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 our company’s characteristics, and is continuing
to create value through sustainability initiatives and a series of business activities.

Research andDevelopment

Procurement andManufacturing

P. 27

Installation and
Maintenance Services

Sales
P. 31

P. 29

P. 33

Overview

Overview

Overview

Overview

 Development of innovative and unique Establishment of stable production capabilities

 Be the sole strategic partner for customers by Deploying the Best Technical Service with high

 Proposals on optimal solutions that contribute Strengthening of our global support structuretechnologies for creating high-value-added,
next-generation products that will be neededby customers in the future

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

high-reliability, safe and environmentfriendly products

 Continuous development that looks into the

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

providing the Best Products and BestTechnical Service

added value in a prompt and appropriatemannerto the creation of value for our customers

to provide advanced field solutions that solve
customers’ issues

 Creation of value through partnerships

with suppliers

Differentiation Points

Differentiation Points

Differentiation Points

Differentiation Points

 Optimization of R&D by maintaining close Business expansion based on relationships of Early comprehension of the needs of Field engineers who are highly specialized andcollaboration between the Corporate
Innovation Division and the development
divisions at individual sites

mutual trust with suppliers who possess highquality and technological capabilities World-class manufacturing operations

through the use of our manufacturingknow-how, knowledge and the equipment
data we have accumulated over many years

 Development of leading-edge technologies

through various types of collaboration withconsortiums and academia in Japan and overseas Pursuit of development efficiency and new

possess broad knowledge

 Providing highly efficient and high-quality

services by a remote maintenance service, etc.

 Ability to suggest solutions by taking advantage

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

 Aiming for productivity and efficiency byvalue creation by promoting digitaltransformation (DX)customers based on a solid relationship ofmutual trust and incorporating those needs
into product development

creating production systems that respondswiftly to market fluctuations

knowledge management and utilizing AI,
digital technology, etc.

 Continuous initiatives to improve thecustomer satisfaction level

Value Created

Value Created

Value Created

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

 High-value-added products incorporating Comprehensive services that include

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

 Products that address a variety of applications, Contribution toward the long-term steady Customer responsiveness based on the High-quality technical services that contributetechnologies

innovative technologies by simultaneous
parallel evaluation of four technology nodes

incorporating leading-edge technologies

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

further improving the accuracy of the
production plan and increasing the efficiencyof manufacturing operations

 Equipment technology that increases

environmental performance Safety-first operation

everything from equipment delivery to
post-sale maintenanceas well as used equipment and re-engineered
equipment

operation of equipment across many
generations

deployment of global operations* Throughput: Ability to process wafers over a unit of time

to improving customers’ productivity

Sustainability Initiatives in the Value Chain
� Environment� SafetyP. 35

� Continuous Improvement of Business Operations
� Information Security

25 TOKYO ELECTRON Integrated Report 2021

P. 51

� Human Rights

P. 37
P. 42

� Corporate Governance� Engagement with Capital Markets

P. 52

� Supply Chain Management

P. 37
P. 43

� Compliance

P. 39

P. 48

� Evaluation from Third-party Institutions

� Human Resources

P. 40

� Risk Management

P. 49

� Quality

P. 41

P. 52

TOKYO ELECTRON Integrated Report 2021

26

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

We are taking on the challenge of developing our own unique technologies through 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.
to long-term development strategies and progressing various
types of basic and elemental R&D toward the next growth phase.
Additionally, we are continuing to develop technologies that will
help customers create value through worldwide collaboration
with domestic development bases as the core as well as throughstrengthening our R&D capabilities through alliances with outside
consortiums, research institutes and academia.

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: A method that tests performance and quality from an early stage of the development life cycle to reduce reworking in the latter stages

Management Resources to Be Invested
R&D investment
over three years, beginningin fiscal 2020
More than400

billion yen

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)

Primary Management Indicators
Cost of development andreturn (ROI)

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Research and Development
研究開発

We are creating innovative and unique technologies for
manufacturing leading-edge semiconductors and flat panel
displays (FPDs) by ascertaining technological and market trends aswell 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-Sales

New products fornext-generation technologies
as a percentage of all
equipment models

Reduction in CO₂emissions from products

Main Research and Development Initiatives
Strengthening Research and Development Capabilities
One of the important themes that we uphold is continuous
creation of high-value-added, next-generation products thatwill be needed by customers in the future. To make this happen,
we have a duplex structure for development. The development
divisions at individual sites and the Corporate Innovation
Division jointly promote both the progress and improvement oftechnology in both the areas they manage and newer areas,collaborating where necessary while maintaining theirrespective individuality.
The development divisions at individual sites are focusing on
improving functions in the product areas they manage as well as inperipheral areas, and also developing technologies and systems to
be installed in products intended for use in manufacturing vastly
evolved future-generation semiconductors and FPDs.
The Corporate Innovation Division works closely with thedevelopment divisions at individual sites to maintain consistency
in each product area and focuses on further high-value addition by
optimizing research and development while maintaining a bird’seye view of the entire development structure. At the same time,the division is also engaged in a search for potential growth areas,
as well as in research and development of fundamental
technologies toward creating new value in the future.

Global Alliance
To promptly comprehend leading-edge technological trends andlink them to stronger R&D capability and productization, we areadvancing various types of collaboration with consortiums andacademia in Japan and overseas.
With research institutes and universities in Japan, we are
primarily developing basic and fundamental technologies. In
Europe, we are conducting joint research at leading-edge
research facilities at some of the world’s largest international
institutes, in an effort to develop leading-edge processes,
including next-generation patterning technologies. In the UnitedStates, we are participating in a consortium specializing in
nanotechnology and are conducting joint research on newgeneration AI chips, neuromorphic devices modeled after humanneural circuits, and three-dimensional stacking technology,
which is attracting attention as a new integration technology.

We are actively deploying the leading-edge technologies
established through these activities to our company’s R&D,
helping our customers bring to fruition the cutting-edge devices
they are working on.
(As of March 31, 2021)
Tokyo Electron Development Sites
Consortiums

Tokyo Electron
Technology Solutions1
Tokyo Electron Kyushu2
Tokyo Electron Miyagi

TEL Magnetic
Solutions TEL
Technology
imecCenter Korea
CEA-Leti

TEL Manufacturing andEngineering of America3

TEL Technology
Center, America
CNSE
BRIDG

National Institute of Advanced
Industrial Science and Technology

IME
1 Tohoku Office, Hosaka Office, Fujii Office
2 Koshi Office, Ozu Office
3 Chaska Office, Chelmsford Office

TEL Technology
Center, Taiwan

Promotion of Digital Transformation (DX)
Sustainability Initiatives
� Initiatives related to product environment  P. 35

Medium- and Long-term Environmental Goals

� Future-oriented development of environmental technologies
P. 36

Initiatives Related to Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)

� Structure to promote innovative development that takes advantage of global diversity
� Development efficiency improvement through the promotion of DX

P. 42

P. 40

Diversity and Inclusion

Continuous Improvement of Business Operations

Risk Management Initiatives
Main Risks

27

Research andDevelopment

Declining productcompetitivenessIntellectual
Property Rights

Declining productcompetitivenessOccurrence of liability
for damage

Human
Resources

Diminished product development
capability or
customer support quality

TOKYO ELECTRON Integrated Report 2021

Initiatives
� Established the Corporate Innovation Division, and built a Group-wide development framework that integrates

innovative technological development with the technologies of each development division� Provide highly competitive next-generation products ahead of competitors through collaborating with research

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

an appropriate intellectual property portfolio

Prioritizing DX as an important means for continuing to provide
new value to customers, we are promoting it company-wide.
Tangible results are definitely showing up in research anddevelopment, including the realization of remote support using
AR technology. We are also advancing initiatives targeted atproviding new value to customers, such as the search for new
materials and achievement of process optimization at
overwhelming speeds by utilizing materials informatics.
In 2020, we opened TEL Digital Design Square, a DX-focusedsite, in Sapporo, Japan. We are establishing an environment inwhich data scientists can thrive, and are also providing educationand training on DX knowledge and methods to support engineers
in the individual divisions in creating innovation in their work.
We plan to continue promoting DX and the utilization of things
such as AI in solving a variety of issues and developing functions, andto advance the development and provision of products, such as
production equipment that analyzes its own operating conditions
and makes functional enhancements and operating efficiency
improvements, that are equipped with innovative functions.
Development Activities
Equipment
software

DigitaltransformationAI
applications

� Make ongoing improvements to work environments and promote health and productivity management, including

having top management share direction through regular employee meetings, establishing training plans for the
next generation of human resources, visualizing career paths for employees and offering attractive remuneration
and benefits

TOKYO ELECTRON Integrated Report 2021

28

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

Main Procurement and Manufacturing Initiatives

Along with striving to build a sustainable supply chain, we have establisheda system for manufacturing high-quality products more efficiently.

Initiatives with Suppliers

To ensure stable and sustainable procurement, we carry out
CSR and BCP assessments throughout the supply chain based on
industry codes of conduct, as well as share knowledge* with our
suppliers regarding safety, quality, the environment andcompliance. We value fair and transparent relationships with our
suppliers and aim to grow alongside them and contribute tosociety on a global level through firm relationships based on trust.
* Knowledge: Value-added information such as experience and know-how that isbeneficial to a company

Key Themes for Medium- to Long-term Value Creation
 Creating production systems and capabilities 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 ROEManagement Resources to Be Invested
Many years of know-how(people and products)

Firm trust-based
relationship

Product Lifecycle Management System*
based on the latest
digital technology

in semiconductor/FPD
manufacturingwith our suppliers*A system for improving operational
efficiency and profitability acrossthe entire product life cycle

Primary Management Indicators
Direct and indirect
manufacturing costs

Procurement
stockout rate

Production lead times

Sustainability Initiatives
� Quality control in manufacturing  P. 41

Quality� Promoting sound supply chain management based on industry codes of conduct

P. 39

Supply Chain Management

� Initiatives for reducing CO2 emissions and using renewable energy at plants and offices
P. 35

Medium- and Long-term Environmental Goals

� Shortening of production lead times and levelingP. 42

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 incredibility

Quality

Occurrence of costs for countermeasuresof a product defect and a decline incredibility

Environmental
Issues

Initiatives
� Formulate BCPs, establish alternate production capabilities, develop multiple sources of important parts,

Procurement,
Production and
Supplyseismically reinforce plants, etc.

