TOKYO ELECTRONANNUALREPORT 2016
For the Year Ended March 31, 2016

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TOKYO ELECTRON ANNUAL REPORT 2016

1

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Contents

Guide to Buttons

ProﬁleTokyo Electron Limited (TEL™) is a world-leading supplier ofsemiconductor production equipment (SPE) and ﬂat panel
display (FPD) production equipment. We provide a broad lineup of products that offer superior process performance andhigh productivity and related services to semiconductor and
FPD manufacturers around the world.
An unwavering commitment to customer satisfactionthat dates back to our founding in 1963 has cemented our
position as a market leader. Our competitive strength lies inour capability to proactively and precisely identify real customer needs and respond to them with cutting-edge technology and products.
With a global network that spans Japan, the U.S., Europe
and Asia, we are opening up new frontiers for digital networks
by contributing to enhancing our customers’ production lines
through untiring dedication to technology innovation.

Disclaimer
Matters discussed in this annual report, including forecasts of future business performance of Tokyo Electron, management strategies, beliefs and other statements are
based on Tokyo Electron’s assumptions in light of information that is currently available. These forward-looking statements involve known or unknown risks, uncertainties and other factors that could cause actual results to differ materially from thosereferred to in the forward-looking statements.
Factors that have a direct or indirect impact on Tokyo Electron’s future performance include, but are not limited to:• Economic circumstances in Japan and overseas, consumption trends, and large ﬂuctuations in foreign exchange rates• Changes in semiconductor/FPD markets• Changes in the demand for products and services manufactured or offered by Tokyo
Electron’s customers, such as semiconductor manufacturers, FPD manufacturers andelectronics makers• Tokyo Electron’s capabilities to continue to develop and provide products and services
that respond to rapid technology innovation and changing customer needs in a timely
mannerFor details, please refer to Business-related and Other Risks on page 20.

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To Our Stakeholders

2

Business Overview

3

Consolidated Financial Highlights

4

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Medium-term Management Plan (Fiscal 2016-2020)

5

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Interview with the CEO

6

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Review of Operations and Business Outlook

9

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Sustainability
Message from the Chairman of the Board

10

Corporate Governance

11

CSR Operations

14

Directors, Audit & Supervisory Board Members andExecutive Officers

16

Financial Section

17

Consolidated Subsidiaries

34

Investor Information

34

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TOKYO ELECTRON ANNUAL REPORT 20162

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

To Our Stakeholders

To Our Stakeholders

Tetsuo Tsuneishi

Toshiki Kawai

Chairman of the Board

President & CEO

A Strong New Start for Tokyo Electron

To begin, we would like to express ourthanks for the continued understanding and support of our investors andall of Tokyo Electron’s stakeholders.
Looking back at 2015, the global economy continued to gradually recover,although economic growth in China
and other emerging countries slowed.
In the electronics industry, demand
grew for higher capacity memory formobile devices as well as for semiconductors used in data centers, reﬂecting
the further sophistication of mobile
devices and spread of cloud services.
Capital investment by semiconductor
manufactures was ﬁrm, driven by the
dawning internet of things as well assuch new forms of memory as 3D
structure devices and cutting-edge
logic semiconductors.
In this environment, Tokyo
Electron’s consolidated net sales grew
8% to ¥663.9 billion for ﬁscal 2016,
ended March 31, 2016. Consolidated
operating income rose 33% year on
year to ¥116.8 billion, and ROE rosefrom 11.8% in the previous ﬁscal year to
13.0%. We paid annual dividends of¥237 per share, surpassing the ﬁscal
2015 annual dividend, which had been
our highest ever. Tokyo Electron also
repurchased and cancelled treasury
stock (8.53% of issued shares before
the cancellation) to further increase
shareholder returns.
In terms of business strategy, weformulated a new medium-term management plan comprising growthstrategies aimed at reaching worldclass proﬁtability. Strengthening ofproduct competitiveness, responsiveness to customer needs and the proﬁt
structure are pillars of the plan. In ﬁscal 2020, assuming a wafer fab equipment market of US$37 billion, we aim
for consolidated net sales of ¥900 billion, a consolidated operating marginof 25% and ROE of 20%. To help us
achieve the goals of the medium-term
plan, we established the Tokyo
Electron Corporate Governance
Guidelines as our policy for building aproactive corporate governance system. With this and other efforts, in ﬁscal 2016, we took strong ﬁrst steps
toward our goal of achieving worldclass proﬁtability.
Our medium-term vision is to be atruly global company generating highadded value and proﬁts in the semiconductor and ﬂat panel display
industries through innovative technologies and groundbreaking proactive
solutions that integrate diverse technologies. In line with this vision, we
will focus our full energies on continuously increasing our corporate value.
We look forward to your continued
support and conﬁdence as we advancethese endeavors.
June 2016

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TOKYO ELECTRON ANNUAL REPORT 20163

CONTENTS

To Our Stakeholders

Business Overview

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Consolidated Financial Highlights

Business Overview
Summary of Business

Semiconductor
Production
Equipment

FPD
Production
Equipment

Semiconductor devices are broadly used in mobile
devices, such as smartphones and tablets, as well as thedata center servers that are indispensable to the use of
big data. Going forward, with the arrival of the internetof things, semiconductor applications will expand acrossall ﬁelds, from consumer electronics and automobiles to
medicine and healthcare. Tokyo Electron provides semiconductor production equipment used to manufacturesuch semiconductors along with superior technical support and service. Our main product lineup includes coater/developers, plasma etch systems, thermal processing
systems, single wafer deposition systems and cleaningsystems used in wafer processing. Other products
include wafer probers used in the wafer testing process
as well as electrochemical deposition systems and wafer
bonders/debonders used in advanced packaging processes.

Flat panel displays (FPDs) are employed in a wide variety
of products, from TVs and mobile devices including
smartphones and tablets to digital signage for advertising. Tokyo Electron supplies coater/developers and plasma etch/ash systems for manufacturing FPDs alongwith solid technical support and service. We also offer an
inkjet printing system for manufacturing OLED panels
using large-sized substrates to take advantage of the
expanding OLED display market.

Main Products

Sales by Region

Coater/Developers
Plasma Etch System
Thermal Processing System

Coater/Developers
CLEAN TRACK™
LITHIUS Pro™ Z

Single Wafer Deposition System
Cleaning System
Wafer Prober

Plasma Etch System
Tactras™

China

Southeast Asia

19.0%

North America

16.9%

ALD System
NT333™
EuropeTaiwanSingle Wafer Cleaning System
CELLESTA™ -i

16.2%

26.4%

Japan

Overseas

FPD Plasma Etch/Ash System
Impressio™

8.3%

Wafer Prober
Precio™ XLFPD Coater/Developers
FPD Plasma Etch/Ash System
Inkjet Printing System for Manufacturing OLED Panels

FPD Coater/Developers
Exceliner™

2.8%

Japan

South Korea

Single Wafer Deposition System
Triase + ™

10.4%

Inkjet Printing System for
Manufacturing OLED Panels
Elius™ 2500

11.4 %

88.6 %

PAGE

TOKYO ELECTRON ANNUAL REPORT 20164

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Business Overview

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Consolidated Financial Highlights

Consolidated Financial Highlights
Fiscal 2016 Results

Net Sales

Gross Profit Margin

663.9

40.2

Billions of yen

Operating Margin

EPS

17.6

%

461.10%

Yen

Grew revenue and profit for third consecutive period
Achieved record-high gross profit margin
Net Sales and Gross Proﬁt Margin

Operating Income andOperating Margin(Yen)(Billions of yen)(Billions of yen)

800

100

150

15

600

80

120

(%)

(Billions of yen)

20

80

77.9

33.0
613.1

600

116.8

16

60

11.7

663.9
30

90

20

60

88.1

Shareholder Returns

144.7
105.5

7 1.9

17.6
14.4

Paid record-high dividends for second consecutive period
Acquired and cancelled ¥105.5 billion in treasury stock

20(Billions of yen)

150

120

Billions of yen

(%)

(%)

40

144.7

Free Cash Flow

50

40.2

Billions of yen

EPS

1,000

39.6

60.4

Shareholder Returns

Net Income (Loss) Attributable to Ownersof Parent and Net Income Margin(Billions of yen)

800

Free Cash Flow

11.7

461.10

12

40

10

400

8

20

5

200

401.08

64.2

60

60.4

90

612.2
400

40

200

10

60

33.4

5.3
30

4

0

0

-20

-19.4

0

0

-5

-200

20

30

0

0

32.2
0

0

14
Net Sales

15

0

14

16

Gross Proﬁt Margin

Operating Income

15

-3.2

16

14

Operating Margin

Net Sales per Employee

Selling, General and Administrative
Expenses and Ratio to Net Sales

15

14

15

14

16

15

16

Free cash ﬂow = Cash ﬂows from operating activities +Cash ﬂows from investing activities (excluding changes
in deposits with maturities of more than three months)

Net Income (Loss) Attributable to Owners of Parent
Net Income Margin

R&D Expenses and Ratio to Net Sales

ROE

39.2

15

16

9.0

-108.31

16

25.6

14
Cash Dividends

Share Repurchases

Capital Expenditures andDepreciation and Amortization

Equity and Equity Ratio(Millions of yen)(Billions of yen)(%)(Billions of yen)

(%)

(%)

(Billions of yen)(Billions of yen)

(%)

100

200

50

100

15

20

30

1,000

100

80

160

40

80

12

15

12.8

169.7
154.7

150.4

11.6
78.7

60

57

62

120

30

60

20

71.3

11.5
76.3

1 1.8

13.0

24.9

24

800

9

10

18

40

6

5

12

19.3

50
40

80

27.7

25.2

40

10

20

3

0

0

0

0

0

0

-5

15

16

* The above graphs show data for ﬁscal years ended March 31.

14

15

12.8

13.2

13.3

600

578.1

73.0

80

70.9

639.5
562.4

60

400

40

6

200

20

0

0

0

22.6

20

14

69.8

20.9

16

14

15

Selling, General and Administrative Expenses

R&D Expenses

Ratio of SG&A Expenses to Net Sales

Ratio of R&D Expenses to Net Sales

16

-3.3
14

15

16

14
Capital Expenditures15

16

Depreciation and Amortization

14
Equity15
Equity Ratio

16

PAGE

TOKYO ELECTRON ANNUAL REPORT 2016

5

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Medium-term Management Plan (Fiscal 2016-2020)

Sustainability

Financial Section

Corporate Data

Interview with the CEO

Medium-term Management Plan (Fiscal 2016-2020)

VisionA truly global company generating high added value and proﬁts in the semiconductor and ﬂat panel display industries through innovative technologies and groundbreaking proactive solutions that integrate diverse technologies.

