outside Director (Nomination Committee Chairman)

Independent Outside Director

Contributing with an awareness of priorities,balance and speed to expand profits andincrease corporate value

Fostering a culture that embraces diversity
and nurturing it to become a strength that isa part of the company’s DNA

Tokyo Electron’s corporate culture, Corporate Philosophy, Management Policies and TEL Values, which are one of thesources of its competitiveness, are clearly reflected in the Board of Directors, and there is an open, candid and active
exchange of opinions. I believe that carefully listening to the opinions of outside directors and Audit & Supervisory Board
members, speedy and high-quality execution and organizational values have contributed to high evaluations of theeffectiveness of the Board of Directors every year.
The explanation of business performance and other important matters in the CEO reports at each Board of Directors
meeting is detailed, easy to understand and helpful in gaining an overall understanding. Off-site meetings are alsovaluable opportunities to deepen understanding of matters such as medium- to long-term management strategies anddevelopment investments through in-depth explanations and discussions, so I would like the company to continue thesegoing forward.
I would like to utilize the management experience I have accumulated in the development and manufacturing industry
until now as well as my current experience in the IT industry to continue to contribute as an outside director. I would liketo do this with a particular awareness of whether our priorities, balance and speed are optimized in order to expand profit
and improve corporate value, including ESG, SDGs, development investment, DX, human resource development and risk
management such as security in order to achieve our new Medium-term Management Plan.

Discussions at Tokyo Electron’s Board of Directors are open, fast-paced and lively. I expected Japanese companies to place
more of an emphasis on formality, but Tokyo Electron is completely different. Things that need to be discussed are
discussed with the necessary depth and internal discussions are becoming more transparent. In my participation in the
Board of Directors meeting over the past few years, I have seen that Tokyo Electron is a lively company that continues to
evolve, learn and embrace new opportunities to grow without any hesitation.
As the company continues to grow, it is essential to be able to incorporate the talents of people from diverse
backgrounds. This was more clearly defined as both a company policy and a growth strategy in 2021. Setting a numericaltarget is just the first step. The true work is in fostering a culture that embraces diversity, building a framework andnurturing this diversity to become a strength that is part of the company’s DNA.
As Tokyo Electron grows rapidly, we must quickly assess and respond to a variety of opportunities and risks.
Semiconductors shape the future, and in this regard, I believe that Tokyo Electron has a significant role to play. From myposition as an outside director, I would like to contribute to Tokyo Electron’s sustainable growth from a medium- tolong-term perspective.

Role of the Nomination Committee
The most important role of the Nomination Committee is selecting candidates for the next CEO and proposing themto the Board of Directors.
The Nomination Committee holds fair and open-minded discussions every month regarding the creation of aframework to select and develop the next CEO who will inherit Tokyo Electron’s excellent corporate culture, which isthe foundation of its growth, and who will achieve both sustainable growth and improved corporate value over the
medium to long term. Specific selection and development frameworks are discussed at the Top Management
Review Meeting (TRM) consisting of the representative director, the executive officer in charge of human resourcesand other members, and attended by members of the Nomination Committee. There, the next generation leader
development PDCA cycle is reviewed and assignments are determined.
In the next-generation leader development program, the cycle is as follows:
1. A succession planning roadmap is established2. Executive officers, division general managers and the Human Resources Department select succession
candidates and continuously update the succession pool
3. Individual development plans for succession candidates are formulated, followed by the person in charge,
capability development through other competitions, and training using TEL UNIVERSITY
4. Review is conducted at TRM
Through this cycle, we reinforce the leadership, on-site skills, judgment, environmental adaptability and sense ofbalance of candidates and promote the continuous development of next-generation leaders.
The Nomination Committee consults with the CEO and selects several future CEO candidates, discussing andformulating a roadmap that follows them on the path to becoming CEO. Through this process, we work with therecognition that it is our responsibility to our stakeholders to propose a leader to the Board of Directors who canrealize Tokyo Electron’s medium- to long-term growth and expansion of profits.