� Build a system for the stable supply of products by sharing forecasts based on demand projections with

suppliers to ensure the early procurement of parts and production leveling

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

29 TOKYO ELECTRON Integrated Report 2021

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Procurement and Manufacturing

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 production
systems that can respond swiftly to market fluctuations, as well
as strengthening and leveling of production capacity.

Sales� Based on the “Safety First” approach, thoroughly implement safety design at the product development

stage, promote safety training and establish a reporting system in the event of an accident� 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� Set industry-leading medium- to long-term environmental goals� Reduce greenhouse gas emissions from product use. Reduce overall energy consumption and increase

the ratio of renewable energy used at plants and offices� Provide technologies that help reduce the power consumption of semiconductors

In addition to conducting STQA* when beginning transactions
with new suppliers, we conduct annual surveys with regard to
CSR, BCP, conflict minerals and environmental laws andregulations, and we work with our suppliers to promote
improvement activities based on the survey results. We also holdproduction update briefings and TEL Partners Day on a regularbasis to create opportunities to share market trends, ourmanagement policy and business policies, and CSR initiatives
with our suppliers.
Procurement policies based on each country’s laws andregulations, social norms and industry codes of conduct are
disseminated internally and externally to relevant parties, andcompliance is encouraged. In addition, as a BCP measure, we havecreated a database of manufacturing sites for procured items andhave established a system that enables us to quickly confirm thedamage sustained in the event of a disaster and promptly begin
restoration activities. We are also striving to improve the quality ofprocured items by clarifying the required specifications foressential parts and units, identifying and improving parts with highnon-conformance rates and auditing suppliers’ quality systems.
STQA Activity Model
Unit
A

Supplier
selection

Improvement
report review

Creating
improvement
plan

Selfassessment

On-siteaudit

Social responsibility(CSR/RBA/Environment/Safety)

Unit
B

Improvements (cost reduction)

Unit
C

General quality

Unit
D

Individual process management* STQA: Supplier Total Quality Assessment. An assessment that focuses on industry
codes of conduct, cost reduction/higher productivity and quality.

Manufacturing Operations
We have key manufacturing sites in Japan. We are constantly
striving to innovate in production and further improve
profitability while engaging in the strategic development ofworld-class manufacturing operations through the use of ourmanufacturing know-how, knowledge and the equipment data
we have accumulated over many years.
In assembly, adjustment, inspections and other processes, wehave 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. In the manufacturing process, which consists of a
combination of procurement from suppliers and our own
operations, we meticulously control the quality of procured
products and are working to build a resilient supply chain that canguarantee stable procurement. Moreover, each manufacturing site
is working to shorten the transition period from productdevelopment to mass production and improve product quality bystrengthening production capacities, optimizing inventory andreducing management resources involved in mass production andreallocating them to product development.

Tokyo Electron Technology Solutions
New Production Buildings (Left: Tohoku Plant Right: Fujii Plant)

Aiming for Productivity and Efficiency
We are creating a production system that centralizes all
production-related information and can respond swiftly tomarket fluctuations. In addition, we have implemented a coresystem and a manufacturing execution system (MES1) thatutilize the latest digital technology to strengthen our IT
infrastructure and computerize field data. By utilizing theaggregated data in each business operation, we can quickly
collect data needed for business decisions, make production
schedules more reasonable and more efficient, visualize delivery
dates for parts and achieve stronger coordination between sales
planning and production/procurement/inventory planning.
In addition, based on BOM2 information, we have establishedproduction capabilities (flow lines) for performing work in an
accurate and efficient manner according to the schedule
expected by the customer, all while ensuring appropriate
availability of materials and staff. Also, given the nature of ourbusiness, which involves a wide range of parts, we haveintroduced automated warehouses and a warehousing andshipping navigation system, as well as automated inspections tosave on human labor and increase efficiency.
1 MES: Manufacturing Execution System. A system that monitors and controls the work offactory machines and workers by linking them to the parts of the factory production line.
2 BOM: Bill Of Materials. A list of the parts that control a product, showing the hierarchicalstructure as well as including basic information on each part, such as from which parts
the product is assembled.

Tokyo Electron Miyagi JIT Supply Center (Automated Warehouse)

TOKYO ELECTRON Integrated Report 2021

30

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Sales
We propose optimal solutions that contribute to the creation of value forour customers in order to be the sole strategic partner.
technologies for future generations.
In addition, by leveraging our strengths as a device 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 andre-engineered equipment, we can meet a wider range of customer
needs and help maximize their return on investment.

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 inan accurate and timely manner, as well as developing innovative

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

Joint development evaluationequipment

in which business units, the Account Sales
Division, the Global Sales
Division and overseas
subsidiaries coordinate
with one anotherfor promoting
on-site collaboration
with customers

Broad-ranging knowledge andcomprehensive technologicalcapabilities
born fromour diverse
product lineup

Primary Management Indicators
Customersatisfaction

Market share ofmajor customers

OperatingmarginMain Sales Initiatives
Product Feedback that Reflects Accurate Understanding of Customer Needs
optimize products and shorten the time from technology
By collaborating with customers to create technology roadmaps
development to mass production.
spanning multiple generations, we can identify customer needs
To carry out these activities efficiently, global operations
early on and reflect them in R&D for the next generation and(=One-TEL) are being rolled out by an organic organization
beyond. This allows us to offer highly competitive products thatconsisting of business units, the Account Sales Division, thehelp improve the yield rate of devices and maximize equipment
Global Sales Division, development and manufacturing divisions,
utilization rate. We are also strongly promoting on-site
service divisions, overseas subsidiaries and other entities.
collaboration to deliver value-added machines to customers’
fabs and laboratories at an early stage, and are working to

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
Cleaning
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 responding to customer demands for the productionof multiple generations of products.
We are also working to satisfy the market’s diversifying needs
Etchby providing products for the IoT market, which include powerdevices, image sensors and communication devices, as well as
used equipment and re-engineered equipment.

Deposition

Coater/Developer

Improvement of Customer Satisfaction
Sustainability Initiatives
� Initiatives for improvement of customer satisfaction  P. 32
� Ongoing efforts to ensure customer safety  P. 37

Improvement of Customer Satisfaction

Safety� Reducing CO2 emissions from product usage by addressing Medium-term Environmental Goals
P. 35

Medium- and Long-term Environmental Goals

� Improvement of operational efficiency in sales activities

P. 42

Continuous Improvement of Business Operations

Risk Management Initiatives
MarketFluctuations

Main Risks

Initiatives

Opportunity losses due toinability to supply customers
with products in a timely
manner� Periodically review market conditions and orders received at Board of Directors and other important meetings,

Geopolitics

Restrictions on businessactivities

Information
Security

Diminished public confidence
in the Company or liability fordamages

and appropriately adjust capital investments, personnel/inventory planning and other aspects of business� Account Sales Division and Global Sales Division to strengthen the sales framework and customer base by

grasping investment trends of customers and responding to a wide range of customer needs� Carefully watch policy and diplomatic trends to understand moves to introduce regulations

� Communicate opinions to policy-making authorities such as through public comment, and anticipate the impact

of different countries introducing polices and regulations, and consider countermeasures� Establish an information security system that conforms to global standards by launching a dedicated security

organization and having security assessments conducted by external experts

� Establish globally standardized rules and regulations for information management

We are working to build a solid relationship of mutual trust withcustomers by further enhancing customer satisfaction, which wehave valued highly since our founding. As an indicator for thiseffort, for many years we have been conducting a uniquecompany-wide customer satisfaction survey (TEL CS Survey) at
the same time every year to promote ongoing improvements toour business practices.
In the customer satisfaction survey for fiscal 2021, responses
were received from approximately 1,400 individual customers(70.2% of all customers), and 96.7% of all survey items received ascore of three points or higher (Very Satisfied or Satisfied)*. This
marked an improvement of 3.4 percentage points from fiscal
2020. Information obtained from the survey is analyzed bybusiness unit (product), account (customer) and function(software, development, etc.), and the results of this are sharedwith relevant divisions, such as sales, plants, service and overseas
subsidiaries to implement actions for improvement.

CS Survey activity
preparation

Conduct survey ofcustomers

Feedback to customers
Implement improvement
activities in each division
Confirm progress ofimprovement activities

Analyze and reportsurvey results
Investigate
improvement plan

* On a four-point scale, three points or higher represents “Very Satisfied” or “Satisfied”.

31

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

32

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Installation and Maintenance Services
We have established a global support system to provide the Best Technical Service with high added
value in a prompt and appropriate manner.
provide timely feedback to our development and manufacturing
operations. In addition, we are making efforts to further improve
the quality of our services through the provision of advanced
field solutions, such as by constructing a global support system
via our Total Support Center (TSC) and enhancing remotesupport through our remote maintenance service.