Medium-term Management Plan (Fiscal 2016-2020)

Management Policy

A New Beginning forTokyo Electron
Becoming Truly Global• Strengthen business and technological platforms to aim for world-class proﬁtability.
• Respond to changes in the market environment and customer needs, grasp the true needs of customers, and generate demand by offering timely solutions that combine Tokyo Electron’s technological strengths.

Executive Framework

Operating margin: 20-25%
ROE: 15-20%• Powerful executive framework under the new CEO• Corporate senior staff (CSS) that enable swift business execution• Bringing broad perspectives into management, including younger members• Actively utilizing global talent

Main Measures
Tokyo Electron will achieve world-class proﬁtability through sales expansion that outpaces market growth andgreater operational efficiency.

Medium-term Business Targets
Three Areas for Improvement
Tokyo Electron aims to achieve world-class proﬁtability within our industry by attaining an operating margin of
25% and ROE of 20% by ﬁscal 2020, assuming a wafer fab equipment market size of US$37 billion.
In light of the rapidly changing nature of the markets we serve, we are working to build a structure that will
even sustain an operating margin of 20% and ROE of 15% if the market contracts to US$30 billion.

Fiscal 2016

Fiscal 2020
(Medium-term Management Plan)

Wafer fab equipment market size

US$31.5 billion

US$37 billion

US$30 billion

Net sales¥663.9 billion¥900 billion¥720 billion

40.2%

44%

42%

¥150.4 billion¥ 1 70 billion¥160 billion

22.6%

1 9%

22%

¥ 1 1 6.8 billion¥225 billion¥1 45 billion

1 7 .6%25%

20%¥ 77.9 billion¥ 1 5 5 billion¥100 billion

1 3 .0%20%

1 5%

Gross proﬁt margin
Selling, general and administrative expenses
Ratio of SG&A expenses to net sales
Operating income

Operating margin
Net income attributable owners of parent

ROE

Reorganization centered on strengthening development divisions
to better offer next-generation technology solutions

World-Class Proﬁtability• Provide solutions combining cutting-edge technologies• Reevaluate development priorities and focus resources on key areas(etching, deposition and cleaning systems)• Assign account technology general managers for each customer
Expand the ﬁeld solutions business (used equipment sales,

Greater productcompetitivenessupgrades and various other services) by leveraging Tokyo Electron’s
installed base—among the highest in the industry—and providing
solutions to needs presented by the internet of things.

Greater
responsivenessto customers

Greater
operational
efficiency

PAGE

TOKYO ELECTRON ANNUAL REPORT 2016

6

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Medium-term Management Plan (Fiscal 2016-2020)

Sustainability

Financial Section

Corporate Data

Interview with the CEO

Interview with the CEO

VisionA truly global company
generating high added value and proﬁts inthe semiconductor and ﬂat panel display
industries through innovative technologies andgroundbreaking proactive solutions that
integrate diverse technologies.

Q1

From your new position as CEO, what do you see ahead for Tokyo
Electron’s businesses?
The semiconductor and ﬂat panel display (FPD)
production equipment industries are approachinga new phase of growth for which I have great
expectations. I am certain that we will be able touse this opportunity as a springboard for dramatic new growth to create a business structure withworld-class proﬁtability.
Semiconductor manufacturing technologies
are evolving every minute. Miniaturization technologies have now reached the 10 nanometerlevel. In addition to lithography and other existing
technologies that have steadfastly upheld
Moore’s Law, development of new semiconductor technologies, such as 3D structure devices
and the use of new materials, is advancing.
Customers are now looking for advanced semiconductor production technologies that combine
such cutting-edge technologies in complex andnovel ways. I think that breadth of Tokyo
Electron’s product lineup, one of the greatest inPAGETOKYO ELECTRON ANNUAL REPORT 20167

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Medium-term Management Plan (Fiscal 2016-2020)

Sustainability

Financial Section

Corporate Data

Interview with the CEO

Interview with the CEO
the industry, and our wealth of cutting-edge
technologies will serve as major strengths in creating such innovative technologies. Greater
demand for more sophisticated technologies
means greater opportunities for growth.
Furthermore, the full-ﬂedged arrival of theinternet of things (IoT), which will connect allkinds of devices and objects, is just around thecorner. This is expected to cause semiconductor
applications to rapidly expand, from conventional
uses in mobile and other electronics, to automobiles, healthcare, and virtually all other ﬁelds ofbusiness. In China, the world’s greatest consumer

Q2

As the IoT broadens semiconductor applications, new technological needs are
emerging in semiconductor manufacturing processes of all generationsof semiconductors, domestic production is
expected to grow, with both overseas and local
manufacturers expanding their production facilities in the country. I believe that the establishment of such new semiconductor manufacturingbases will present Tokyo Electron with excellent
opportunities for business expansion.
The continued evolution of semiconductors is
powered by semiconductor production equipment manufacturers. By continuing to provide
innovative technologies, I believe Tokyo Electron
can achieve greater growth than ever.

AI

How will you turn these expanded business opportunities into real
growth for the Company?
As technologies grow more advanced, there isgreater demand for solutions that take a comprehensive view of the whole semiconductor production process. I think it is important for Tokyo
Electron to not just improve the performance of
its existing individual products, but also to leverage its extensive product lineup to combine
advanced technologies across product categories.
By doing so, we will be able to speed development of next generation products that optimize
entire production processes.
Furthermore, the IoT will cause rapid growth insemiconductor applications in the near future. In
addition to the advanced semiconductors used in
mobile devices, data centers and artiﬁcial intelligence, there will be an enormous number of sensors and other simple semiconductor devices in all
kinds of everyday objects. With all these different
devices being used together, different generations
and technologies will increasingly be used along-side one another. Tokyo Electron’s delivered semiconductor production systems number over
59,000, among the highest installed bases in thesemiconductor production equipment industry.
This broadening of technological applications
therefore presents us with a chance to generate
income on par with the opportunities in cuttingedge technologies. We will steadily turn thischance into results by selling older generations ofequipment, offering upgrades and providing new
forms of service to increase customer productivity.
Based on these measures, we formulated the
medium-term management plan assuming a scenario in which we will be able to meet the medium-term ﬁnancial targets for ﬁscal 2020 of ¥900
billion in net sales, a 25% operating margin, and
20% ROE. We will further reinforce our strengths inproduct competitiveness and responsiveness tocustomers and achieve world-class proﬁtability.

MemoryQ3

Processors

Sensors

Strengthening product competitiveness and responsiveness tocustomers are pillars of the medium-term management plan.
How, specifically, do you intend to achieve these goals?
In my new position as CEO, I have had the chance
to take a fresh look at Tokyo Electron’s history.
Doing so has reaffirmed my belief that the driving
force behind the Company’s growth is its
advanced and diverse technological prowess thatgenerates innovation, the commitment to putting
customers ﬁrst passed down since its founding,and the Company’s trailblazing, future-oriented
spirit. To maximize these strengths and achieve

world-class proﬁtability, we have built a new operating structure, focusing on strengthening thedevelopment divisions.
We integrated Tokyo Electron’s development
divisions and reallocated resources. This was aimed
at effectively combining the Group’s many diverse
technologies, such as those related to wet and dry
cleaning, atmospheric and low-pressure deposition, plasma etching and temperature control, inPAGETOKYO ELECTRON ANNUAL REPORT 20168

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Medium-term Management Plan (Fiscal 2016-2020)

Sustainability

Financial Section

Corporate Data

Interview with the CEO

Interview with the CEO

Q5order to bring new products to market ahead of
the competition. We reevaluated our development
priorities, and are now focusing on strengthening
the areas of etching, deposition and cleaning systems, markets which are expected to grow.
Furthermore, we have assigned account technology general managers for each customer to help us
zero in on and quickly offer new proposals to meetQ4

the technological needs presented by the next
generation of products and generations to come.
Through these initiatives, we will seek to generate customer demand by creating and providing
products that surpass expectations. By also bolstering product competitiveness and operational
efficiency, we aim to achieve the ﬁnancial targetsof the medium-term management plan.

Please tell us about your management philosophy as CEO and thekind of company you think Tokyo Electron should aim to be.

Tokyo Electron generates steady cash flows. Please tell us
your thoughts about shareholder returns and how cash
should be used.
Our greatest priority is the development of newtechnologies for growth. The source of Tokyo
Electron’s proﬁts is the Company’s advanced technological capabilities that create innovation. As
such, our policy for using cash is now even more
focused on aggressive investment in R&D.
In terms of shareholder returns, beginning ﬁscal 2016, we have raised the payout ratio from
35% to 50%. As we aim for world-class proﬁtability, we feel that we must bolster returns to shareholders accordingly. Furthermore, with an eye toensuring stable dividends, we have set a lower
limit on annual dividends of ¥150 per share.* We
will also ﬂexibly consider stock repurchases, tak-ing a comprehensive view of such factors asneeded investment for growth, cash on hand andthe macroeconomic environment.
Fiscal 2016 annual dividends reached ¥237 pershare, a second consecutive record-high, due toincreases in the payout ratio and net income. The
Company also repurchased and cancelled stock(15,400,000 shares, or 8.53% of issued shares
before the cancellation). Going forward, we willcontinue working to maximize corporate value
and boost shareholder value through continuous
growth in proﬁt.
* This lower limit may be revised in the event that the Company does not
generate net income for two consecutive ﬁscal years.

New Policy for Shareholder Returns
As CEO, I want to do three things. These are providing returns to the shareholders who havetrusted and invested in the Company, helping our
employees and their families prosper, and contributing to industry and society.
To achieve these goals, we must create proﬁt.
The source of proﬁt is our technologies, and ourtechnologies are created by our employees. We
must therefore be a company where employees
are excited to work, where they can grow by taking
on ambitious goals, and where growth is rewarded
fairly. To this end, it is important that we maintainthe open and energetic corporate culture thatTokyo Electron has nurtured since its founding andcreate frameworks that allow each employee touse his or her abilities to the fullest. By broadening

the scope of compensation systems that objectively evaluate ability and contribution based on clearlydeﬁned roles and responsibilities, I believe we canhelp all employees become high performers. I wanteach employee to feel highly motivated to work
together toward big goals, thus fostering a dynamic culture of ambition and energy.
The proﬁts generated this way will feed a virtuous cycle to create new proﬁts, providing continuous returns to all stakeholders. By doing so,
we can contribute to the development of society
as a leader in the semiconductor and ﬂat panel
display production equipment markets. Working
toward these goals is my mission as a member ofTokyo Electron’s top management.