55 TOKYO ELECTRON Integrated Report 2022

Sachiko Ichikawa
Independent Outside Director

Governance has performed well to date;however, governance is never complete andalways requires improvement
The Board of Directors and its members have a responsibility to shareholders and other stakeholders. This responsibility is
not limited to the current fiscal period but rather extends over the medium to long term. Tokyo Electron’s strong
performance in fiscal 2022 despite the difficult economy environment can be seen as a product of its corporate
governance to date.
At Tokyo Electron’s Board of Directors meetings, the words “investor and shareholder reaction,” “time axis” and“alternative scenarios” appear frequently. This shows that the Board of Directors is looking further and wider while
monitoring and supervising the current status of business execution. This perspective is necessary to avoid short-term
bias, closed-minded thoughts and a lack of analysis. This receptive approach to listening has made Tokyo Electron what it
is today. However, governance is never complete and always requires improvement. Furthermore, the level of uncertainty
in the economic environment has increased significantly. The needs of stakeholders are likely different than they havebeen in the past. I will strive to realize a Board of Directors that has an eye on the future, conducts investments andstructure improvements in advance to continue producing good business results, and allows the executive side to fully
demonstrate its abilities when opportunities arise.

TOKYO ELECTRON Integrated Report 2022

56

Value Creation by the Value Chain

Chapter 3

Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Item

Risk Management
Approach to Risk Management
We are building and developing a risk management system torespond appropriately and promptly to risks that are growing
increasingly complex and diverse as society and the businessenvironment change. We identify cross-division andcomprehensive risks across the entire Group to build a solid
financial foundation based on the new Medium-termManagement Plan that is competitive globally. We makedecisions and supervise particularly material risks at the
Corporate Officers Meeting and the Board of Directors, andimplement countermeasures without fail alongside each of theGroup companies and related departments.
We believe accurately understanding the risks and impacts
that we may face in our businesses with an eye on the future,
viewing them as opportunities for business growth andappropriately addressing them are essential to sustainablegrowth as a company that is trusted by society.
Risk Management System
We have established the organization to oversee the entire
Group at our headquarters and carry out enterprise risk
management1 to promote more effective risk management. This
organization, together with the respective departments
responsible for each operation, comprehensively identifies awide range of risks associated with our business activities, suchas compliance, human resource, labor and business continuity,and classifies those with high impact and probability as ourmaterial risks.
In addition to holding management workshops and training
for employees and raising awareness company-wide, we arealso working to strengthen the PDCA cycle and improve theeffectiveness of risk management by formulating and executing
measures to mitigate material risks, monitoring the effect of saidmeasures and holding discussions at major internal meetings.
Specifically, we review the response status of the executive
department and each of the Group companies regarding theidentified material risks at the BUGM meeting, quarterly
Item

1. Market Fluctuations

2. Geopolitics

review meeting and the CSS, etc., and decide a response policy at
the Corporate Officers Meeting. We ensure the operating
rhythm of this procedure and also report periodically to theBoard of Directors.
Additionally, we are continuing to focus on the revision andoperation of our BCP, including responses to COVID-19, and are
rapidly executing business continuity measures.
In fiscal 2021, we introduced CSA2, with each risk owner of theGroup further strengthening risk management in the 13 defined
categories. We will continue to implement autonomous andhighly effective risk management.
1 Enterprise risk management: Group-wide systems and processes related to risk
management activities

Risk Management Initiatives
We have begun to address emerging risks from a medium- tolong-term perspective, going a step further than its conventional
approach of assessing the current risk management state,
identifying known and unknown risks that may surround thecompany in the future and examining mitigation measures.
In fiscal 2022, the 13 risks identified to date were reviewed
and reevaluated from the perspective of their potential to have asignificant impact on our operating results, financial conditionand cash flow. We then pushed forward risk management
initiatives for each identified risk even further.