For installation and equipment maintenance, we take advantage of acumulative number of equipment installations of approximately
76,000 units to offer the Best Technical Service with high added value.
We make full use of leading-edge AI, digital technology andknowledge management* tools, and promote enhanced efficiency
for our services to support the stable operation of various
generations of equipment for a wide variety of applications.
By refining the skills of the front-line engineers who interact withcustomers, we work hard to accurately identify customer needs andSales* 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
 Improvement of customer satisfaction through the provision of high-value-added services
 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

Main Installation and Maintenance Service Initiatives
Enhancing Front-line Engineers
We believe it is essential to accurately ascertain valuable
information, including customer needs and equipment operation
status, in markets where we deliver equipment, as well as toprovide timely feedback with regard to related operations to assist
in equipment development and improvements to functionality.
To efficiently conduct these activities, we are working to
improve the skills of each and every engineer involved in on-siteequipment installation and maintenance. We also strive topromote seamless communication between our development
and manufacturing departments and both the engineers at ouroverseas subsidiaries and our own engineers assigned overseas
who serve as our on-site contacts with customers.
Moreover, we are making efforts to establish a management
system for 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

Customerfeedback

Development andmanufacturing
divisions

Engineers
assignedoverseas

Seamlesscollaboration

Professional
technical support

Business Unit
Product development inline with customer needs* Comprehensive services primarily for post-warranty maintenance (maintenance work, performance maintenance, provision of spare parts etc.)

Management Resources to Be Invested

Promotion of High-value-added Services

Service database andremote support system

Service support infrastructure at

76 sites in
18 countries and regions

Approximately

4,000 field engineersthat utilizes AI, knowledge
management etc.

with highly specialized
and broad knowledge

Primary Management Indicators
Net sales for field
solutions business

Man-hours for
installation andmaintenance services
at overseas subsidiaries

Profitability of field
solutions business

Sustainability Initiatives
� Improving the efficiency of start-up operations and maintenance services  P. 42
� Safety initiatives for installation and maintenance services
� Provision of high-quality services

P. 41

� Effective utilization of diverse talent

P. 37

Continuous Improvement of Business Operations

SafetyQuality

P. 40

Quality

Occurrence of costs forcountermeasures for a
product defect and a decline incredibility

Human
Resources

Diminished productdevelopment capability or
customer support quality

The Novel
Coronavirus(COVID-19)

Slows the Company’s businessactivities or the deteriorationof global economic conditions

33 TOKYO ELECTRON Integrated Report 2021

Promoting these initiatives in smooth collaboration with fieldengineers and manufacturing sites allows us to provide highvalue-added services.
* Smart glasses: Glasses-style wearable devices that can display images and digital
information

CustomerField engineer dispatched

Total Support Center

Dispatch

TELeMetricsTM

Technical support
engineers
Equipment records
Service
database

Response

Technical advice

Diversity and Inclusion

Improving Service Productivity

Risk Management Initiatives
Main Risks

We have built a global support system, establishing Total
Support Centers (TSCs) in Japan, the United States, China andEurope. At each TSC, dedicated representatives maintain andutilize a database of information about customers’ equipment
and examples of similar incidents. Further, through our
TELeMetrics™ remote maintenance service, TSCs use theirknowledge and tools to propose solutions to the various issues
customers face.
And to expand remote support for field engineers, we areengaged in developing a remote support system that can sharevideo and audio from customers’ fabs in real time, as well as
further enhance the confidentiality of information. Throughsuch efforts, we are promoting remote support that helps toensure stable equipment operation. Starting in fiscal 2021, we
will add unique functions such as information protection,
restricted video transmission, and call translation to ourexisting smart glasses* system to make remote support moreconvenient and further improve support quality.

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 ongoing improvements to work environments and promote health and productivity management, including

having top management share direction through regular employee meetings, establishing training plans for the
next generation of human resources, visualizing career paths for employees and offering attractive remuneration
and benefits

To further improve service productivity, we are implementing
initiatives in conjunction with Group-wide business innovation
projects. To promote knowledge management, we are deploying
Service CRM* on a global scale to centrally manage customers’
equipment records (support/trouble history) as a database, as
well as to ascertain each field engineer’s actual work statusthrough work orders.

In addition, 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).
* Service CRM: Service Customer Relationship Management� Established 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

TOKYO ELECTRON Integrated Report 2021

34

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sustainability Initiatives in the Value Chain

Sales

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
and governance to help create new value.

Environment
Environmental Management
Environmental issues such as climate change are growing evermore crucial. To promote activities in the medium to long termthat meet the environmental/social/governance needs of its
customers and other stakeholders, the Manufacturing Company
Presidents’ Council, which includes the corporate director in
charge of environment, health and safety (EHS), monitors andsupervises progress related to environmental issues. A
headquarters has been established, headed by the corporate
director in charge of EHS, and promotes environmental activities
across the entire Group. The Environment Council, made up of
members appointed by the executives of the Group companies,
sets targets related to environmental issues, monitors progress
and also works to achieve its goals. Furthermore, to continuously

promote our environmental activities, we have operated anenvironmental management system based on ISO 14001 since
fiscal 1998, primarily at our manufacturing subsidiaries. The
progress of our activities and legal compliance status arechecked through internal audits and third-party audits. Any
issues identified through these activities are reviewed by theEnvironment Council, reported to the Manufacturing Company
Presidents’ Council and used for promoting environmental
activities across the entire Group. Under such an environment
management system, fiscal 2021 was again free fromenvironmental incidents, accidents, violations and associatedlegal proceedings.

Medium- and Long-term Environmental Goals
In order to further strengthen our initiatives toward theenvironment in our products, plants and offices, the contents ofthe medium-term environmental goals for fiscal 2031 wererevised in December 2020. In the goals for products, the reference
year for per-wafer CO₂ emissions was changed from fiscal 2014 to
fiscal 2019. In addition, in the goals for plants and offices, the total
CO₂ emissions reduction goal was changed from 20% reduction to
70% reduction, while reaching a rate of 100% renewable energy
usage. At present, we are working on new initiatives towardachieving these revised goals. Specifically, we are planning to
introduce renewable energy at our plants and offices in Japan, theUnited States and China starting from fiscal 2022. This will bringour use of renewable energy company-wide to over 50%, while

dropping our CO₂ emissions by 40%. In terms of products, we aremoving ahead with understanding the amount of CO₂ emissions
during use of standard equipment and creating a roadmap. We arerolling out activities toward achieving our goals based on this.
We have set the following as a long-term goal to achieve by
2050: “As a leading company in environmental management, we
strive to contribute to the development of a dream-inspiring
society by proactively promoting the reduction of environmental
burden of both our products, plants and offices, and at the sametime, providing evolutionary manufacturing technologies that
effectively reduce the power consumption of electronic products”.
We are working on initiatives for this at a company-wide level.

E-COMPASS
We established E-COMPASS (Environmental Co-Creation by
Material, Process and Subcomponent Solutions) as a new supply
chain sustainability initiative. E-COMPASS aims to align our
products and the entire operations more closely with ourenvironmental mandates, strengthen our ties with business

partners, solidify our industry leadership, and pave the way for asustainable future. We will utilize every management resource atour disposal to drive the major trends of digitalization andgreening of society and actively endeavor to preserve the global
environment throughout the supply chain.

Initiatives Related to Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
divisions of the Group companies.
We are pursuing ongoing disclosures and initiatives based on the
For Scope 1 and 2 CO2 emissions, we are adopting renewable
TCFD framework and relating to risks and opportunities thatclimate change presents to our business.
energy from a global perspective, including the implementationof measures at our key manufacturing sites in Japan with highStatus of Initiatives Related to Recommendations of the TCFD
emissions.
• Governance
For Scope 3 emissions, we recognize the importance ofEach of our corporate directors for EHS and CSR is working underproviding products that generate fewer CO2 emissions because
the supervision of the CEO to monitor progress of goals related
about 88% of the emissions in our entire value chain are
to our response to climate change. With the establishment of thegenerated during use of products after sale, so we are focusing
EHS Promotion Department and CSR Operations Department at
on development of a range of environmental technologies.
headquarters, these activities are being driven by the entire
We also formulate business continuity plans in anticipation ofGroup. At the Environmental Council , comprised of members
natural disasters caused by abnormal weather and other factors,
appointed by executives of the Group companies, companyand take measures with our suppliers to ensure that businesswide goals are set, progress is monitored and the achievement ofoperations can be maintained.
• Metrics and Targets
these goals is promoted.
• Strategy
To further reinforce our initiatives toward improving
Utilizing the framework of the TCFD recommendations, we
environmental performance of products and conserving theidentified the risks and opportunities of climate change that will
environment at our plants and offices, we revised our mediumimpact business over the medium to long term. We haveterm environmental goals in December 2020*. While supporting
evaluated the quantitative impact on business from some of
the advancement of information and communications
those risks and opportunities, and we aim to continue
technology through the provision of our semiconductor and FPD
quantifying others going forward as we investigate relevant
production equipment, we are also committed to achieving newmeasures.
environmental goals in keeping with our Corporate Philosophy:• Risk Management"We strive to contribute to the development of a dreamThrough the Manufacturing Company Presidents’ Council, we
inspiring society through our leading-edge technologies andapprove company-wide risk management initiatives, from shortreliable service and support.”
term to long term, that related divisions and councils* Refer to Medium- and Long-term Environmental Goals on p. 35
recommend, and then apply those initiatives to the facilities andExamples of Climate Change (Risks and Opportunities) Impacting Business over the Medium to Long term
ScenarioType

Details

2°C
Temperature
Increase

Transition
risks• Increased energy costs in line with taxes on fuel and energy. Assuming our greenhouse gas (GHG) emissions and useof renewable energy remain at fiscal 2021 levels, if a carbon tax were applied, we estimate our costs would increaseby 1.1 billion yen/year by fiscal 2026 (assuming a tax of 6,000 yen per ton CO2) and 2.6 billion yen/year by fiscal 2041
(14,000 yen per ton CO2)
• Decreased net sales if we are unable to meet customers’ requirements and demands for environmental initiatives• Reduced reputation among investors, NGOs and local communities if a response to climate change and otherenvironmental issues is delayed

4°C
Temperature
Increase

Physical risks• Impacts on us, our suppliers and customers from abnormal weather (net sales decrease as a result of supply chain
disruptions, operation stoppages, production/shipping delays and other factors)

CO2 Emissions across the Value Chain
Our Scope 3 CO₂ emissions account for approximately 97% of total emissions, and approximately 88% (5,668 kilotons) of that comesfrom the use of products, so we believe that product development with low CO₂ emissions during operation is critical.