Dividend payout ratio: 50%
Annual DPS of not less than ¥150
We will review our dividend policy if the company does not generate net
income for two consecutive ﬁscal years

We will flexibly consider share buybacks

PAGE

TOKYO ELECTRON ANNUAL REPORT 20169

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Review of Operations and Business Outlook

Review of Operations and Business Outlook

Semiconductor Production Equipment
Share of Net SalesFPD Production Equipment

Business Environment

Share of Net Sales

Demand for ﬂat panel displays (FPDs) for both TVs and mobile devices each grew more than 10%

In 2015, demand for memory was ﬁrm. Speciﬁcally, demand grew for higher capacity memory as aresult of the ongoing sophistication of smartphones and data center servers, and global server(area basis) year on year in 2015. In these circumstances, capital investment in FPD production

6.7%

equipment for thin-ﬁlm transistor (TFT) array processes grew more than 20% year on year, driven

shipments increased. However, because PC and smartphone shipment volumes were less thanmainly by investment in small- and medium-sized panels. By region, capital investment in China

robust, demand for cutting-edge logic semiconductors was weak.
Net Sales

Net Sales

Given these circumstances, capital investment by foundries and logic chip manufacturers was¥ 613.0

was ﬁrm, and investment in Japan and Taiwan grew.

¥ 44.7more restrained than in the previous year, but capital investment by memory manufacturers grew.

billionBusiness Environment

billionInvestment in DRAM miniaturization grew signiﬁcantly, while the majority of investment in NAND

Business Overview

was aimed at new memory utilizing 3D structure. As a result, 2015 global capital investment in

92.3%

Segment net sales rose 36.6% to ¥44.7 billion.

wafer fab equipment held steady year on year, at US$31.5 billion.

By region, China continues to account for the majority of sales, but sales in Taiwan recovered.
Tokyo Electron’s etch systems, which have a competitive edge among products for highdeﬁnition, large-sized panels, gained market share.

Business Overview
Sales by Segment

Segment net sales grew 6.4% year on year to ¥613.0 billion, reﬂecting growth in sales ofdeposition and cleaning systems, which Tokyo Electron has been focusing on expanding.

(Billions of yen)

In deposition systems, a key part of Tokyo Electron’s growth strategy, sales of ALD* systems
for cutting-edge miniaturization grew by about 50% year on year.

800

Sales by Segment

80

Sales of cleaning systems grew by about 30% year on year, reﬂecting the steady development of business with customers of strategic products.
613.0
576.2

600

Business Outlook
69.9

Total area-basis FPD demand is forecast to continue expanding, reﬂecting rising average screen
sizes of televisions and smartphones. Going forward, OLED TVs and digital signage are also expect60

ed to see growth in usage.

Sales in the ﬁeld solutions business rose approximately 8% year on year, reﬂecting risingdemand for used equipment and parts certiﬁed by highly reputable equipment manufacturers.

478.8

477.9

By region, sales in Japan, China and Taiwan grew, reﬂecting booming investment in memory.

Sales of inkjet printing system for manufacturing OLED panels in customer’s development
lines were recorded.

(Billions of yen)

Under these circumstances, the overall market for FPD production equipment for TFT array pro44.7* ALD (Atomic Layer Deposition): An atomic level ﬁlm deposition technique

392.0

400

rising, and that for small- and medium-sized panels growing considerably.

40

Business Outlook

200

For large-sized panels, we will continue to increase sales of technologically superior etch sys-

32.7

tems compatible with metal oxide semiconductors—such as indium gallium zinc oxide (IGZO)—

28.3

With the arrival of the internet of things (IoT), simple semiconductors, such as sensors to collect allkinds of data, will be needed in great quantity, and demand for advanced semiconductors used inthat feature low power consumption and high resolution. In China, capital investment in
20.1

20

production lines for generation 10.5 ultra-large panels is planned. Using our track record in pro-

artiﬁcial intelligence (AI) and big data analytics and information processing is also expected to rise.

viding products for mass production of generation 10 panels, we aim to seize this opportunity toThis expansion of applications of both cutting-edge and older generations of semiconductors will

improve proﬁtability.

create new opportunities in the market for semiconductor production equipment, which is thus
expected to see ongoing growth in demand.

0

12

13

14

15

16

cesses is expected to see continued growth of 20%, with capital investment for large-sized panels

In products for cutting-edge semiconductors, Tokyo Electron will continue to effectively combine
its wealth of semiconductor technologies to accelerate the development and release of next gener-

At the same time, in small- and medium-sized panels, as the adoption of low-temperaturepolysilicon (LTPS) for high-deﬁnition panels continues, we aim to increase the market share of

0

12

13

14

15

16

our new etch system released last year that is energy efficient and signiﬁcantly improves process
uniformity.

ation products. As the miniaturization of circuits continues and we approach such technologicalIn terms of OLED displays, which are gathering attention for offering high contrast andinﬂection points as the adoption of 3D structure devices, we are especially focusing efforts on etch,enabling the adoption of ﬂexible displays, Tokyo Electron’s inkjet printing systems are being

deposition and cleaning systems, for which markets are expected to grow. Tokyo Electron aims to

adopted in the organic luminescent layer formation processes of customers’ development lines

ﬁrmly establish a leading position and raise its market share with differentiated, cutting-edge prod-

for large-sized panels. Going forward, we will continue to contribute to the panel manufacturingucts, such as etch systems that achieve high precision processing and deposition systems that real-technologies and productivity of our customers, aiming to promote the use of this product forize both exceptional productivity and ﬁlm quality.

mass production.

With regard to simple semiconductors produced with older generations of equipment, Tokyo
Electron will leverage its installed base of over 59,000 units—among the largest in the industry—
to swiftly meet demand for older equipment sales and upgrades. At the same time, we will offer
comprehensive solutions including parts and services to improve customer productivity. By doing
so, we will further increase sales in the ﬁeld solutions business.
By meeting needs related to both cutting-edge and older technologies, Tokyo Electron will contribute to the creation of the IoT while achieving continuous growth in sales and proﬁt.

PAGE

TOKYO ELECTRON ANNUAL REPORT 201610

CONTENTS

To Our Stakeholders

Business Overview

Message from the Chairman of the Board

Medium-term Management Plan
Interview with the CEO

Corporate Governance

CSR Operations

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Message from the Chairman of the Board

Proactive Governance for Sustainable Growth
Achieving Both Effective Decision Making and Oversight
Corporate governance has been growing in signiﬁcance since 2001, when a major U.S.
scandal involving corporate accounting fraud brought the issue to the public consciousness. In Japan, the Tokyo Stock Exchange’s Corporate Governance Code came into effectlast year. Under this new set of governance principles, all listed companies must disclose
their overall approach, speciﬁc measures and future policy with regard to each of thecode’s recommendations on a “comply or explain” basis. Our related disclosure is detailedon Tokyo Electron’s website. I invite all our stakeholders to take a look.
At Tokyo Electron, we aim to maintain and enhance our competitiveness at the cutting-edge of the global electronics and semiconductor industries. We will consider multiple
perspectives, spanning short to long horizons, to signiﬁcantly increase shareholder value
and achieve continued growth. Effective corporate governance is essential to achieving
these goals. Governance must comprise management structures, including the Board of
Directors and executive systems, that facilitate optimal, timely discussions and decision
making in light of changing conditions in relevant markets and beyond. As I see it, thebasic systems for increasing corporate value as quickly as possible form the foundation of
corporate governance. However, Tokyo Electron does not rely solely on such systems. In
addition, we strive to maintain a corporate culture in which employees act with initiative
and ambition and all stakeholders are treated with honesty and fairness. Tokyo Electron
has fostered this culture since its founding. It is both a source of pride and a notable element of the Company’s corporate governance.
Tokyo Electron was among the earliest companies in Japan to establish highly independent nomination and compensation committees within its Board of Directors. We have alsoestablished a ﬁve-member Audit & Supervisory Board that is independent of the Board of
Directors, creating a robust governance system. Furthermore, the Board of Directors comprises directors who serve concurrently as executive officers, directors who do not, and outside directors. Those who are concurrently executive officers bring expertise necessary tonavigate the particularities of the semiconductor and display industries. Their business execution is overseen and supported by the non-executive directors, who offer rich experiencein these industries. And Tokyo Electron’s outside directors possess rich management experience at other companies, not limited to the industries in which Tokyo Electron operates. I
JJune 2016

believe that our board is unique, reﬂecting the increased emphasis on diversity in recent
years, and its composition enables strong corporate governance.
As chairman of the board, I will continue do my utmost to make the Board of
Directors even more effective, striving to maintain and strengthen optimal governanceTetsuo Tsuneishi

that facilitates timely, appropriate business execution and oversight while emphasizing

Chairman of the Board

vigorous discussion and swift decision making.

Sustainability

PAGE

TOKYO ELECTRON ANNUAL REPORT 201611

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Message from the Chairman of the Board

Corporate Governance

CSR Operations

Review of Operations
and Business Outlook

Financial Section

Sustainability

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate Governance
Basic stanceIn an environment where over 80% of our sales come fromoverseas, Tokyo Electron regards building governance as
essential to becoming a truly global company that achieves
sustainable growth.
To that end, Tokyo Electron has built a framework to maximize the use of its worldwide resources and works to incorporate a wide range of opinions. In addition to strengthening its
management platform and technology base, the Company
maintains a governance structure that will enable it to attainworld-class proﬁtability.
Tokyo Electron uses the Audit & Supervisory Board System,
which consists of a Board of Directors and an Audit &Supervisory Board. Effective governance is achieved based on
the supervision of management by the Audit & Supervisory
Board.