Main Potential Risks

Main Risk Management Initiatives• A rapid contraction of the semiconductor market could lead to
overproduction or an increase in dead inventory• A sharp increase in demand could lead to an inability to supply
customers with products in a timely manner, resulting in lost
opportunities• Periodically review market conditions and orders received at
the Board of Directors and other important meetings, andappropriately adjust capital investments, personnel/inventory
planning and other aspects of business• The Account Sales Division and the Global Sales Division
strengthen the sales framework and customer base by grasping
investment trends of customers and responding to a wide
range of customer needs• Geopolitical tensions could undermine the international orderand global macroeconomic conditions, affecting national andregional security, foreign, industrial or environmental policy. This
could in turn lead to supply chain disruptions or deteriorationof the macroeconomic environment, restricting the Company’s
ability to operate business• Carefully monitor the international situation as well as the
diplomatic and security measures and industrial policy trends ineach country and region• Anticipate the impact of macroeconomic fluctuations andregulations related to product imports/exports or technologicaldevelopment on the Company’s business and consider
countermeasures in advance57 TOKYO ELECTRON Integrated Report 2022

Main Risk Management Initiatives• Establish the Corporate Innovation Division and build a Groupwide development framework that integrates innovativetechnology development with the technologies of eachdevelopment division• Provide highly competitive next-generation products aheadof competitors by collaborating with research institutions andsharing a technology roadmap spanning multiple generations
with leading-edge customers

4. P rocurement, Productionand Supply• Interruptions in the Company’s production due to a natural
disaster or delays in component procurement due todeterioration in the business conditions of a supplier or an
increase in demand that exceeds the supplier’s supply capacity
could lead to delays in the supply of products to customers• Formulate business continuity plans, develop alternate
production capabilities, promote the seismic reinforcement ofplants, level production, enhance the backup capabilities for
information systems, use multiple sources of important parts,and maintain appropriate inventory levels• Share forecasts based on demand projections with suppliers
and build a system for the stable supply of products

5. Safety• Safety problems with the Company’s products could lead todamage to customers, liability for damages and a decline in the
Company’s credibility• Based on the “Safety First” approach, place the highest priority
on the safety and health of all people, implement inherently
safe design with an awareness of risk reduction at the productdevelopment stage, promote safety training, and establish an
accident reporting system• The occurrence of a product defect could lead to liability fordamages, costs for countermeasures and a decline in the
Company’s credibility• Establish a quality assurance system and a world-classservice system• Resolve technical issues from the product development anddesign stage• Investigate the cause of any defects and implement measures
to prevent the same or similar defects from occurring• Monitor the quality status of suppliers, conduct audits andprovide support for improvement• Violations of the laws and regulations of the countries andregions where the Company operates could lead to diminishedpublic confidence in the Company, fines, liability for damages or
restrictions on business activities• Monitor compliance activities at key sites in and outside Japan
under the direction of the Chief Compliance Officer• Have assessments conducted by external experts and report
identified issues to the CEO, the Board of Directors and the
Audit & Supervisory Board for swift and effective action• The inability to obtain exclusive rights to proprietary technologies
could lead to reduced product competitiveness• Infringement of the intellectual property rights of third parties
could lead to restrictions on the production and sale of products
as well as liability for damages• Advance the intellectual property strategy, business strategy
and R&D strategy in an integrated manner to build an
appropriate intellectual property portfolio• Breaches of information or the suspension of services due
to unauthorized access by cyberattack, natural disasters orother factors could lead to diminished public confidence in the
Company or liability for damages• Launch a dedicated security organization and establish an
information security system that conforms to international
standards by having security assessments conducted byexternal experts, etc.
• Establish globally standardized rules and regulations for
information management and implement response guidelines• The inability to recruit and retain necessary human resources on
an ongoing basis or the inability to create an environment where
people with diverse values and expertise can play an active role
could lead to diminished product development capability or
customer support quality• Make continuous improvements to work environments andpromote diverse work styles as well as health and productivity
management (e.g., sharing our visions by management,
establishing training plans for human resource who will leadthe future, visualizing career paths for employees and offering
attractive remuneration and benefits)• The inability to respond appropriately to each country’s climatechange policies, environmental laws and regulations, andcustomer needs could lead to additional related costs such as
for developing new products or changing specifications, as wellas to reduced product competitiveness and diminished publicconfidence in the Company• To achieve industry-leading medium- to long-term
environmental goals that include the net zero target,
implement measures such as reducing greenhouse gas
emissions from the use of our products, increasing the rate ofrenewable energy usage at plants and offices, reducing overall
power consumption, reviewing packaging materials, andpromoting a modal shift• Provide technologies, etc., that contribute to higher
performance and energy efficiency of semiconductor devices
through implementation of our E-COMPASS initiative• The spread of COVID-19 could slow the Company’s businessactivities or lead to a global economic downturn• Establish an Emergency Task Force headed by the CEO• Restrict travel to high infection-risk countries and regions,maintain supply chains and thoroughly implement infection
prevention measures at plants and offices• Business could be influenced by the global and regional politicallandscape, economic environment, financial and stock markets,foreign exchange fluctuations and other factors• Take appropriate measures to counter such risks