409

kilotons
Scope 3 upstream Not from our Group
Fuel- andenergy-related
activities

14 kilotons

Employee commuting

11 kilotons

Business travel

Capital goods

162 kilotons

Purchased goods
and services

211 kilotons

186

kilotons
Scope1, 2 Own emissions

1 kiloton

Waste generated inoperations

1 kiloton

Upstream transportationand distribution

9 kilotons
Upstream

35 TOKYO ELECTRON Integrated Report 2021

5,813 kilotons

Scope 3 Not from our Groupdownstream

End-of-life treatmentof sold products

Direct emissions
from fuel and gas use
Scope 1

29 kilotons

Indirect emissions fromelectricity use andheat purchase
Scope 2157 kilotons

2 kilotons

Use of sold products

5,668 kilotons

Downstream
transportation anddistribution

143 kilotons
Downstream

Scope 1: Direct greenhouse gas (GHG)
emissions from use of fuel and gas we
owned or controlled
Scope 2: Indirect GHG emissions fromuse of electricity, steam and heat wepurchased
Scope 3: Emissions from corporate
value chains (excluding scope 1 and 2
emissions), such as producttransportation, employee businesstravel and major outsourced
production processes* Scope 3 is divided into upstream
activities, which include emissions
associated with purchased or
procured products and services, anddownstream activities, which include
emissions associated with soldproducts and services

Common• Accelerated efforts to create new value, including innovation toward development of low-GHG products and services,and equipment and technologies that contribute toward the manufacture of low-power consumption devices• Gaining superiority and business opportunities through proactive initiatives for climate change and adding value toOpportunities the market• Higher productivity by streamlining operations and reducing related environmental impacts• Securing a competitive advantage by building resilience (responsiveness to climate change) into global operations,
including working to adopt renewable energy, and improving corporate value through these initiatives

TOKYO ELECTRON Integrated Report 2021

36

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

SafetyApproach 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.

Handling of Accidents
We analyze the causes of all accidents and implement corrective
measures. We strive to prevent accident recurrence by not only
identifying the main cause, but also carrying out multi-faceted
cause analysis, targeting the operator who was involved, the facility,
the environment, the involved coworkers and the management
aspect, and sharing the results with all Group companies.

Safe Design of Equipment
Taking the entire product life cycle into consideration, we carryout product risk assessments as early as possible in thedevelopment phase. Based on the assessment results, we
implement safe equipment design1 to reduce the risks posed tohumans. We also examine and ensure compliance withincreasingly strict laws and regulations around the globe, andhave a system in place for all safety regulations of the regions
where our equipment is delivered. Equipment we ship is checked
to ensure that it complies with international safety standards such
as SEMI S22 and CE marking3 as well as the safety laws andregulations of each country and region.

Safety Education
We are implementing two education programs globally for theestablishment of safe work environments. The first is a programon basic safety targeting all employees and the second is a
program on advanced safety targeting employees working on
manufacturing lines and cleanrooms. To eliminate incidents, we
also provide online training and risk assessment training for
employees in Japan and overseas. Also, to expand the concept ofsafe equipment design to our design, manufacture and service
operations, we hold a semiannual safe equipment design
seminar at our manufacturing sites in Japan, inviting an external
guest to speak. Finally, we also promote our initiatives to prevent
accidents, such as providing our suppliers and customers withsafety information as circumstances demand. As a result of
having maintained a high priority on creating safe work
environments, TCIR has been maintained at less than the
Company’s target of 0.5, with 0.27 in fiscal 2021.

1 Safe equipment design: A design concept that eliminates the cause of the machine’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 manufacturersof semiconductor equipment in the United States and Europe, not only forsemiconductors but also as safe procurement guidelines for electric and electronic
device manufacturing equipment around the world.
3 CE marking: When exporting into the European Union, CE marking defines rules fordisplaying a CE mark as proof that the equipment is safe and complies with EU-definedrules (directives)

0.27

TOKYO ELECTRON Integrated Report 2021

3 Refer to Supply Chain Management on p. 39

Commitment

Assessment

Remediation

ReportCommitment to respecting
human rights• Human Rights Policy publication• Awareness and implementation• Education

Assessment of human rights risks
in business and supply chains• CSR assessment• Human rights risk assessment• Human rights impact assessment

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

Regular disclosure of information• Sustainability Report publication• Disclosures on the website

We recognize the importance of having highly effective
grievance mechanisms related to human rights and are working
to establish and operate those mechanisms. In fiscal 2021, we
further strengthened our internal and external reporting systems
in Japan and overseas for employees and suppliers. By continuing

to conduct human rights due diligence going forward, we willassess and correct any human rights issues we identify in ourbusiness activities, and further improve the grievancemechanisms we provide.

Supplier Human Rights Risk Survey Results
Percentage of companies
considered to have low
risks

65%

Human Rights Initiatives
In fiscal 2018, we formulated our Human Rights Policy1,
summarizing our approach to human rights. We have specified thehuman rights we believe are particularly important in businessactivities as Freedom, Equality & Non-Discrimination; Freely
Chosen Employment; Product Safety & Workplace Health and
Safety; Freedom of Association; and Appropriate Working Hours &Breaks/Holidays/Vacations. In preparing the Human Rights Policy,
we referred to the United Nations’ Guiding Principles on Businessand Human Rights and the International Bill of Human Rights andthe 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.
1 Human Rights Policy: www.tel.com/csr/employee/diversity/
2 RBA Code of Conduct: A global initiative with a focus on the electronics industry, theResponsible Business Alliance (RBA) establishes a set of standards for supply chains in
the electronics industry for a safe labor environment, to ensure that workers are treatedwith respect and dignity, and that companies take responsibility for environmental
impact in the manufacturing process.

37

utilized a self-assessment questionnaire (SAQ) for internal use,
based on the RBA Code of Conduct, and also reviewed the resultsof a CSR assessment3 for suppliers of materials, staffing andlogistics to assess the current situation throughout the value
chain. We are using the results of these surveys to consider
corrective actions and reduce human rights risks.

TCIR

Human Rights
Approach to Human Rights
Conscious of our corporate social responsibility, we recognizethat it is important to conduct ourselves with a strong sense of
integrity. Based on this recognition, we have firmly upheld
human rights since our founding, as reflected in the spirit of our
Corporate Philosophy and Management Policies. For us,
respecting human rights means a significant undertaking, notonly 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 contributeto the realization of a sustainable, dream-inspiring society. We
incorporate the concept of respect into every aspect of ourbusiness activities, and strive to nurture a dynamic corporate
culture where each person can realize his or her full potential.

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 to make it available toeveryone inside and outside the Company, and also implement
online human rights training targeting all of our executives andemployees. In fiscal 2021, as in the previous fiscal year, we
conducted human rights due diligence, as well as risk surveys,
and identified and assessed impacts. As part of the surveys, we

Percentage of companies
considered to havepotential/actual risks

35%

Environment

Management Systems• Appropriate use of water and waste
water management to prevent
pollution• Reporting system

Labor

Health and Safety• Working hours• Burden of
employment-related
fees• Deployment of trained emergency
response personnel• Designation of emergency response
teams, and provision of personal
protection equipment and training• Establishment of risk assessment
procedures and programs, assuming
emergency situations• Implementation of evacuation drills
for all workers, assuming fires andother emergencies

The results of human rights risk surveys conducted at
suppliers showed that 35% of those with 500 or more
employees had potential/actual risks. Among these risks, themajor risks are health and safety issues related to humanrights, followed by labor issues. Based on these results, we
continued to request those suppliers to comply withdomestic laws and regulations and social norms related tohealth and safety. We will work to reduce human rights risks
by promoting corrective actions together with our suppliers.
Meanwhile, inside our company, we identified potential
human rights risks in the areas of labor, and health and safety.
To mitigate these risks, we are renewing our efforts to fully
manage working hours and also taking steps to improve
operational efficiency further.

TOKYO ELECTRON Integrated Report 2021

38

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

Human Resources

Principles and System of Supply Chain Management
The building and maintenance of a supply chain, which responds
flexibly to the demands and risks of a diverse society andcontributes to the creation of new value, is crucial for theenhancement of our medium- and long-term corporate value.
To make our entire supply chain sound and sustainable, we haveformulated a procurement policy based on the laws, regulations
and social norms of each country, as well as the RBA Code of
Conduct, and are promoting activities based on this policy bydisseminating it throughout the Company and our suppliers. We
also promote improvement activities from various perspectives
while valuing continuous 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.
We strive to create value in the supply chain by working tobuild relationships of trust with our suppliers, who support ourbusiness as partners, and by working together to conduct
operations in compliance with global standards. Under theleadership of the Representative Director, President & CEO,issues identified during various activities are shared with relevant
divisions for consideration and action on specific improvements.
Initiatives in the Supply Chain
CSR Operations
To keep track of our suppliers’ engagement in CSR activities,
we have conducted a CSR assessment in the areas such aslabor, health and safety, the environment and ethics since
fiscal 2014. We analyze the results of the assessments, provide
feedback and work together with our suppliers to remediate
any issues. In fiscal 2019, we completely revised the content of
the survey based on audit standards stipulated by the RBA,
and have since conducted surveys on materials1, staffing2 andlogistics3 suppliers.
In fiscal 2021, with the help and understanding of our
suppliers, steps were taken to repay workers with respect tocases of an employment-related expense burden for forcedlabor and bonded labor, which had been identified in theprevious fiscal year and which have been given particularemphasis in the RBA Code of Conduct. In addition, with respect
to cases of false reporting, changes were made in businessprocesses and audits were introduced.
Regarding the human rights issue of “freely chosen
employment”, we have expressly stipulated our zero tolerance
policy for forced labor and bonded labor, and by communicating
this to our major suppliers, we are promoting initiatives to ensurethat all people in our supply chain can work of their own free will.
1 Material suppliers: Surveys have been conducted since fiscal 2014 for suppliers
accounting for more than 80% of our procurement spend.
2 Staffing suppliers: Surveys have been conducted since fiscal 2019 on 100% of
employment agencies and contracting companies (internal contractors).
3 Logistics suppliers: Surveys have been conducted since fiscal 2019 on 100% of
customs-related operators.