Board of Directors
1. Roles and responsibilities of the Board of Directors
The Board of Directors works to achieve sustainable growth andincrease corporate value over the medium- to long-term basedon its ﬁduciary responsibility to shareholders. The roles andresponsibilities of the Board of Directors are as follows:(1 ) Establishing management strategy and vision(2) Making major operational decisions based on
strategic direction(3) Engaging in constructive, open-minded debate

The Board of Directors seeks the active participation of
those present in discussions in order to obtain a widerange of opinions, and supervises management and operational execution based on active debate.
The Board of Directors respects opinions even when
they are minority or opposing viewpoints, including opinions voiced by outside directors; revises the conditions for
implementation or the content of proposals as necessary;and engages in extensive debate with the goal of reachingdecisions based on consensus. However, emphasis is placedon making necessary decisions quickly to avoid missing
opportunities.
2. Board size and independent outside directors
Tokyo Electron considers it essential to maintain a Board of
Directors with the appropriate size to ensure high quality,
active debate and the diversity expected of both executive
directors and independent directors. The current Board of
Directors consists of 11 directors, and Tokyo Electron
believes this to be the appropriate size, at present, toachieve a good balance in terms of knowledge, experienceand skills.
Tokyo Electron regards the active expression of opinions,
not only by independent directors, but also by Audit &Supervisory Board Members, as the cornerstone that supports the sound decision-making of the Board of Directors.
Currently, ﬁve out of the 16 participants in the Board of
Directors meetings, including the Audit & Supervisory
Board Members, are outside members, consisting of two

Does Tokyo Electron have these major components of corporate governance?

independent directors and three outside Audit &Supervisory Board Members. Tokyo Electron believes thatthe current Board of Directors meetings achieve an appropriate sense of productive tension and constructive debate
due to the combined presence of executive directors,
essential for making operational decisions, and outside
members, who provide objectivity.
3. Nominations for Director and CEO
Tokyo Electron has established a Nomination Committee toensure fairness and efficiency in management. The
Nomination Committee proposes director candidates tothe Board of Directors prior to their election at the General
Meeting of Shareholders and also nominates CEO candidates for appointment by the Board of Directors. No representative directors, including the CEO, are members of theNomination Committee, and the authority to propose election or dismissal of the CEO or directors is entrusted to a
Nomination Committee member.

Message from theOutside Directors

This year marks a new start for Tokyo Electron.
From my outside perspective, the Company’s transition to a neworganizational structure appears to be going extremely smoothly.
Tokyo Electron’s new president and CEO, Toshiki Kawai, has made agood start, thanks in part to the thoroughgoing efforts of Corporate
Advisor Tetsuro Higashi and Chairman Tetsuo Tsuneishi. While theplanned merger with Applied Materials last year ultimately did not workout, the process had the signiﬁcant positive effect of prompting deep
analysis of our competitor’s strengths and weaknesses.
Meeting evolving needs and engaging with new technologies is partof Tokyo Electron’s core mission. To survive and prosper, we must also
always maintain a global orientation. To this end, Tokyo Electron’s
employees must continue to commit fully to the Group’s Corporate
Principles and to achieving continuous growth to be even more global
and even more trusted.
Tokyo Electron’s new organization has not changed the transparent,
unrestrained nature of its Board of Directors’ meetings. I believe that
this level of sincerity and openness is the key to cultivating and maintaining highly effective corporate governance.
I hope to see Tokyo Electron reach new heights. I will do my part asbest I can to make that a reality.

Compensation Committee

Yes

Composed of directors, excluding representative
directors, or Audit & Supervisory Board Members

Nomination Committee

Yes

Composed of directors, excluding representative
directors, or Audit & Supervisory Board Members

Outside directors

Yes

Two of the 11 directors are outside directors

Outside Audit & Supervisory Board Members

Yes

Three of the ﬁve Audit & Supervisory Board Members
are outside Audit & Supervisory Board Members

Executive officer system

Yes

Disclosure of individual remuneration of representative directors

Yes

Performance-linked compensation system

Yes

Stock options system

Yes

Retirement allowance system for executives

No

Outside Director

Anti-takeover measures

No

Hiroshi Inoue

Disclosed since 1999

Does not apply to outside directors andAudit & Supervisory Board Members

4. Director and CEO compensation
Tokyo Electron aims to strengthen its global competitiveness and increase management transparency, adopting a
director and executive officer compensation system that isclosely linked to performance and shareholder value. The
compensation of directors and executive officers comprises
a ﬁxed monthly wage and an annual performance-linked
bonus.
The Compensation Committee, which comprises three ormore directors and includes at least one outside director,
performs an analysis of industry wage levels in and outside
Japan, accounting for both monetary and non-monetary
aspects of the total compensation package. Based on thiscomprehensive analysis, the committee proposes a policy
and system for director compensation to the Board of
Directors. The proposal includes speciﬁc amounts for individual compensation, including the CEO’s bonus.
In order to better link factors that increase corporate
value and shareholder value to compensation, Tokyo

PAGETOKYO ELECTRON ANNUAL REPORT 201612

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Message from the Chairman of the Board

Review of Operations
and Business Outlook

CSR Operations

Corporate Governance

Financial Section

Sustainability

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceElectron has designated the net income attributable toowners of the parent and return on equity (ROE) for thecurrent period as the main calculation benchmarks in theperformance-linked compensation system for the CEO andother directors. These are adjusted, as necessary, forextraordinary income/losses and other special factors.
In principle, performance-linked compensation consistsof monetary compensation and share-based compensation; the composition is roughly 1:1 for directors, and single
year performance is appropriately reﬂected in the performance-linked compensation of the CEO and other directors. Share-based compensation is awarded in the form ofstock options with the exercise price set at one yen per
share, and the restriction that they may not be exercisedfor three years from the date of allotment.

members and includes three outside Audit & Supervisory
Board Members. Three members, including one outside
member, are full-time. The full-time Audit & Supervisory
Board Members collect information through onsite surveys,
and the board maintains appropriate coordination with theInternal Audit Department and the independent auditors aspart of a structure that enables Audit & Supervisory Board
Members to obtain all information necessary for audits.
Moreover, the composition of Audit & Supervisory Board
Members provides a good balance of knowledge requiredfor operational audits and accounting audits, including
ﬁnancial and accounting knowledge, legal knowledge, andaudit experience at other companies. Tokyo Electron thus
believes its Audit & Supervisory Board Members are able toperform their auditing functions effectively.

5. Evaluation of the effectiveness of the Board of Directors
Each year, based on an evaluation survey ﬁlled out by the
Board of Directors and Audit & Supervisory Board members, the Board of the Directors discusses, analyzes andevaluates its own effectiveness, and discloses a summary of
the results.

Internal Control System and Risk Management

Audit & Supervisory Board
The Audit & Supervisory Board currently consists of ﬁve

Basic StanceIn order to enhance the Tokyo Electron Group’s corporate
value and remain accountable for our actions to our stakeholders, we are making efforts to strengthen effective
internal control. This involves implementing practical measures that are in line with the Fundamental Policies concerning Internal Controls within the Tokyo Electron Group,
set out by Tokyo Electron’s Board of Directors. We are also

Corporate Governance Framework, Internal Control System and Risk Management System
Shareholders' Meeting
Compensation Committee

Board of Directors Nomination Committee

Chief Business Ethics Director
Chief Internal Control Director
Chief CSR Promotion Director

Audit & Supervisory Board

Representative Directors

Request for improvement/Report

Committees

Conﬁrm the progress ofimprovements and give instructions

CSS & Executive Officers

Internal Audit Dept.
(Global Audit Center)

Ethics Committee
Information Security Committee
Export Trade Control Committee

CSR Management Council
CSR Global Promotion Committee

Request for improvement/Report

Audit

Risk Management & Internal Control Function(General Affairs Dept.)
Request for improvement/Report

Monitoring

Administrative Depts.

Cooperate

Audit and
improvement reports

Request for improvement/ReportCompliance & Internal Control Executive Officer
CSR Promotion Executive Officer

Independent Auditors
Cooperate

Check and balance

annually evaluating our internal control over ﬁnancial
reporting based on the Financial Instruments and Exchange
Act of Japan.

Based on this reevaluation, the Group is redeﬁning material
risks and clarifying each risk owner to enhance the efficacy
of its risk management framework.

Risk Management System
To more effectively strengthen the internal control and risk
management systems of the entire Group, Tokyo Electron has
established a dedicated risk management and internal control
function within the General Affairs Department of the corporate headquarters. This function manages and reduces risks
through appropriate measures, such as by analyzing the risks
that could affect the Group, and instructing responsible
departments to conduct self-assessments of major identiﬁed
risks. The function also regularly reports the status of risk
management activities to the Audit & Supervisory Board
Members and the Board of Directors.
In ﬁscal 2016, the Group thoroughly reevaluated thematerial risks surrounding its operating environment inorder to improve the effectiveness of its risk management.

Auditing by the Internal Audit Department
The Global Audit Center of the corporate headquarters is
the Group’s internal audit department. This Center is
responsible for auditing business activities, compliance andsystems at domestic and overseas Group companies andbusiness units (BUs) in accordance with each ﬁscal year’s
auditing plan. The Center also annually evaluates the effectiveness of the Group’s internal control over ﬁnancial
reporting based on the Financial Instruments and Exchange
Act of Japan.
At operating divisions where issues have been identiﬁed
through audits and assessments, the Center monitors progress and provides necessary guidance for improvement.

Message from theOutside Directors

Tokyo Electron has a strong reputation among market participants as
an early adopter of robust corporate governance systems in line with
global best practices. At the same time, stakeholder expectations continue to evolve amid an increasingly competitive global environment
and what could be described as historic geoeconomical changes.
Corporate governance in Japan is in a period of historic transformation. The adoption of Japan’s Corporate Governance Code, StewardshipCode, and the new benchmark JPX-Nikkei 400 has led investors to focus
more and more on companies’ business strategies in the context of agreater emphasis on return on equity (ROE) and the role of independent outside directors. In this regard, an effectively functioning corporate governance system is critical to enhancing understanding of andconﬁdence in Tokyo Electron with its operations throughout the world.
I believe the role of an independent outside director is to pay close
attention to global trends and, in addition to providing an independentand objective point of view, proactively raise issues and ask questions
regarding matters of importance to the Company, including topics that
may be difficult to debate within the organization. I hope to contributeto enhancing Tokyo Electron’s corporate value by fulﬁlling my responsibilities as an independent outside director and helping to further foster
the Company’s culture that promotes free and open discussion.
Outside Director

Business Depts.