3. Research andDevelopment

2 CSA: Control Self-Assessment. Internal risks and controls are evaluated andmonitored by those who are actually performing the duties with the goal ofbuilding and maintaining an autonomous risk management system.

Auditing by the Internal Audit Department
The Global Audit Center serves as the internal audit department
for the entire Group, conducts audits based on plans, provides
instructions and support for making improvements to issues andconfirms the progress of these improvements.
The Group’s internal control over financial reporting during
fiscal 2022 was evaluated as effective by the independent
auditors, the same as in the previous fiscal year.

Main Potential Risks• Delays in the launch of new products or the mismatch of suchproducts with customer needs could lead to a decline in thecompetitiveness of products

6. Quality

7. Laws and Regulations

8. Intellectual Property
Rights

9. Information Security

10. Human Resources

11. Environmental Issues

12. Novel Coronavirus(COVID-19)

13. Other Risks

TOKYO ELECTRON Integrated Report 2022

58

Value Creation by the Value Chain

Chapter 3

Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Information Security

Compliancetransformation and other measures, and actively promotemeasures that protect the entire supply chain from the risk ofcyberattacks that target companies.

As the data-driven society advances and the importance of
information security increases, we aim to achieve both datautilization and information security by promoting digital
Main Activities
Information Security Systems

Security at Manufacturing Sites

The Vice President and General Manager,
Information Security, run the Security Committee
and implement measures on a global scale. We holdthe TEL Group Information Security Committee
twice a year, and Information Security Committees
at each company more than twice a year.

We implement security measures at eachmanufacturing site to ensure that the
manufacturing systems that support our businessactivities are operating safely and stably while
maintaining QCD1.

Information Security Management

Supply Chain Security

We established global information security rules,
and conduct security education twice a year andphishing email training every month for all
executives and employees. We hold seminars twicea year to share the latest situation to all Group
members. In addition, we implement risk
assessments and internal audits for eachdepartment of the entire Company to identify risks
and strengthen technological, human,organizational and physical security measures.

We respond to customer requests for security andmonitor the security status of our suppliers toensure that confidential information andinformation on our customers and suppliers that isshared in the course of business activities can beused safely without a loss of convenience.

Increasing Resilience
We operate a system that can detect theoccurrence of security incidents. We confirm
pre-determined procedures so that we can do theright actions for a swift response and recovery byimplementing incident response training. We also
implement a penetration test2 once a year to verify
system vulnerabilities.

Responses to Security Threats
We have proactively introduced advanced
technology and established a dedicated security
organization to build a robust monitoring system inorder to respond to security threats such as
cyberattacks and information leaks.