Responsible Procurement of Minerals (Conflict Minerals)
We regard taking action against conflict minerals (3TG4) obtained
through illegal exploitation, including sources with human rights
violations or poor working conditions, as an important part ofcorporate social responsibility. Our resolute goal is to eliminate theuse of raw materials made from these conflict minerals, as well as
any parts or components containing them. We conduct surveys on
conflict materials using the CMRT5 and referring to the OECD6 Due
Diligence Guidance for Responsible Supply Chains of Minerals from
Conflict-Affected and High-Risk Areas.

Formulation of
supply chain policies

39 TOKYO ELECTRON Integrated Report 2021

practice by our employees all over the world.
We have established TEL UNIVERSITY as an in-house
educational establishment, helping employees to independently
build their careers and realize their personal goals for their
growth and development. Our aim is to stand shoulder toshoulder with each employee, supporting their self-growth andfruitful career development throughout their working life, andcreate a foundation that enables the organization and individuals
to trust each other and grow. We are focusing on employee
growth that leads to corporate growth through the following
four initiatives: Provision of Personalized Learning Opportunities,
Support for Career Development, Leader Programs, andProvision of Global Learning Opportunities.

Corporate Education System (TEL UNIVERSITY)
Management

Executives

Leaders

Junior Employees/
New Employees

Mid-level Employees

Introductory programs (new graduates, mid-career recruits)
Level-based
Programs

OJT* programs (new graduates, mid-career recruits)
Manager programs

Mid-level employee programs

Junior employee programs

Leader programs
Compulsory web-based training

4 3TG: Tantalum, tin, tungsten and gold

Business skills

5C
 MRT: Conflict Minerals Reporting Template. Survey format for reporting conflictmaterials, provided by the Responsible Minerals Initiative (RMI), which has establishedinternational guidelines on conflict minerals.

Goal-based
Programs

Procurement BCP
As part of our business continuity plans (BCPs), we collaborate
with suppliers for 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. In addition, we conduct
BCP assessments on our suppliers, analyze their responses andprovide them with feedback to promote further improvement.

Do

Check

Act

Notification of requests toour suppliers and appeal
for CSR activities

Implementation of
supply chain CSR assessment
and analysis of response

Provision of feedback based on
the results and requests for
improvements to suppliers

Global communication
Employee life support
Technical programs (seminars, workshops)

6O
 ECD: Organisation for Economic Co-operation and Development

Supply Chain CSR Process

Plan

Employees Both Create and Fulfill Company Values
A total of 14,479 employees are working at the 76 Tokyo Electronsites located in 18 countries and regions of the world, and webelieve that each of them maintaining a high level ofengagement and demonstrating their full potential will leaddirectly to our company’s growth. By sharing with our employees
the direction toward which management is aiming and providing
platforms for direct dialogue through the employee meetingsand discussions held every year at each site, we are striving tobuild mutual trust between the organization and individuals.
Furthermore, to realize our Corporate Philosophy, we establishedTEL Values, which delineate Tokyo Electron’s values, the mindset
that each employee must possess and the codes of conduct tobe passed on to the future. The TEL Values—pride, challenge,
ownership, teamwork and awareness—are being put into

* OJT: On the Job Training

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 pursuing them withthe strong commitment of our management.

Although the areas of emphasis for diversity and inclusion
vary by country, we have taken on gender and nationality as
major themes and put the following goals and initiatives in place
based on the characteristics of each region.

• In terms of succession planning, we conduct a diversityconscious talent pipeline (plan for developing humanresources) and strive to increase the ratio of women in
management positions• We create an organizational structure where even thosefrom outside of Japan can take on corporate roles
through the use of technology and shared global humanresources systems• Taking into consideration that many of our employees
are engineers, we actively invest in the use of recruiters
and branding to hire women at a level that is equal to or
greater than the ratio of women in each region (or theratio of women majoring in science and engineering in
the case of engineers)• We organize events such as talks on diversity andinclusion from internal and external experts and leaders,
generate networking opportunities for employees withsimilar characteristics and experience, and hold roundtable discussions regarding careers before and after
taking maternity/paternity leave and childcare leave

TOKYO ELECTRON Integrated Report 2021

40

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

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 results of thesurveys, our management takes the lead in making
improvements to foster a better workplace environment andculture. These initiatives resulted in an increase in the employee
engagement score of 12 points from fiscal 2016 to fiscal 2021 anda turnover rate of 2.5%.
We plan to continue these initiatives since we believe that
improving employee engagement leads to providing increased
value to our stakeholders.

Continued Implementation of Engagement Surveys（ポイント）

40
Reviewingof circumstances

Improvementof measures

30

Planning formeasures20

10

Confirmationof effects

Score

Implementationof measures

Up 12 points

0

We strive to implement own-process assurance systems bycarrying out strict risk management and development/design
inspections beginning at the development stage, and also by
ensuring verification of customers’ operations using simulations.
スコア
We have also built an important component traceability systemポイント
as part of our effort to strengthen our information environment.
By making it possible to use the One Platform1 to view suchinformation as past problems and adjustment values used during
manufacturing and assembly, as well as important component
inspection information from suppliers, we have successfully
strengthened our risk management (FMEA2) to prevent various
types of non-conformance.
We believe that thorough implementation of these own（年）
2016
2021
process
assurancesystems and prevention
makes it possible for
employees to focus on high-value-added business operations
and promote initiatives that lead to Shift Left (front-loading). We
will continue to strive to provide high-quality and high-valueadded products and services to our customers.

Shift Left (Front-loading) Initiatives
Man-hours

Front-loading
development style

12
UP

Accelerated issue
identification
Creation ofvalue-added
operations bysolving issues atthe early stage ofdevelopment

Detailed
designConceptual
designPrototypeevaluation

Development
quality

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

Full-scale
production

Supplier
qualityTime

Operation
streamlining

2 FMEA: Failure mode and effects analysis. Method to identify, prevent and mitigate risks
in advance.

Quality
Initiatives for Quality Improvement
In order to help each of our employees correctly understandand implement quality assurance activities, we realize theimportance of correctly defining the ideal form of quality
assurance (goals), along with creating an environment andculture for widely disseminating it. From the ideal form, weestablished “Our Approach to Quality” and “Quality Policy” andcommunicate the importance of quality to our employees atvarious opportunities to increase their quality awareness. To
carry out correct quality assurance activities, it is important toestablish clear rules for what has to be done and correctly
implement those rules. To ensure that our employees are always
aware of their roles and purposes and correctly perform theirwork, we are striving to make the rules comprehensive, reassessand deploy our quality education from time to time andvisualize appropriate quality information. Based on thesefoundations, 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.
Approach to Quality
We have defined our approach to quality as follows:“The Tokyo Electron Group seeks to provide the highestquality 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”.

Quality Policy
1. Quality Focus
Focusing on quality to satisfy customers, meet production
schedules and reduce required maintenance even withtemporary cost increases.
2. Quality Design and Assurance
Building quality into products and assuring in-process quality
control, from the design and development phase throughout
every process.
3. Quality and Trust
When a quality-related problem occurs, working as a team to
perform thorough root cause analyses and resolve problems
as quickly as possible.
4. Continual Improvement
Ensuring customer satisfaction and trust by establishingquality goals and performance indicators and 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.

Continuous Improvement of Business Operations
We are currently introducing a new enterprise system (ERP*) to
improve productivity and quality further. The new ERPs, being
integrated across operational and national boundaries, are aimed
at creating the following five benefits: (1) compliance with the
new revenue recognition standards in Japan; (2) business andmanagement decision making with quick response to change;(3) large improvements in business operation efficiency;(4) utilization of globally integrated information with an eye
toward overall digital transformation; and (5) realization ofultimate work style reform. Beginning with business operational
improvement, we are contributing to the resolution of issues
from COVID-19 with global progress in the expansion of
telecommuting, the shift to online approval operations, andoverall digitalization.

In fiscal 2021, we made progress in communication andconsensus-building that included our headquarters,
manufacturing sites in Japan, and overseas subsidiaries, as well as
partner companies, to form a globally unified team towardbusiness innovation. In May 2021, the new ERPs began operation,
primarily at our headquarters. While making the most of theknowledge gained from this process and the results, we plan torealize a true globally integrated system, with project members
and all our employees working as one.
* ERP: Enterprise resource planning. A system that integrates the core business
operations of an enterprise, such as accounting, personnel, production, logistics andsales, for better efficiency and centralized information.