Charles Ditmars Lake IIPAGETOKYO ELECTRON ANNUAL REPORT 201613

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Message from the Chairman of the Board

Corporate Governance

CSR Operations

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Corporate GovernanceBusiness Continuity Management
Since 2012, the Group has been improving its BusinessContinuity Plan (BCP) for large-scale earthquakes. The BCP
is being updated at the headquarters, local offices andplants so that it will work effectively in the event of a disaster, facilitating early recovery and alternate production.
In ﬁscal 2016, the Group focused on revising the manuals
and plans, as well as on implementing BCP drills andemployee education.
In addition, emphasis has been placed on improving early
emergency response with top priority given to securing
employee safety, including stockpiling emergency supplies(including food and drinking water), and reinforcing essential infrastructure. As a result of these preparedness initiatives, we were able to smoothly implement the BCP to
respond quickly to the Kumamoto Earthquake in April 2016.
Information Security Management
To ensure appropriate management and safe and effective
use of information assets, the Group has established aframework for preventing information leakage under the
Tokyo Electron Group Information Security Policy and theRegulation for Management of Technical and BusinessInformation. These rules have been disseminated globally
throughout the Group companies and are updated whenever necessary.
In order to strengthen information security, the Group isenhancing training and education for all of its executives
and employees worldwide. These programs ensure thatthey can protect technical and business data and abide by
the IT security rules.
Additionally, we have established a system for reporting
both actual and potential cases (incidents) of information
leakage. Such reports are critical in making quick responses,
and their analysis can offer valuable insights into improving
Group-wide measures to prevent leakage.

Business Ethics and Compliance
Basic Stance
Stakeholder trust is the cornerstone of business activities. In
order to maintain trust, it is necessary to continuously act inrigorous conformity to business ethics and compliance. Inline with the Fundamental Policies concerning Internal
Controls within the Tokyo Electron Group, all Group execu-

tives and employees are required to maintain high standardsof ethics and to act with a clear awareness of compliance.

and internal company rules, and consistently apply theserules in all of their activities.

Business Ethics
In 1998, Tokyo Electron formulated the Code of Ethics of theTokyo Electron Group to establish uniform standards to govern all of its global business activities. In the same year, theCompany appointed a Chief Business Ethics Director andestablished the Ethics Committee, which is responsible forpromoting business ethics awareness throughout the Tokyo
Electron Group. The Ethics Committee comprises the Chief
Business Ethics Director, the Ethics Committee Chairman,
and presidents of major Group companies in and outside
Japan. The members meet semiannually, report on ethicsrelated issues facing each company, and discuss measures tofurther improve ethical behavior and compliance.
The Code of Ethics is reviewed in response to changes inthe expectations of society. In January 2015, an anti-corruption statement was added to its introduction based on
Principle 10 of the UN Global Compact, which concerns
working against corruption including extortion and bribery. In
ﬁscal 2016, the Group reviewed its Code of Ethics in responseto the Code of Conduct of the EICC®*, an electronic industry
CSR consortium that the Group joined in June 2015.
The Tokyo Electron Group’s Code of Ethics and its Q&A
section are published in Japanese, English, Korean andChinese and disclosed on the intranet to enable all Group
executives and employees, including those overseas, to view
them at any time. The Code of Ethics is also publicly accessible from the corporate website.

Compliance Education
Through the Group’s e-learning system, we provide standard web-based training programs covering the basics ofcompliance, export-related compliance, protection of personal information, the Act for Subcontracting and othertopics. All executives and employees are required to complete this training. In addition, other web-based programs
tailored to speciﬁc positions and job roles are also available,
including those on insider trading and the Social Security
and Tax Number System.
We also have a quiz-based business ethics compliance education course for all Group executives and employees from ﬁscal
2014. Updated yearly, the quiz is intended to maintain compliance awareness throughout the Group and disseminate thelatest information.
In addition to these web-based courses, we organized

http://www.tel.com/environment/corp_governance/compliance/ethical.htm* EICC is a registered trademark of Electronic Industry Citizenship Coalition Incorporated.

Compliance System
Tokyo Electron has appointed a Compliance & Internal
Control Executive Officer from among its executive officers
to raise awareness of compliance across the Group and further improve Group-wide compliance. The Company has
also drawn up the Compliance Regulations, setting out
basic compliance-related requirements in line with theCode of Ethics. The Compliance Regulations are intended toensure that all individuals who take part in the businessactivities of the Tokyo Electron Group clearly understandthe pertinent laws and regulations, international standards

in-house seminars in ﬁscal 2016 for Corporate Directors anddomestic Group company presidents on the subjects ofcompliance and internal control.
Internal Reporting System
The Tokyo Electron Group has an internal reporting systemthat employees can use to report any activity suspected ofbeing in breach of laws, regulations or business ethics principles. An ethics hotline and a compliance hotline havebeen established to receive reports from all Group companies, and each overseas location also has its own reporting
system. In all instances, the system ensures that whistleblowers remain anonymous and are protected from any
disadvantage or repercussions.
There were no reports or cases of non-compliance withlaws, regulations, or principles of ethics in ﬁscal 2016 that
could have had a material impact on the Group’s businessor local communities.

I have closely followed the semiconductor production equipment industry
over the eight years I have served as an outside director on Tokyo Electron’s
Board of Directors. I am now certain that the Company’s greatest strength
stems from the firm trust customers place in Tokyo Electron.
To me, corporate management means working with customers to increasebusiness value and generate higher returns and then fairly distributing these
returns to stakeholders, including shareholders and employees.
With the popularization of the internet of things, semiconductor applications are on the verge of enormous change and expansion, deeply altering
the market landscape. Applications that used to target customers in relaOutside Director
tively specialized fields, such as niche products or control technologies, are
Masahiro Sakane
now beginning to expand in scope. They are finding uses across extremely
broad areas, spanning not just supply chains, but entire value chains.
As such, this is a time of great opportunity for Tokyo Electron. By capitalizing
on its strengths and working with customers to stay ahead of the curve as markets evolve, I hope to see Tokyo Electron markedly increase its corporate value.
Although I will leave the Board of Directors in June
2016, I am confident that Tokyo Electron will continue
producing results that meet the expectations of its
shareholders and other stakeholders. I would like tothank all of the Company’s stakeholders for your support over these eight years, and I look forward to seeing
the great things to come for Tokyo Electron.
Outside Director

Masahiro Sakane

Message from theOutside Directors

PAGE

TOKYO ELECTRON ANNUAL REPORT 201614

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Message from the Chairman of the Board

Corporate Governance

Review of Operations
and Business Outlook

CSR Operations

Sustainability

Financial Section

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

CSR Operations
Corporate Philosophy

We strive to contribute to the development of a dream-inspiring society
through our leading-edge technologies and reliable service and support.

Through business activities

Improvement ofcorporate value

Creation of new value

Advancement ofdream-inspiring
society

Sustainable operations

Contribution to the solution of social problems

Material issues

Tokyo Electron considers CSR to be the embodiment of its
Corporate Philosophy, which has been ﬁrmly upheld since
the Company’s founding. Tokyo Electron pursues sustainable operations from the viewpoints of corporate governance, legal and regulatory compliance and business ethics
while creating new value through its products and services.
Based on these efforts, the Company implements CSR
activities to help solve social problems. Tokyo Electron willcontinue to pursue CSR activities to build stakeholder trust,
improve corporate value and promote the growth of a sustainable and dream-inspiring society.

Stakeholder Communication

CSR Promotion Framework
Corporate
Philosophy
Management
Policies

CSR Policy
TEL Values

issues and promote improvement. Starting in ﬁscal 2017,
the Company semiannually convenes the CSR Management
Council, comprising CEO, corporate directors, and division
general managers. At the same time, the CSR Promotion
Committee has been reorganized into the CSR Global
Promotion Committee to further enhance CSR activities at
the global level.

Through the end of ﬁscal 2016, Tokyo Electron semiannuallyconvened a CSR Promotion Committee, consisting of the
Chief CSR Promotion Director, CSR Promotion Executive
Officer, and the heads of related departments. The
Committee discussed CSR, set goals, and checked the progress of ongoing action plans. Tokyo Electron held Monthly
CSR Meeting to share information about departmental CSR

Business activities are based on good communication withstakeholders and society at large. That is why Tokyo Electron
considers building stakeholder trust essential to its operations. Accordingly, the Company discloses information on the
progress of its initiatives and future direction of its businessin a fair and timely manner through regular brieﬁngs and its
corporate website. In addition, Tokyo Electron interacts withstakeholders on many occasions and through various contact points. This helps us accurately understand their viewsand expectations, and allows the Company to quickly reevaluate and adjust its course of business as appropriate.

Through these efforts, TEL is reducing the latent impact
of social and environmental issues on its business while
seeking to improve its competitiveness and market position
to maintain sustainable business operations.

Participation in International CSR Initiatives
Tokyo Electron performs CSR activities in line with global
standards and operates its businesses in a socially responsible manner throughout its supply chains. To address CSR
challenges from an even broader perspective, TEL is actively
engaged with global CSR initiatives, including the UN Global
Compact and the EICC, an electronic industry CSR alliance.

Stakeholder Communication

CSR Policy
Tokyo Electron has developed a CSR Policy that outlines the principles and values that form the foundation of its CSR activities.

Tokyo Electron’s key stakeholders
1

Corporate Activities

Tokyo Electron provides safe, high-quality products and services to customers around the world and works
toward the enrichment of society.

Divisions in charge

Key communication methods

Shareholders/investors

Management, IR

Earnings announcement (quarterly), medium-term management plan
brieﬁng, interviews, factory tours

Tokyo Electron acts in compliance with the laws and regulations of the countries in which it operates,
observes international regulations and acts in accordance with strict business ethics. We do not engage inany conduct that impedes fair and open market competition.

Customers

Sales, R&D, Marketing

Interviews, executive meetings, customer satisfaction survey (annual),Technology Conference

Respect for IndividualsTokyo Electron respects the character and individuality of each person. We value the diversity of employees,
share a strong sense of mission, and promote the development of a vibrant work environment.

Suppliers

Procurement, Materials

Production Update Brieﬁng (semiannual), Partners Day (annual), STQA*
audit, interviews

4

The Environment

Tokyo Electron seeks to achieve harmony with the global environment. By developing and providing ecofriendly products, we strive to reduce our own impact on the environment and help our customers reduce
theirs as well.

5

Communication
with Stakeholders

6

Social Contribution

2

3

Business Ethics* Supplier Total Quality Assessment

Employees

Management, HR

Employee meetings, Technology Conference, interviews, global engagement survey (annual)Tokyo Electron discloses information in a fair, impartial and timely manner; strives to engage in two-way
communications; and works to meet stakeholder expectations.