24

Approach to Compliance
To practice Tokyo Electron’s Corporate Philosophy, it is vital thateach employee performs their daily duties with strong interest in
and a deep understanding of compliance. We established “Tokyo
Electron’s Code of Ethics” as a code of conduct to ensure that ouremployees are aware of the risks around them and conduct
themselves appropriately. We have built a global system that candirectly raise questions and concerns about compliance andbusiness ethics to quickly address potential problems.
Compliance System
In order to effectively promote a compliance program that is
expected of a global company, Tokyo Electron has appointed a
Chief Compliance Officer (CCO) and established a dedicatedCompliance Department at its headquarters. Additionally, thepersons responsible for compliance who called Regional
Compliance Controllers have been appointed at key overseas
sites, an operation for direct reporting to the Chief Compliance
Officer and Compliance Department.
Compliance Initiatives
Business Ethics
Tokyo Electron has established the Business Ethics Committee topromote and raise awareness of compliance and business ethics
more effectively together with implementing “Tokyo Electron’s
Code of Ethics” as the standard of conduct for all executives andemployees. We have also set up the Disciplinary Committee as asubordinate organization of the Business Ethics Committee toensure the implementation of reasonable and appropriate
disciplinary action and proper procedures. In addition, throughregular meetings with each of the Group companies, we discussand implement measures to promote compliance.

Initiatives for Anti-Bribery and Corruption and forCompetition Laws
We have globally established the Basic Policy on the Preventionof Bribery and Corruption and the Guidelines for Gift, Hospitality,
and Entertainment in the area of anti-bribery and corruption,and the Basic Policy on Competition Law Compliance andGuidelines in the area of competition laws. In order to prevent
violations, we regularly provide training to promote
understanding and awareness of these Policies and Guidelines
as well.
Internal Reporting System
Preventing problems from occurring and resolving them quickly
when they occur requires a system that allows employees toraise questions and concerns about business ethics andcompliance without reservation or hesitation and to discussthem fully. We have established an internal reporting systemthat ensures complete confidentiality, anonymity and theprohibition of retribution, so that employees can safely andreassuringly provide information and seek redress outside thechain of command about behavior that is, or may be, in violationof laws, regulations or business ethics.
Specifically, we have established and are operating the Tokyo
Electron Group Ethics & Compliance Hotline—a global common
internal point of contact that uses a third-party system that is
also accessible to our suppliers—as well as an external point ofcontact that allows direct consultation with an outside law firm.
The internal point of contact can be accessed via phone or a
dedicated website 24 hours a day, 365 days a year, andaccommodates all languages used by employees.

1 QCD: Quality, Cost, Delivery
2 Penetration test: A test method for verifying vulnerabilities in networks, PCs, servers and systems.

Global Response to Internal Reports

Overview of Information Security
Mechanisms that support
information security activities
Vice President andGeneral Manager,
Information Security

TEL Group Information
Security Committee

Day-to-day activities implemented globally

Systems established in preparation for
emergencies

Tokyo Electron

Security Monitoring Organization

Information Security Management
Responses to security threats

Early detection ofsigns of potential
attacks

Report/Consult

Progress/Results Report

Information
Providers

Human/Organizations

Technology

PhysicalMinimization ofdamage when an
incident occurs

24

NoticeInternal Pointof Contact

Progress/Results Report

Follow-up
Redress

Incident Response Organization
Information Security
Committees at eachcompany

Board of Directors
Audit & Supervisory Board Member

Third-party System

Report/Consult

Progress/Results Report
Follow-up

External Pointof Contact(Outside Law Firm)

ReportComplianceDepartment/
Legal, Compliance
Division of each
Overseas
Subsidiary

ReportRepresentative Director, President & CEO
GM of Legal, Compliance Unit
Chief Compliance Of f icer

Report/Consult

Request for Investigation/
Corrective and Preventative Action

Report/Consult

Progress/Results Report

Relevant Divisions, etc.