Overview of the New Enterprise System
Sales
CRM

Scheduler(Plan)(Opportunities
and Forecast)

Customer
Investments

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)

41

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

42

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Corporate GovernanceCorporate Governance Framework
With over 80% of our sales coming from overseas, we regard
building governance structure as essential in order to achieve
success in global competition and sustainable growth. To that
end, we have built a framework to maximize use of worldwide
resources, and have worked to incorporate a wide range of
opinions to strengthen our management foundation andtechnology base, establishing a governance structure capable of
ensuring that we attain global-level earnings power. We havealso established the Corporate Governance Guidelines* which
outline this governance structure.
We use the Audit & Supervisory Board System, which consistsof a Board of Directors and an Audit & Supervisory Board, andhas achieved effective governance based on the supervision ofmanagement by the Audit & Supervisory Board. Furthermore, in
addition to the Board of Directors, whose role is to make major
operational decisions and play a supervisory role in the executive
management’s execution, and support appropriate risk-taking
by them, we have established systems that facilitate growthoriented governance directed at sustainable growth, including
the following: (1) the Nomination Committee and Compensation
Committee to ensure fair, effective, and transparent
management; (2) the Corporate Senior Staff (CSS) to formulate
and advance company strategy; and (3) the Business Execution
Meeting, to play a role in deliberations of the executive
management.
* Corporate Governance Guidelines: www.tel.com/about/cg/

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Shareholders’ Meeting
Appointment or Dismissal of Corporate Directors

Management& Supervision

Nomination
Committee
Compensation
Committee

Appointment or Dismissal of Audit & Supervisory Board Members

Audit

ReportAudit

Board of Directors

Audit &
Supervisory Board

ReportCooperate

Independent Auditors

Audit

Proposal & Report

Business execution

Appointment or Dismissal

Supervision/
Appointment or
Dismissal

Cooperate

Cooperate

ReportRepresentative Director,
President & CEO

Global Audit Center

Audit

Business Execution
Meeting
Internal Control Executive Officer

Corporate Senior Staff(CSS)

Risk Management Executive Officer

Ethics Committee

Compliance Executive Officer

Risk Management Committee

Audit

Information Security Committee
Export Trade Control Committee

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

Composition and Results of the Board of Directors, Nomination and Compensation Committees (In fiscal 2021)

Policies for Allocation of Earnings
Our basic stance is for the appropriate allocation of company
earnings to all stakeholders.
Our dividend policy to shareholders is to link dividend
payments to business performance on an ongoing basis andmaintain a payout ratio of around 50% based on net income
attributable to owners of the parent company. Furthermore, we
also set the minimum annual dividend at 150 yen per share inlight of the stable distribution of dividends.
We effectively use internal capital reserves to raise corporate
value through earnings growth by concentrating investment inhigh-growth areas and provide returns directly to shareholders
by linking dividend payments to business performance.
Furthermore, we flexibly consider implementing repurchases oftreasury stocks as part of returning earnings to shareholders.
Establishment of the Director Compensation System
As our basic policies on executive compensation, we emphasize(1) levels and plans for compensation to secure highly competentmanagement personnel with global competitiveness; (2) highlinkage with business performance in the short term andmedium- and long-term increase of corporate value aimed atsustainable growth; and (3) securement of transparency andfairness in the decision process of compensation andappropriateness of compensation.
Compensation for inside directors consists of fixed basic
compensation, annual performance-linked compensationand medium-term performance-linked compensation.
Compensation for outside directors consists of fixed basic
compensation and non-performance-linked (stock-based)compensation. Compensation for Audit & Supervisory Board
members consists solely of fixed basic compensation inconsideration of their role being primarily the audit andsupervision of management.
In order to secure transparency and fairness in management
and appropriateness of compensation, the Compensation
Committee, which an independent outside director chairs,
utilizes advice from an external expert, compares compensationlevels with those of industry peers in Japan and overseas, andanalyzes the latest trends and best practices in Japan andoverseas (such as reflecting ESG in compensation). The
committee then proposes to the Board of Directors acompensation policy for corporate directors, a compensation
system that is globally competitive and the most appropriate
for us, and individual compensation amounts for the
representative directors.

Composition
Fixed Basic
Compensation

Number of Times Held

Corporate Directors

Independent
OutsideDirectors

Speaker/Chairperson

Board of Directors

83

Corporate Director(Non-Executive Director)

12

Corporate Directors

Nomination Committee

31

Corporate Director

10Compensation Committee

22

Independent Outside Director

743 TOKYO ELECTRON Integrated Report 2021

Fixed Basic Compensation
Fixed basic compensation is determined in reference to thecompensation standards of industry peers in Japan and overseas.
For inside directors, it also depends on the scale of their
responsibilities based on the job grade framework provided by
the external specialist organization.
Annual Performance-linked Compensation
Annual performance-linked compensation consists of cash
bonuses and stock compensation-based stock options at a ratioof approximately 1:1. The specific amounts paid and the numbersof stock options granted are determined based on the results ofcorporate business performance and individual performance
evaluations for the relevant fiscal year. Net income attributableto owners of parent and consolidated ROE are adopted as
evaluation indicators for corporate business performance.
Evaluation items for individual performance include the degreeof contribution to short-term and medium-term management
strategy targets (including ESG).
Medium-term Performance-linked Compensation
Medium-term performance-linked compensation is a
performance share (stock-based) compensation to motivate
recipients to contribute to improving medium-term businessperformance and raise awareness for enhancing corporate valueby sharing the perspective of shareholders through the holdingof shares. The number of shares issued to each corporate
director varies according to the payout rate based on theirrespective responsibilities and level of performance goal
achievement over the relevant three-year period. Consolidated
operating margin and consolidated ROE have been adopted as
the indicators for measuring the levels of performance goal
achievement which are linked to the Medium-termManagement Plan.
Non-performance-linked (Stock-based) Compensation
Non-performance-linked stock-based compensation has been
introduced for the purpose of making the compensation systemfor outside directors more consistent with their expected role of,in addition to supervising management, giving advice tomanagement from the perspective of increasing corporate value
over the medium to long term. Under this stock-based
compensation system, shares are granted after the expiration of
the applicable period (three fiscal years) which is set each year.

Annual Performance-linked Compensation

Medium-term
Performance-linked
Compensation

Non-performancelinked Compensation

Cash Bonuses

Stock Compensationbased Stock Options

Performance Share
(Stock-based)

Restricted Stock Units(Stock-based)

●

●

●

●

－

Outside Directors

●

－

－

－

●

Audit & Supervisory Board
Members

●

－

－

－

－

TOKYO ELECTRON Integrated Report 2021

44

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Process for Evaluating the Effectiveness of the Board of Directors and Management Issues
conduct, aggregate and analyze the interviews in an effort toTo evaluate the effectiveness of the Board of Directors, including
increase objectivity.
the Nomination Committee and Compensation Committee, we
In terms of the evaluation results in fiscal 2021, open andconduct questionnaire surveys of all corporate directors anddynamic discussions were held at Board of Directors meetings
Audit & Supervisory Board members, as well as individualand off-site meetings. We recognize that the Board of Directors,
interviews with some corporate directors and Audit &including the Nomination Committee and Compensation
Supervisory Board members. We also conduct opinion
Committee, is functioning in an effective manner.
exchanges and deliberations with a group comprised mostly of
In light of the results of this evaluation, we will continue ouroutside directors and Audit & Supervisory Board members. The
efforts to have fuller discussions regarding medium- to longresults of this questionnaire, summaries of interviews and theterm management strategies, promote diversity, strengthen
content of deliberations are then shared with the entire Board ofgroup governance at a global level and share appropriate
Directors before deliberating and comprehensively evaluating
information with the Nomination Committee, Compensation
the effectiveness of the Board of Directors. We appoint a third
Committee and Board of Directors.
party to provide advice on setting assessment items and to

Skills Matrix
In view of our Corporate Philosophy that “We strive to contributeto the development of a dream-inspiring society through ourleading-edge technologies and reliable service and support”, weare engaged in enhancing our governance structure and insustainability-focused management in order to respond tochanges in the global environment, achieve success in global
competition, and realize sustainable growth and increased
corporate value over the medium to long term to respond to the

mandate from our stakeholders. We believe that our corporate
directors and Audit & Supervisory Board members have thenecessary qualifications to realize these initiatives.
Described in detail below, all of them have knowledge ofglobal business, governance, sustainability and so on. In
addition to this matrix of individual skills, we also disclose theoverall diversity of our Board of Directors in an easy-tounderstand format.

Diversity of Board Members
Expertise and experience of Corporate Directors and Audit &Supervisory Board Members

Independence and diversity of Corporate Directors(Unit: persons)(Unit: persons)

Independent Outside Directors

8

Corporate Management

4/12
3/12

12

Semiconductor/FPD

8

Manufacturing/Development
Sales/Marketing
Finance, Accounting/Engagement with Capital Markets
Legal Affairs/Risk Management10

Foreign national/female Corporate Directors

8
6Foreign national Corporate Director

Female Corporate Director

Directors and Audit & Supervisory Board Members (As of July 1, 2021)
Directors

Tetsuo Tsuneishi

Toshiki Kawai

Sadao Sasaki

Yoshikazu Nunokawa

Tatsuya Nagakubo

Corporate Director
Chairman of the Board

Representative Director
President & CEO

Representative Director

Corporate Director

Corporate Director

Kiyoshi Sunohara

Seisu Ikeda

Yoshinobu Mitano

Charles Ditmars Lake II

Michio Sasaki

Corporate Director

Corporate Director

Corporate Director

Outside Director

Outside Director

Chairman and Representative
Director, Aflac Life Insurance
Japan Ltd.
President, Aflac International
Incorporated
Outside Director, Japan Post Holdings
Co., Ltd.

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

Corporate Director,
Tokyo Electron Device Ltd.