Local communities

Local management teams

Factory tours, participation in local activities, visits to/interviews withlocal authorities, social contribution activities

As a good corporate citizen, Tokyo Electron promotes the development of local communities and the betterment of society worldwide.

Governments/associations

Local management teams

Legal and regulatory compliance/notiﬁcation/monitoring/advocacy,industry group activities, alliances with external organizations

PAGETOKYO ELECTRON ANNUAL REPORT 201615

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Message from the Chairman of the Board

Corporate Governance

CSR Operations

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

CSR Operations
Identifying Material Issues

Promoting Dialog with Investors

Based on the expectations and requests communicated bystakeholders and on the social and environmental challenges surrounding the sustainability of its businesses,

Tokyo Electron has identiﬁed issues that are material to themedium- and long-term improvement of its corporate
value. Accordingly, CSR goals have been set to addressthese issues.

Fiscal 2017 CSR Goals
For the ﬁscal year ending March 2017, Tokyo Electron has set 16 goals related to 5 material issues and is working to achieve them.
Material issues

Enhancing productcompetitiveness

Reinforcing responsiveness tocustomers

ThemesGoals

Innovation

Maintain development costs at the ﬁscal 2016 level.

Environmental contribution of
products

Continue initiatives to reduce per-wafer consumption of energy and purewater by 10% by ﬁscal 2019 (as compared with ﬁscal 2014).

Customer satisfaction

Get 3 points or more on a 4.0 scale for every item in the customer satisfaction survey.

Quality

Implement PDCA training and disseminate the TEL6-Step model (8Dproblem solving method).

Information security

Ensure all target employees take a training course in information security.

Improve proﬁtability

See Medium-term Management Plan on page 5 for details.

Streamline operations

Keep the number of TPM programs at the ﬁscal 2016 level.

Create an invigorating workplace

Provide a work environment that supports continuous growth while ensuring performance-responsive, scrupulously fair treatment of employees.

Social contribution

Maintain the number of social contribution programs at the ﬁscal 2016 level.

Corporate governanceImprove the operation of the Board of Directors through annual effectiveness evaluations.

Compliance and ethics

Ensure all employees take training courses in business ethics and compliance.

Business continuity
management

Provide business continuity plan (BCP) training at principal manufacturing
sites and headquarters, revise the BCP manual and implement safety conﬁrmation system training (all to be performed annually).

Strengthening earnings power

Maximizing dreams and drive

Establishing sustainable
operations

SafetyEnvironmental management

TCIR*: Less than 0.5.
* Total Case Incident Rate (the number of workplace injuries per 200,000 work hours)• Reduce energy consumption by 1% on a per-unit basis* from the ﬁscal
2016 level.
• Maintain water consumption at the ﬁscal 2012 level (on a per-unit basis).
* Energy consumption (environmental burden) divided by values closely associated withenergy consumption, such as production volume, number of employees or total ﬂoor area.

Reinforce supply chain management through supply chain CSR assessment*.
Supply chain management* Targeted at high-ranking suppliers whose aggregate business with Tokyo Electron
accounts for 80% of its procurement.

Basic StanceTokyo Electron endeavors to provide opportunities for constructive dialog with growing numbers of investors aroundthe world to contribute to the Company’s sustainablegrowth and increase corporate value over the medium andlong term. Furthermore, to the extent that this is reasonable and possible, Tokyo Electron places emphasis on having the CEO and representative directors engage in direct
dialog with investors.
IR Activities
Striving to maintain dialog with investors, Tokyo Electron
appoints an executive officer in charge of IR and maintains
a dedicated Investor Relations Department under the directcontrol of the CEO.
Tokyo Electron holds earnings release conferences andmedium-term management plan brieﬁngs for securities
analysts and institutional investors with such speakers as
the CEO and the executive officer in charge of accounting.
The Group also participates in IR conferences in and outside
Japan, at which the executive officer in charge of IR speaks,
and holds individual meetings.
The spokespersons for the IR Department hold individual
meetings with investors and periodically relay the opinions
of investors at these events to the CEO and the executive
officer in charge of IR so that feedback can be of use inmanagement.

Shareholders’ Meeting
Tokyo Electron mails a Notice of Annual General Meeting of
Shareholders to shareholders more than three weeks inadvance of the meeting as one of its measures to vitalize
these meetings and to promote smooth and efficient voting. It also sets the date of the Company’s meeting to avoid
days on which many such meetings are concentrated.
In addition, shareholders are free to cast their votes via
the internet, and Tokyo Electron participates in the webbased voting platform for institutional investors operated
by ICJ, Inc.
To supplement the above shareholder meeting-related
initiatives, Tokyo Electron’s website carries the notices, resolutions, voting results and presentation materials of shareholders’ meetings.
For more details, please refer to the Tokyo Electron
Corporate Governance Guidelines, published in December
2015.
http://www.tel.com/ir/policy/cg/document/index_02.pdf

Constituent of the
FTSE4Good Global Index

Tokyo Electron has been a constituent of the FTSE4Good Global Index
since September 2003. The FTSE4Good Global Index is a social
responsibility investment (SRI) index provided by the FTSE Group,a world-leading index firm wholly owned by the London Stock Exchange.

PAGE

TOKYO ELECTRON ANNUAL REPORT 201616

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Message from the Chairman of the Board

Corporate Governance

Review of Operations
and Business Outlook

CSR Operations

Sustainability

Financial Section

Corporate Data

Directors, Audit & Supervisory Board Members and Executive Officers

Directors, Audit & Supervisory Board Members and Executive Officers (As of July 1, 2016)

Directors

Executive Officers
Toshiki Kawai

David BroughYoshifumi Tahara

President & CEO, GM, Business Division

SVP & GM, Global Strategy, Europe Region
President, Tokyo Electron Europe Ltd.

VP & Deputy GM, Development Division (Deposition,
ATS/FPD), Product Development Division
President, Tokyo Electron Yamanashi Ltd.

Sadao Sasaki

Tetsuo Tsuneishi

Toshiki Kawai

Sadao Sasaki

Tetsuro Hori

Gishi Chung

Corporate Director
Chairman of the Board

Representative Director
President & CEO

Representative Director

Representative Director
Internal Control

Corporate Director

EVP & GM, Development & Production Division,
Product Development Division, Deposition
President, Tokyo Electron Tohoku Ltd.

Seisu Ikeda (Yoh)Tetsuro Hori

SVP & GM, ATS BU

Tatsuya Nagakubo

Hirofumi Kitayama

Tetsuro Higashi

Corporate Director

Corporate Director
Business Ethics, CSR Promotion

Corporate Director

Corporate Director
Corporate Advisor

Kenji Washino

EVP & GM, Corporate Administration Division,
Accounting, Finance, Intellectual Property, Corporate
Strategy, IR, Compliance & Internal Control

Kiyoshi Sunohara

Gishi Chung

Tatsuya Nagakubo

SVP & GM, FS BU

SVP & Deputy GM, Development Division (Process),Innovative Technology Planning Division

VP & Deputy GM, Corporate Administration Division,
Human Resources & General Affairs, CSR Promotion

Masami Akimoto

Masahiko Hamajima

SVP & Deputy GM, Development Division (Coat &Clean)
President, Tokyo Electron Kyushu Ltd.

VP & GM, Corporate Strategy

Takeo Sasaki

Hideyuki Tsutsumi

Keisuke Koizumi

SVP & GM, Global Field Division

Masami Akimoto

SVP & GM, CTSPS BU

Takeshi Okubo
SVP & Deputy GM, Global Field Division

Barry Mayer
SVP & GM, Global Strategy
President, Tokyo Electron U.S. Holdings, Inc.

VP & GM, Legal, Export & Logistics Control
VP & GM, IT Division

Yutaka Nanasawa
VP & Deputy GM, IT Division
President, TEL Solar Services AG

Masayuki Kojima
VP & Deputy GM, Development Division (Etch)

Akihisa Sekiguchi
VP & GM, Advanced Semiconductor Technology Division

Kazushi Tahara
VP & Deputy GM, Production Division
President, Tokyo Electron India Private Ltd.

Toshihiko Nishigaki
VP & GM, Business Innovation
President, TEL FSI, Inc.

Yoshinobu Mitano
VP & GM, ES BU

Shingo Tada
VP & GM, Thin Film Formation BU

Tsuguhiko Matsuura
VP & GM, FPD BU

Yoshiaki Horii
VP & GM, Planning of Region Strategy Division

Takao Sasaki
VP & Deputy GM, Global Field Division, Production
Division (Corporate Safety)
President, Tokyo Electron FE Ltd.
EVP : Executive Vice President
SVP : Senior Vice President

Hiroshi Inoue*

Charles Ditmars Lake II*

Corporate Director
Honorary Chairman, Tokyo
Broadcasting System Holdings, Inc.

Corporate Director
Chairman and Representative in Japan, American Family Life Assurance Company (Aﬂac Japan)
President, Aﬂac International, Incorporated* Outside Director

Audit & Supervisory Board Members

Yoshiteru Harada

Shojiro Mori

Mikio Akaishi*

Takatoshi Yamamoto*Ryuji Sakai*

Audit & Supervisory Board
MemberAudit & Supervisory Board
MemberAudit & Supervisory Board
MemberAudit & Supervisory Board
MemberAudit & Supervisory Board
Member / Attorney at law,
Nagashima Ohno & Tsunematsu* Outside Audit & Supervisory Board Member

VP : Vice President
GM : General Manager

PAGETOKYO ELECTRON ANNUAL REPORT 201617

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Sustainability

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review
Results of the Company’s R&D efforts included the release

SPE and FPD production equipment segments, see

Sales and Income

net income per share rose 15.0% year on year, outpacing theof new products, such as coater/developers compatible with

Performance by Segment on page 18.

rise in net income, to ¥461.10.

advanced packaging technologies and single wafer deposi-

Operating Environment
The overall world economy in ﬁscal 2016 saw gradual recov-

Gross Proﬁt, SG&A Expenses and Operating Incometion systems for next-generation miniaturization.