Strengthen/Improve

59 TOKYO ELECTRON Integrated Report 2022

Plan

Do

Act

Check

Supply Chain
Security
Customers

Suppliers

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Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Reports and consultations received via these points of contact
are handled with sincerity and investigations are undertaken inaccordance with internal regulations. If a compliance violation isfound, disciplinary action is taken in accordance with the Rules of
Employment*, and preventive measures and corrective
measures, such as improvements to the workplace environment,
are implemented as necessary.
In fiscal 2022, a total of 95 cases were received via the internalreporting system, of which 19 were recognized as complianceviolations. The reports and requests for advice primarily related toharassment and the workplace environment. Based on this result,
we have conducted regular education programs for our
employees with the goal of preventing harassment and haveprovided thorough follow-up with those concerned or involved.
There were no reports or cases of non-compliance that could
have had a serious impact on our business or on local communities.

Breakdown of Consultation/Report Contents

Recognition Program⁸.
Regarding our IR activities, we received “the Best IR Award,”
and were selected as the “Most Honored Company”.
The Tokyo Electron Integrated Report 2021 was selected as an“Excellent Integrated Report” by the Government Pension
Investment Fund (GPIF)’s external asset managers entrustedwith domestic equity investment.

Workplaceenvironment
29%

Other
27%

Fiscal 2022
Gift/Entertainment 2%
Company asset 2%
Sexual harassment 3%
Information security/Intellectual property 5%

Abuse of authority
24%

Safety/Environment 8%* A leniency system has been introduced whereby any disciplinary action may
be reduced or exempted in the event the employee involved in a complianceviolation has made a report or sought advice on their own volition.

1D
 JSI: Dow Jones Sustainability Indices. An ESG investment index of S&P Dow Jones Indices LLC. The DJSI Asia Pacific covers companies in that region.

Engagement with Capital Markets
Our management actively engages in IR (investor relations) andSR (shareholder relations) activities to contribute to oursustainable growth and increase corporate value over the
medium to long term.
For IR activities, in addition to quarterly earnings conferences,
the CEO and each company’s executive appear at Medium-termManagement Plan announcement and IR Day events to share
our business strategies and growth story. Simultaneousinterpretation and subtitles are used to broadcast briefings inJapanese and English in an effort to provide fair disclosures tooverseas investors. The IR Department, which was establishedunder the direct control of the CEO, also supplements
explanations as appropriate through individual interviews andregularly reports opinions from investors to management andthe Board of Directors so that feedback can be of use inmanagement. In addition, we actively participate in IR and ESG
conferences in Japan and overseas and encourage dialogue withcapital markets through the cooperation of company executives
and the IR Department to gain a deeper understanding of theGroup. In fiscal 2022, we received a Best IR Award from Japan

2 FTSE4Good Index: An index related to environmental performance and corporate social responsibility developed by FTSE Russell.

Investor Relations Association and were selected as a Most
Honored Company by Institutional Investor magazine in the U.S.
for the seventh consecutive years.
As a part of our SR activities, company executives play acentral role in constructive dialogue with our major investors andproxy advisory firms. In addition to explaining the Shareholders’Meeting agenda in advance, we engage in repeated dialogue
throughout the year on a wide range of topics including
corporate governance, our policies about sustainability-related
initiatives, the environment, human rights, and diversity anddeepen mutual understanding.
To encourage active discussion and facilitate smooth andefficient voting at Shareholders’ Meetings, we send convocation
notices at an early stage, and also post notices in both Japaneseand English on our website prior to sending notices and takeother measures to provide information to shareholders in atimely manner. In addition, we analyze the results of the exercise
of voting rights, report to the Board of Directors, and use theresults to further enhance engagement with investors.