President & Representative
Director, Tokyo Electron
Technology Solutions Ltd.

Expertise and Experience*
Name

Corporate
Management●

Tetsuo Tsuneishi

Corporate
Directors●

Sales/
Marketing

Finance,
Accounting/Engagementwith CapitalMarkets●●

Toshiki Kawai

●

●

●

●

Sadao Sasaki

●

●

●

●

Yoshikazu Nunokawa

●

●

●

Tatsuya Nagakubo●

Kiyoshi Sunohara

●

●

●

Seisu Ikeda

●

●

●

●

●

●

Yoshinobu Mitano
Charles Ditmars Lake Ⅱ

Outside●Michio Sasaki

Outside●Makiko Eda

Outside●Sachiko Ichikawa

Outside●●●●Kazushi Tahara
Kyosuke Wagai

OutsideMasataka Hama

OutsideRyota Miura

Outside●●Legal Affairs/
RiskManagement

●
●

●

●

●

●

●

●

●

●

●

●
●

●

Yoshiteru Harada
Audit &
Supervisory
Board
Members

Semiconductor/ Manufacturing/
FPD
Development●

Sachiko Ichikawa

Outside Director

Outside Director

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

Partner, Tanabe & Partners
Outside Corporate Auditor, Ryohin Keikaku Co., Ltd.
Statutory Auditor, The Board Director Training
Institute of Japan
Outside Director, OLYMPUS CORPORATION

Audit & Supervisory Board Members●●●* The six categories of “expertise and experience” are defined as follows:� Corporate management: Having experience in managing an enterprise (experience serving as a representative director or chairperson/president)
� Semiconductor/FPD: Having knowledge of semiconductor/FPD-related industries
� Manufacturing/development: Having knowledge/experience in manufacturing and development at Tokyo Electron and other manufacturers
� Sales/marketing: Having knowledge/experience in sales and marketing at Tokyo Electron and other manufacturers
� Finance, accounting/engagement with capital markets: Having knowledge in financial accounting and M&A, or knowledge/experience in engagement with capital markets
� Legal affairs/risk management: Having knowledge in legal affairs, compliance and risk management

45 TOKYO ELECTRON Integrated Report 2021

Makiko Eda

Yoshiteru Harada

Kazushi Tahara

Kyosuke Wagai

Masataka Hama

Ryota Miura

Audit & Supervisory Board
MemberAudit & Supervisory Board
MemberOutside Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member

Representative, Wagai CPA OfficeOutside Audit & Supervisory Board
Member, Mochida PharmaceuticalCo., Ltd.

Outside Director, Nissay AssetManagement Corporation

Partner, Miura & Partners Legal
Profession Corporation
Corporate Auditor, TECHMATRIXCORPORATION
Outside Director, Eisai Co., Ltd.

TOKYO ELECTRON Integrated Report 2021

46

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

ComplianceApproach 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.

Message from the Chairman of the Board

Further Pursuit of Board
Effectiveness and Strengthening ofGovernance Structure Are theFoundation for Enhancement ofCorporate Value

Compliance System
In order to effectively promote a global compliance program, we
have appointed a Chief Compliance Officer (CCO) andestablished a dedicated Compliance Department at ourheadquarters. Additionally, people responsible for compliance(Regional Compliance Controllers) have been appointed at key
overseas sites, creating a system for direct reporting to the Chief
Compliance Officer and Compliance Department.

Tetsuo Tsuneishi
Corporate Director
Chairman of the Board

The most important duty of Tokyo Electron’s Board of
Directors is making decisions on important matters towardenhancing short-, medium- and long-term shareholder value.
In fiscal 2021, we achieved the highest net sales and operating
income in our corporate history. This was due in large part tothe tremendous effort of our executive management andemployees. At the same time, I also recognize that the Boardof Directors maintained a high level of effectiveness andmade decisions on important directions and strategies afterwide-ranging discussions, all of which also contributed to ourgood performance.
Priority issues for further growth, medium- to long-term
management strategies and initiatives regarding
sustainability were also discussed and deliberated in depth. All
corporate directors and Audit & Supervisory Board members
engaged in discussions based on their diverse insights andexperience with a global perspective and strong awareness ofTokyo Electron’s corporate culture to arrive at our directions
for growth and many important resolutions.
Through our discussions about short-, medium- and longterm value creation, we made the decision to issue theIntegrated Report starting from this year in addition to ourannual Sustainability Report to allow us to accurately
communicate these initiatives to our stakeholders.

Japan’s Corporate Governance Code was revised in June 2021,
and the Tokyo Stock Exchange will also be carrying out atransition to new market segments (Prime, Standard and
Growth) in April 2022. To further improve the effectivenessof the Board of Directors, we are also working on initiatives
for the new recommended items in the revised Corporate
Governance Code. Together with the introduction of a skills
matrix for corporate directors, we are also overseeing
successor training plans as appropriate. In addition, we seek
to strengthen diversity by positioning the development andappointment of global human resources and the promotionof gender diversity as key issues that must be addressed. As
for the important matter of risk management, we will
broadly identify risks on a company-wide basis, including
overseas sites, and respond to them appropriately. At thesame time, we will evolve and further strengthen ourGroup’s governance.
To correctly grasp the trends of the rapidly growing global ICT
industry, meet the expectations of the capital market, achievesustainable growth and improve our medium- to long-term
corporate value, our Board of Directors will undertake
management with world-class effectiveness so as to always
make the best decisions at the right time regarding importantmanagement issues.

Compliance Initiatives
Business Ethics
In addition to establishing the Code of Ethics as standards ofconduct by which executives and employees should abide anddistributing it in the form of booklets, we also strive forunderstanding and awareness by regularly obtaining
confirmation of compliance from all executives and employees.
In fiscal 2021, we made a full-fledged revision on the content towhat is required as a global company and changed the booklet
design to make it easier to understand.

Initiatives for Anti-Bribery and Corruption and forCompetition Laws
We have established the “Global Anti-Bribery and Corruption
Policy” as well as the “Gifts and Entertainment Guidelines”, andthe “Global Competition Law Policy” and the “Guidelines”. In
addition, we also regularly conduct training to promote
understanding and awareness.
Internal Reporting System
Preventing problems from occurring and resolving them before
they become significant requires a system that allows employees
to raise questions and concerns about business ethics andcompliance without reservation or hesitation and to discussthem fully. For this reason, we have established an internalreporting system that ensures complete confidentiality,
anonymity and the prohibition of retribution, so that employees
can safely and reassuringly provide information and seek redress
outside the chain of command about behavior that is, or may be,in violation of 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.
Reports and consultations received via these points ofcontact are handled with sincerity and investigations areundertaken in accordance with internal regulations. If acompliance violation is found, disciplinary action is taken inaccordance with the Rules of Employment, and preventive
measures and corrective measures, such as improvements to theworkplace environment, are implemented as necessary.

Response to Internal Reports
Board of Directors
Audit & Supervisory Board Member

Third-party System
Report/Consult
Progress/Results Report

Information
ProvidersInternal Pointof Contact

NoticeProgress/Results Report

Follow-up
Redress
Report/Consult
Progress/Results Report
Follow-up

External Pointof Contact(Outside Law Firm)

ReportCompliance
ReportDepartment/
Legal, Compliance
Division of each
Overseas
Subsidiary

Representative Director, President & CEO
GM of Legal, Compliance Unit
Chief Compliance Officer

Report/Consult

Request for Investigation/
Corrective and Preventative Action

Report/Consult

Progress/Results Report

Relevant Divisions, etc.

Corporate Director
Chairman of the Board

47 TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

48

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Risk Management

Item

Approach to Risk Management
Reflecting changes in society and the business environment, therisks facing businesses are growing increasingly complex anddiverse. Tokyo Electron considers understanding andappropriately addressing the risks that it may face in its
businesses, as well as their impacts, to be essential to its
sustainable growth.

management activities throughout our Group, we will implement
risk management that is more effective than ever before.
1 Enterprise risk management: Group-wide systems and processes related to risk
management activities

4. Procurement,
Production and Supply

2 CSA: Control Self-Assessment. Internal risks and controls are evaluated and monitoredby those who are actually performing the duties with the goal of building andmaintaining an autonomous risk management system.

5. Safety

Risk Management System and Initiatives
In order to promote more effective risk management, we carryout enterprise risk management1 through a body establishedwithin the General Affairs Department at our headquarters. Thisbody works with the respective departments responsible foreach operation to identify a wide range of risks arising in businessactivities, such as compliance risk, human resource and labor risk,
and business continuity risk. It then classifies risks with highimpact and probability as our key risks.
The body also formulates and executes measures to minimize
these key risks, monitors the effect of said measures, as well asworks to understand the status of risk control, and implements
the PDCA cycle for risk management.
In fiscal 2021 we introduced CSA2 and started a risk
management committee. We will continue these activities going
forward. By continuing to strengthen and progress risk

Item

1. Market Fluctuations

2. Geopolitics

3. Research and Development

Auditing by the Internal Audit Department
The Global Audit Center serves as the internal audit department
for the entire Group and implements audits based on the audit
plan. Based on the results of these audits, it provides instructions
for making improvements as needed, confirms the progress ofthese improvements, and provides any necessary support. The
Group’s internal control over financial reporting in fiscal 2021 wasalso evaluated as effective by the independent auditors.
Risk Management Initiatives
We conduct Group-wide reviews to identify the current status ofrisk management as well as any potential and actual risks
surrounding the Company in the future. Based on the results of
the reviews, we have identified the following 13 risks as having
potential to cause significant issues to our financial condition,
operating results and cash flows, and are working to address them.