Comprehensive Income

ery, despite slowing growth in China and some other emerg-

Cost of sales during ﬁscal 2016 increased 7.1% year on year to

Furthermore, the EXIM™ sputtering system, used to manu-

In ﬁscal 2016, Tokyo Electron recognized comprehensive

ing countries. In the electronics industry, demand grew for¥396.7 billion, while the cost of sales ratio dropped 0.6 offacture STT-MRAM* and other products, was adopted in theincome of ¥61.0 billion, down 24.1% from ﬁscal 2015 evenhigher capacity memory for mobile devices as well as fora percentage point to 59.8%, reﬂecting the 8.3% increase indevelopment lines of multiple customers.

though net income increased ¥6.0 billion year on year toCPUs and memory used in data centers, reﬂecting the further

net sales. Gross proﬁt was up 10.1% year on year to ¥267.2

In FPD production equipment, Tokyo Electron released¥77.9 billion. This was mainly due to ¥9.2 billion in loss on

sophistication of mobile devices and development of cloudbillion, and the gross proﬁt margin rose 0.6 of a percentage

new etch systems for high-resolution small- and medium-

remeasurements of deﬁned beneﬁt plans related to a reduc-services. The semiconductor production equipment (SPE)point to a record high of 40.2%.

sized panels.

tion in the discount rate used to calculate retirement beneﬁts

SG&A expenses fell 2.7% year on year to ¥150.4 billion. This

market, in which Tokyo Electron operates, was ﬁrm, as semiconductor manufacturers carried out capital investment

decrease was mainly due to a reduction in business merger-

driven by the dawn of the internet of things (IoT) as well as

related expenses as a result of the cancellation of the merger

as a result of the Bank of Japan’s negative interest rate policy* STT-MRAM (Spin Transfer Torque-Magnetoresistive Random Access
Memory): An emerging memory promising for its low power consumption

as well as ¥5.7 billion in loss on foreign currency translation
adjustments reﬂecting the appreciation of the yen, and a ¥1.6

the adoption of new forms of memory, such as 3D structureagreement with Applied Materials. The ratio of SG&A expens-devices, and cutting-edge logic semiconductors. The market

es to consolidated net sales dropped from 25.2% in the previ-

Other Income (Expenses) and Net Income Attributableto Owners of Parent

for ﬂat panel display (FPD) production equipment for thin-ous ﬁscal year to 22.6% in the ﬁscal year under review.

During ﬁscal 2016, main sources of other income were ¥1.0

Dividend Policy, Dividends and Stock Repurchasesbillion in gain on sale of the land and buildings of the former

It is the policy of Tokyo Electron to pay dividends on thebasis of business performance. As the Company aims forConsequently, operating income increased 32.5% year on

ﬁlm transistor (TFT) array processes saw overall growth asbillion loss on changes in fair value of investment securities.

capital investment in small- and medium-sized LCD panels

year to ¥116.8 billion, and the operating margin rose fromTechnology Center Tsukuba, ¥0.9 billion in foreign exchange

grew considerably, despite a decline in investment in large-

14.4% to 17.6%.

gain and ¥0.9 billion in interest and dividend income. Other

world-class proﬁtability, it seeks to bolster returns to share-

expenses included ¥9.7 billion in loss on impairment of good-

holders accordingly, and beginning with ﬁscal 2016, raised the

Research and Development

will and other assets and ¥2.2 billion in loss on businesspayout ratio from 35% to 50%. Furthermore, with an eye toSales

R&D expenses were up 6.9% year on year to ¥76.3 billion. The

restructuring due to revisions to business plans for TEL FSI,

ensuring stable dividends, a lower limit of ¥150 per share has

Net sales in ﬁscal 2016 rose 8.3% year on year to ¥663.9 bil-main cause of this rise was increases in expenses in the key

Inc. As a result, net other income (expenses) came to ¥10.3

been set on annual dividends.*

lion. This reﬂected the steady development of business withﬁelds of etch, deposition and cleaning systems in the SPEbillion of net expense in ﬁscal 2016, compared with ¥1.3 bil-customers of Tokyo Electron’s mainstay products as well as

segment. The ratio of R&D expenses to net sales dropped 0.1

lion of net expense in ﬁscal 2015.

growth in sales of parts and used equipment as a result ofof a percentage point year on year to 11.5%.

sized panels.

As a result, income before income taxes came to ¥106.5

share (for a payout ratio of 51.4%), its highest ever. In addi-

Tokyo Electron regards advanced technological prowess as

billion, up 22.6% year on year. Net income attributable totion, the Company repurchased and cancelled stock (8.53% ofissued shares before the cancellation).

as a share of total consolidated sales came to 81.7% in ﬁscal

term management plan, the Company focused investment ontion of stock (8.53% of issued shares before the cancellation),

2016, down 2.8 percentage points from 84.5% in ﬁscal 2015.

ﬁelds in which market growth is forecast. In the SPE ﬁeld,

Orders received during ﬁscal 2016 came to ¥679.3 billion,

development centered on key technologies in the areas of

80¥612,170¥613,125¥663,949

Gross proﬁt

211,445

158,755

201,892

242,774

267,210

33.4%

31.9%

33.0%

39.6%

40.2%

Selling, general and administrative expenses

151,002146,206

169,687

154,661

150,421

Operating income

60,443

12,54932,205

88,113

116,789

Gross proﬁt margin

Operating margin

9.5%

2.5%

5.3%

14.4%

17.6%

Income (loss) before income taxes

60,602

17,767(11,756)

86,828106,467

Net income (loss) attributable to owners of parent

36,726

6,076(19,409)71,88877,892

400

13

14

15

16

88.1

60

40
10

9.5
30

12
왎 Domestic
왎 Overseas

14.4
60

200

0

15

20

32.2

¥497,300

17.6

5.3

5

12.5

¥633,091

90

60.4

Net sales

121.8

2016

518.1

2015

95.0

2014

378.8

2013

461.7

2012

116.8

(Billions of yen)

20

542.1 663.9

(%)

120
613.1

(Billions of yen)

171.4

Sales and Income

Net Income (Loss) Attributableto Owners of Parent

800

600

Millions of yen

Operating Income andOperating Margin(Billions of yen)612.2

ture NAND ﬂash memory and the adoption of new materials.

450.5

year on year. For orders received and order backlog in theDomestic and Overseas Sales

161.6

ed for multiple patterning for further miniaturization, 3D struc-497.3

backlog at the end of March 2016 was ¥311.1 billion, up 5.2%

118.5

etching, deposition and cleaning. These technologies are need-

633.1

up 2.8% compared with the previous ﬁscal year. The order* This lower limit may be revised in the event that the Company does not generate net income for two consecutive ﬁscal years.

77.9

8.4% from ﬁscal 2015. Due in part to the repurchase and cancella-

71.9

generation products and achieve the goals of the medium--19.4

the source of its growth. Accordingly, to produce strong next

while overseas sales grew 4.6% to ¥542.1 billion. Overseas sales

6.1

Domestic sales grew 28.2% year on year to ¥121.8 billion,

owners of the parent totaled ¥77.9 billion in ﬁscal 2016, up

36.7

increased demand for older generation technologies.

Reﬂecting the Company’s ﬁrm business results, Tokyo
Electron paid annual dividends for ﬁscal 2016 of ¥237 per

13

14

0

2.5
0

0

12
왎 Operating Income쎲 Operating Margin

13

14

15

16

-20

12

15

16

PAGE

TOKYO ELECTRON ANNUAL REPORT 201618

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Consolidated Eleven-Year Summary

Financial Review

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Sustainability

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review
Performance by Segment

a result of revisions to business plans for TEL FSI, Inc. The왎 Otherand insurance. Net sales to external customers amounted tosegment proﬁt margin fell from 23.6% in ﬁscal 2015 to 20.1%.

Tokyo Electron’s photovoltaic panel production equipment¥6.2 billion, up 49.3% year on year.

Orders received in this segment edged down 0.1% tobusiness, from which it has been withdrawing, no longer왎 Semiconductor Production Equipment

Financial Position and Cash Flows

In 2015, the SPE market was roughly level with the previous¥626.3 billion. The order backlog as of March 31, 2016 was up

meets the standards of importance speciﬁed by the

year. Demand for DRAM and NAND ﬂash memory was ﬁrm,

5.1% year on year to ¥273.7 billion.

Accounting Standard for Disclosures about Segments of an

For a business overview of this segment, please see page 9.

reﬂecting demand for higher performance in smartphones
and the shipment growth of data center servers, with partic-* ALD (Atomic Layer Deposition): An atomic level ﬁlm deposition technique** HARC (High Aspect Ratio Contact) process: A deep hole etching process that
requires advanced technology

ular growth in capital investment for cutting-edge nodes by
DRAM manufacturers. However, electronics demand grewless than anticipated, leading to restrained capital investment

왎 FPD (Flat Panel Display) Production Equipment

by logic chip manufacturers and foundries.

Capital investment in the FPD production equipment market

In these circumstances, Tokyo Electron’s sales of deposi-grew overall, as strong growth in investment in small- andtion and cleaning systems, which it positions as key businessmedium-sized panels for mobile devices more than made up

areas, saw year-on-year growth. In deposition systems, theremoved from the reportable segments, and its results are

Assets, Liabilities and Net Assets
왎 Assets

now included under Other. Comparisons with the previous

Current assets decreased ¥53.5 billion from the end of theﬁscal year hereinafter are based on recalculations of the ﬁscal

previous ﬁscal year to ¥617.4 billion, reﬂecting decreases of2015 results using the current segment classiﬁcations.