3 MSCI World ESG Leaders Indexes: Companies that have high ESG performance are selected from the MSCI Global Sustainability Index, an ESG investment index developed by
Morgan Stanley Capital International (MSCI). Please refer to the link for the logo’s disclaimer. www.tel.com/sustainability/review.html
4 Euronext Vigeo World 120 Index: An index selected by NYSE Euronext and Vigeo Eiris composed of 120 companies that excel from an ESG perspective.
5 STOXX Global ESG Leaders indices: STOXX, a subsidiary of Deutsche Börse, selects companies that meet its evaluation standards based on the results of research from the
ESG research company Sustainalytics.
6 S ustainalytics’ ESG Risk Ratings: An ESG risk measured for institutional investors by Sustainalytics in the Netherlands. The rating is based on a company’s exposure toindustry-specific material ESG risks and how well a company is managing those risks. Copyright ©2022 Sustainalytics. All rights reserved. This article contains information
developed by Sustainalytics (www.sustainalytics.com). Such information and data are proprietary of Sustainalytics and/or its third party suppliers (Third Party Data) andare provided for informational purposes only. They do not constitute an endorsement of any product or project, nor an investment advice and are not warranted to becomplete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions available at https://www.sustainalytics.com/legal-disclaimers.
7C
 orporate Governance of The Year®: Carried out by the Japan Association of Corporate Directors since 2015 with the endorsement of the Ministry of Economy, Trade andIndustry and other organizations to encourage companies that practice sound corporate governance to attain medium- to long-term growth.
8C ertified Health & Productivity Management Outstanding Organizations Recognition Program: The program publicly recognizes particularly outstanding organizations thatare practicing health-oriented business management, based on initiatives attuned to local health-related challenges and toward health promotion initiatives led by the
Nippon Kenko Kaigi.

Participation in Global Initiatives
We participate in a variety of global initiatives and promote sustainability in our business activities.

United Nations Global Compact

The United Nations Global Compact (UNGC) is a global initiative that promotes sustainability,
proposed by ex-UN Secretary-General Kofi Annan at the 1999 World Economic Forum. We signed
onto the UNGC in 2013 and are working to contribute to the realization of sound globalization anda sustainable society in accordance with its Ten Principles in the areas of Human Rights, Labor,
Environment and Anti-Corruption.

Responsible Business Alliance

The Responsible Business Alliance (RBA) is a global initiative promoting supply chain sustainability
focused on the electronics industry. We joined the RBA in 2015, and as a member company, we work
together with suppliers to ensure compliance with the RBA Code of Conduct comprised of fivesections: Labor, Environment, Health and Safety, Ethics and Management Systems.

Task Force on Climate-related
Financial Disclosures

In 2020, we expressed our approval of the recommendations offered by the Task Force on Climaterelated Financial Disclosures (TCFD*). We are conducting ongoing disclosures and discussions basedon the framework of governance, strategy, risk management, metrics and targets relating to the risks
and opportunities that climate change presents to our overall business.

Evaluation from Third-party Institutions
Our sustainability initiatives have allowed it to continue to be
selected as a constituent stock under leading global ESG
investment indices, including the DJSI1 Asia Pacific Index,
FTSE4Good Index2, MSCI World ESG Leaders Indexes3, Euronext
Vigeo World 120 Index4 and STOXX Global ESG Leaders indices⁵.
At the same time, we were evaluated as a low-risk company in
Sustainalytics’ ESG Risk Ratings6.
In 2021, we were selected as a prestigious A List company in

61 TOKYO ELECTRON Integrated Report 2022

the water security category of a survey conducted by the CDP,
and won recognition as the “Grand Prize Company,” an award
given to the most outstanding company, in the Corporate
Governance of the Year®7 2021 program sponsored by the Japan
Association of Corporate Directors.
Additionally, the entire Group in Japan received recognition as
top 500 companies under the 2022 Certified Health &Productivity Management Outstanding Organizations* Refer to Initiatives Related to Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) on p. 39

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