Main Potential Risks

Main Risk Management Initiatives

Rapid contraction of the semiconductor market
could lead to overproduction or an increase in deadinventory. In addition, a rapid 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 Board of Directors and other important meetings,
and appropriately adjust capital investments, personnel/
inventory planning and other aspects of businessInitiatives made by an individual country or region
from such perspectives as industrial policy, national
security or environmental policy in shifting todomestic production of semiconductor-related
businesses, strengthening policies prioritizing
domestically manufactured products or tighteningof export controls and environmental laws andregulations could lead to restrictions on businessactivities• Carefully watch policy and diplomatic trends tounderstand moves to introduce regulations

Delays in the launch of new products or the mismatchof such products with customer needs could lead to a
decline in the competitiveness of products• Establish the Corporate Innovation Division, and build
a Group-wide development framework that integrates
innovative technological development with thetechnologies of each development division• Account Sales Division and Global Sales Division tostrengthen the sales framework and customer base by
grasping investment trends of customers and responding
to a wide range of customer needs• Communicate opinions to policy-making authorities suchas through public comment, and anticipate the impact ofdifferent countries introducing polices and regulations,and consider countermeasures• Provide highly competitive next-generation productsahead of competitors through collaborating with research
institutions and sharing a technology roadmap spanning
multiple generations with leading-edge customers

Main Potential Risks

Main Risk Management Initiatives

Interruptions in production due to a natural disasteror delays in component procurement due todeterioration in the business conditions of a supplieror an increase in demand that exceeds the supplier’s
supply capacity could lead to delays in the supply of
products to customers• Formulate BCPs, establish alternate production
capabilities, develop multiple sources of important parts,
seismically reinforce plants, etc.

Safety-related problems with the Company’s
products could lead to damages suffered bycustomers, liability for damages and a decline incredibility•B ased on the “Safety First”3 approach, thoroughly
implement safety design at the product development
stage, promote safety training and establish a reporting
system in the event of an accident

The occurrence of a product defect could lead toliability for damages, costs for countermeasures anda decline in credibility•E stablish a quality assurance system and a world-classservice system

6. Quality• Build a system for the stable supply of products by
sharing forecasts based on demand projections with
suppliers to ensure the early procurement of parts andproduction leveling•R esolve technical issues from the product development
and design stage• Investigate the cause of any defects and implement
measures to prevent the same or similar defects fromoccurring•M onitor the quality status of suppliers, conduct audits
and provide support for improvement• Monitor compliance activities at key sites in and outside
Japan under the direction of the Chief Compliance Officer

7. Laws and Regulations

Violations of the laws and regulations of the countries
and regions where the Company does business could
lead to diminished public confidence in the Company,
fines, liability for damages or restrictions on businessactivities

8. Intellectual Property Rights

The inability to obtain exclusive rights to proprietary
technologies could lead to reduced productcompetitiveness. Furthermore, infringement of theintellectual property rights of third parties could leadto liability for damages• Advance the R&D strategy, business strategy andintellectual property strategy in an integrated manner tobuild an appropriate intellectual property portfolio

Breaches of information or the suspension of services
due to unauthorized access by cyberattack, natural
disasters or other factors could lead to diminishedpublic confidence in the Company or liability fordamages• Establish an information security system that conforms
to global standards by launching a dedicated security
organization and having security assessments conductedby external experts

The inability to recruit and retain necessary humanresources on an ongoing basis or the inability tocreate 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•M ake ongoing improvements to work environments andpromote health and productivity management, including
having top management share direction through regular
employee meetings, establishing training plans for the
next generation of human resources, visualizing career
paths for employees and offering attractive remuneration
and benefits

The inability to respond appropriately to eachcountry’s climate change policies, environmental
laws and regulations, and customer needs could leadto additional related costs such as for developing
new products or changing specifications, as well as
to reduced product competitiveness and diminishedpublic confidence in the Company• S et industry-leading medium- to long-term
environmental goals4

The spread of COVID-19 could slow the Company’sbusiness activities or lead to the deterioration of
global economic conditions• Establish an Emergency Task Force headed by the CEO

Business could be influenced by global and regional
political conditions, economic conditions, financial
and stock markets, foreign exchange fluctuations andother factors• Take necessary measures to counter such risks

9. Information Security

10. Human Resources

11. Environmental Issues

12. T he Novel Coronavirus(COVID-19)

13. Other Risks• Have assessments conducted by external experts andreport identified issues to the CEO, Board of Directors andAudit & Supervisory Board for swift and effective action• Establish globally standardized rules and regulations for
information management• Reduce greenhouse gas emissions from product use.
Reduce overall energy consumption and increase theratio of renewable energy used at plants and offices• Provide technologies that help reduce the power
consumption of semiconductors• Restrict travel to high infection-risk countries and regions,maintain supply chains and thoroughly implement
infection prevention measures at plants and offices

3 Safety First: Company slogan that prioritizes the safety of every person connected with our business activities
4 Refer to Medium- and Long-term Environmental Goals on p. 35

49 TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

50

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Information Security

Engagement with Capital Markets

As the data society develops and the importance of information security increases, we take active measures to use data including digitaltransformation and achieve information security effectively.

Our management actively engages in Investor Relations (IR) and
Shareholder Relations (SR) activities to contribute to oursustainable growth and increase corporate value over the
medium to long term. The Chairman of the Board, CEO andcorporate director in charge of finance serve as spokespersons as
required at IR conferences in and outside Japan and strive toengage directly with investors. In addition to holding quarterly
earnings release conferences, we actively share our businessstrategies and growth story at the Medium-term Management
Plan briefings and on IR day.
The IR Department, which was established under the directcontrol of the CEO, also appropriately supplements the
explanation through individual interviews and regularly reports
opinions from investors to management so that feedback can beof use in management.

Main activities

Creating information security systems

Establishment of global rules

We established a system centered around theVice President and General Manager,
Information Security, and are implementing
integrated security measures on a global scale.

We established global standardized
information security rules and regularly
conduct checks on compliance status andprovide education for all relevant parties.

Supply chain security

Information security management
We identify risks by conducting periodic risk
assessments and internal audits and implement
technological, human, organizational andphysical security measures.

We respond to customer requests and monitor
the status of security at suppliers so that we
can securely use confidential information andcustomer information in our business activities
without compromising utility.

Responses to security threats

Increasing resilience

To respond to cyberattacks and information
leaks, which are major security threats in modern
society, we actively introduce advanced
technologies and have specialized organizations
create systems to establish mechanisms forreliable monitoring.

To prepare for the occurrence of security
incidents, we established a specialized incident
response organization and have establishedsystems so that we can share incident
information at an early stage and promptly
respond and recover.

24

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

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

Human/Organizations

Technology

PhysicalMinimization ofdamage when an
incident occurs

Do

Act

Check

24

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 check the link for the logo's disclaimer. www.tel.com/csr/review/
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 researchcompany Sustainalytics.

Supply Chain
Security
Customers

Our sustainability initiatives have received high appraisal from
evaluation organizations around the world. We have continued
to be selected as a constituent stock under leading global ESG
investment indices, including the DJSI1 Asia Pacific Index,
FTSE4Good Index2 and MSCI World ESG Leaders Indexes3,
Euronext Vigeo World 120 Index4 and STOXX Global ESG Leaders
indices5, and in 2021, we were also rated as a low-risk company in
Sustainalytics’ ESG Risk Ratings6.
We also ranked number 1 among Japanese companies in thesecond ROESG Rankings7 (2020 edition) implemented by Nikkei
Inc. and QUICK Corp. ESG Research Center, with our superior
capital efficiency and dedication to ESG engagement earning asignificantly high score.
Additionally, all Group companies operating in Japan once
again received recognition as top 500 companies under the 2021
Certified Health & Productivity Management Outstanding
Organizations Recognition Program8.

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

Strengthen/Improve

Plan

Evaluation from Third-party Institutions

1 DJSI: Dow Jones Sustainability Indices. An ESG (environmental, social and governance) investment index of S&P Dow Jones Indices LLC. The DJSI Asia Pacific covers companies in that region.

Incident Response Organization
Information Security
Committees at eachcompany

As a part of our shareholder relations activities, company
executives play a central role in active and constructive
dialogue with our major institutional investors and proxyadvisory firms. In addition to explaining the Shareholders’Meeting agenda, we continuously engage in dialogue on a wide
range of topics including the business environment, ESG andsustainability initiatives, and respond to business risks andopportunities including social and environmental issues in orderto deepen mutual understanding. To encourage active
discussion and facilitate smooth and efficient voting at
Shareholders’ Meetings, we send convocation notices at an
early stage and also post the notice in both Japanese andEnglish on our website to provide information to shareholders
in a timely manner. In addition, we analyze the results of theexercise of voting rights and report to the Board of Directors tofurther enhance engagement with investors.

Suppliers

6 Sustainalytics’ ESG Risk Ratings: An ESG risk measured for institutional investors by Sustainalytics in the Netherlands. The rating is based on a company’s exposure to industry-specificmaterial ESG risks and how well a company is managing those risks.
Copyright ©2021 Sustainalytics. All rights reserved. This article contains information developed by Sustainalytics (www.sustainalytics.com). Such information and data are proprietaryof Sustainalytics and/or its third party suppliers (Third Party Data) and are 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 be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions available at https://www.
sustainalytics.com/legal-disclaimers.
7 Nihon Keizai Shimbun, March 29, 2021. ROESG: An integrated index of management sustainability that integrates ROE, which is an indicator of capital efficiency, and ESG, a non-financial
index of sustainability.
8 Certified Health & Productivity Management Outstanding Organizations Recognition Program: The program publicly recognizes particularly outstanding organizations that arepracticing health-oriented business management, based on initiatives attuned to local health-related challenges and on health-promotion initiatives led by the Nippon Kenko Kaigi

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TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

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