¥81.0 billion in total liquidity on hand (cash, cash equivalents

Enterprise and Related Information. Accordingly, it has been

In addition to the abovementioned photovoltaic panel

and short-term investments with original maturities of lessproduction equipment-related sales, other sales mainly

than one year) and ¥1.2 billion in prepaid expenses and otherinclude group-wide logistics services, facility maintenancecurrent assets, as well as increases of ¥19.5 billion in inventories

for a decrease in investment in large-sized panels. In thismarket position of the Company’s batch and semi-batch

context, sales remained favorable, boosted by a gain in mar-systems used in ALD* processes improved. Adoption of theMillions of yen

ket share of Tokyo Electron’s inductively coupled plasma

Company’s cleaning systems in key logic chip and memory
manufacturing processes also progressed. Sales of etch systems, however, fell slightly year on year, reﬂecting decreased
investment by logic chip manufacturers and foundries,(ICP) etch systems, which have a competitive edge among

Segment Information

products for large-sized panels. The Company also recorded

2016:

sales of its ﬁrst inkjet printing system for manufacturing

Net sales

Segment net sales to external customers increased 36.6%

HARC processes**.

year on year to ¥44.7 billion. Segment proﬁt amounted toSales in the ﬁeld solutions business, which handles sales of¥4.7 billion, a turnaround from a segment loss of ¥1.3 billion

parts and used equipment, modiﬁcations and maintenance

Semiconductor
production
equipment

Eliminations
andCorporate

Consolidated¥¥663,949

FPD
production
equipment

Other¥613,033¥44,687¥ 6,229¥663,949——

11,592

11,592(11,592)—

Total

613,033

44,687

17,821

675,541(11,592)

663,949

Segment proﬁt

123,163

4,747

2,036

129,946(23,479)

106,467

Segment assets

321,100

25,1862,134

348,420444,948

793,368

8,792

424

45

9,261

9,996

19,257

970

—

—

970

—

970

Loss on impairment

9,711

—

—

9,711

16

9,727

Capital expenditures, including intangible assets

8,500

285

13

8,798

5,952

14,750

Sales to external customers

large-sized OLED panels for televisions.

despite increased use in advanced patterning and 3D-NAND

Reportable Segment

Intersegment sales or transfers

Total

—

in ﬁscal 2015. The segment proﬁt margin was 10.6%.

services, rose 8% year on year, due to rising demand for used

Orders received in this segment increased 43.1% year on

equipment and parts certiﬁed by highly reputable manufacturers.

year to ¥50.5 billion. The order backlog as of March 31, 2016

Segment net sales to external customers increased 6.4%

was up 18.4% to ¥37.4 billion.

from ﬁscal 2015 to ¥613.0 billion in ﬁscal 2016. Segment proﬁt

For a business overview of this segment, please see page 9.

declined 9.4% compared with ﬁscal 2015 to ¥123.2 billion, due

Depreciation and amortization
Amortization of goodwill

in part to the recording of loss on impairment of goodwill as왎 Selling, General and Administrative Expenses
쎲 Ratio to Net Sales

13

14

15

16

15

16

The ﬁscal 2013 annual dividend of ¥51 includes
a commemorative 50 year anniversary dividend of ¥20.

39.2

14

0

12

12
왎 Cash Dividends
왎 Share Repurchases

25.6

13

0

12

9.0

0

30
14.3

50

80

20

9.1

16

4.9

13

14

15

200

3.9
3.6

3.7

4
3
2
1

100

0

16

5

451.4

400

400
300

100

50

15

60

4.9

200

0

14

600

500

498.1

40

51
0

90
143

150.4

154.7

20

10

13

150

6

451.0

60

22.6

50

12

73.2

25.2

151.0

100

27.7
169.7

146.2

23.9

800

(Times)

482.3

120

600

793.4

200

30

(Billions of yen)

1,000

876.2

80

29.4

150

(Billions of yen)

828.6

150
237

(Billions of yen)

250

76.3

(Yen)

100

71.3

(Billions of yen)

40

78.7

(%)

200

81.5

(Billions of yen)

Working Capital andCurrent Ratio

414.8

Total Assets

775.5

Shareholder Returns

783.6

Cash Dividends per Share

144.7

R&D Expenses

105.5

Selling, General and Administrative
Expenses and Ratio to Net Sales

0

12

13

14

15

16

0

12
왎 Working Capital쎲 Current Ratio

13

14

15

16

PAGE

TOKYO ELECTRON ANNUAL REPORT 201619

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Consolidated Eleven-Year Summary

Financial Review

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Sustainability

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review
and ¥5.7 billion in trade notes and accounts receivable. The

due to a ¥19.3 billion decrease in accrued expenses and otherturnover period for trade notes and accounts receivablecurrent liabilities accompanying a decrease in customer advanc-the end of March 2015 to 70.9% at the end of March 2016.

depreciation and amortization and ¥9.7 billion in loss on

improved from 66 days in ﬁscal 2015 to 64 days in ﬁscal 2016,

es, a ¥1.8 billion decrease in accrued warranty expenses and a ¥1.4

ROE climbed to 13.0% from 11.8% in ﬁscal 2015.

impairment. Major negative factors included a ¥23.5 billion

and the inventory turnover period worsened slightly frombillion decrease in trade notes and accounts payable.

¥106.5 billion in income before income taxes, ¥19.3 billion in

As a result, the equity ratio fell 2.1 percentage points fromincrease in inventories, ¥15.4 billion in income taxes paid andto ¥63.1 billion, due to an increase in net liability for deﬁned

Capital Expenditures* and Depreciation andAmortization**a ¥15.0 billion decrease in customer advances.

Net property, plant and equipment decreased ¥10.6 billion
year on year to ¥96.3 billion due to ¥19.3 billion in deprecia-

beneﬁts of ¥4.2 billion and a decrease in other liabilities ofCapital expenditures were ¥13.3 billion in ﬁscal 2016, a 1.2%

compared with ¥155.7 billion provided in the previous ﬁscal

tion and amortization as well as impairment related to TEL¥3.3 billion.

year-on-year increase. Main factors in these expenditures

year. Major outﬂows included a ¥141.0 billion net increase in

105 days in ﬁscal 2015 to 107 days in ﬁscal 2016.

Non-current liabilities increased ¥0.9 billion year on year

were the acquisition of process evaluation equipment andshort-term investments and ¥11.3 billion used as payment forstood at ¥229.1 billion, down ¥5.9 billion from the end of the

R&D machinery and equipment, primarily for key areas withpurchases of property, plant and equipment.

previous ﬁscal year.

high growth potential in the SPE business as part of efforts to

FSI, Inc. These factors more than offset ¥13.3 billion in new

Total liabilities (current liabilities and non-current liabilities)

ﬁxed asset acquisitions.
Investments and other assets decreased ¥18.7 billion year
on year to ¥79.6 billion. This was mainly attributable to a

Net assets came to ¥564.2 billion at the end of ﬁscal 2016,¥10.0 billion decrease in intangible assets, due in part to loss

down ¥76.9 billion from the end of ﬁscal 2015. This wason impairment at TEL FSI, Inc., as well as a ¥7.2 billion

mainly due to a ¥61.2 billion decrease in retained earnings,

decrease in net asset for deﬁned beneﬁts and a ¥4.0 billion

reﬂecting the recording of ¥77.9 billion in net income attrib-

decrease in investment securities due to sales of stocks held.

utable to owners of the parent and ¥33.0 billion paid in cash

As a result, total assets as of March 31, 2016 stood at

dividends (¥12.2 billion for the ﬁscal 2015 year-end dividend¥793.4 billion, down ¥82.8 billion year on year.

Net cash used in investing activities was ¥150.0 billion,

Cash used in ﬁnancing activities came to ¥138.6 billion,

achieve the goals of the medium-term management plan.

compared with ¥18.2 billion in ﬁscal 2015. Major outﬂows

Depreciation and amortization decreased 7.8% to ¥19.3 bil-

included ¥105.5 billion used in payment for repurchases oflion, reﬂecting continued low levels of capital investment.

treasury stock and ¥33.0 billion in dividends paid.
The balance of cash and cash equivalents at the end of* Capital expenditures represent only the gross increase in property, plant andequipment.
** Depreciation and amortization does not include amortization of goodwill or
losses on impairment.

March 2016 stood at ¥95.6 billion, a decrease of ¥222.0 billion
from the end of ﬁscal 2015. Total liquidity on hand, whichand ¥20.8 billion for the ﬁscal 2016 interim dividend), as wellconsists of cash, cash equivalents and short-term invest-

as a ¥9.6 billion decrease in accumulated remeasurements ofCash Flowsments with original maturities of less than one year,왎 Liabilities and Net Assets

deﬁned beneﬁt plans and a ¥5.7 billion decrease in foreign

Net cash provided by operating activities came to ¥69.4 billion,

decreased ¥81.0 billion year on year to ¥236.7 billion at theCurrent liabilities decreased ¥6.8 billion from the end of ﬁscal

currency translation adjustments due to the appreciation of

down ¥2.4 billion from ﬁscal 2015. Major contributors wereend of March 2016.

2015 to ¥166.1 billion at the end of ﬁscal 2016. This was mainly

the yen.

Millions of yen

Millions of yen

2016

Total current assets¥607,051¥521,501¥621,492¥670,883¥617,416

Net property, plant and equipment

126,885

135,698

112,344

106,896

96,317

Total investments and other assets

49,675

118,329

94,756

98,375

79,635

Total assets

783,611775,528

828,592

876,154793,368

Total current liabilities

124,794

106,670

170,510

172,812

166,061

Total liabilities

185,008

170,401

237,978

234,991

229,129

Total net assets (Total shareholders' equity)

598,603605,127590,614641,163564,239

Equity and Equity Ratio

Receivable Turnover andInventory Turnover

Cash Flows

2012

2013

2014

2015

2016

Cash ﬂows from operating activities¥ 29,712¥ 84,267¥ 44,449¥ 71,806¥ 69,398

Cash ﬂows from investing activities(8,352)(141,769)(19,599)

155,738(150,014)

Cash ﬂows from ﬁnancing activities(27,335)(10,625)(187)(18,214)(138,601)

Cash and cash equivalents at end of year

158,776

85,314

104,797

317,632

95,638ROE

ROA

Capital Expenditures andDepreciation and Amortization

Total Liquidity on Hand

(Billions of yen)

(%)

(%)

(%)

(Billions of yen)(Billions of yen)

150

800

100

15

15

40

350

1.0

0

10

4.4

25
0

쎲 Receivable Turnover
쎲 Inventory Turnover

13

14

15

0

12

16
왎 Equity쎲 Equity Ratio

13

14

15

16

0

0

13

14

12

13

100

1.8

-5

12

150

50

-3.3

12

13.3

25

13.2

5
200

0

19.3

64

12.8

66

20.9

77

50

200

24.9

20

7.7

26.6

6.3

5

250

10.5

10
50

300

30

10

21.8

74

75

24.2

400

86

70.9
562.4

87
75

73.0
639.5

107

69.8
578.1

105

76.5
593.0

100

74.9
586.8

100

100

600

14.1

13.0

11.8

125

39.5

(Days)

236.7

2015

317.7

2014

268.1

2013

240.1

2012

247.6

Financial Position

15

16

ROE = Net income (loss) attributable to owners of parent /Average total equity x 100

12

13

14

15

16

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

0

12

13

14

왎 Capital Expenditures왎 Depreciation and Amortization

15

16

14

15

16

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

PAGE

TOKYO ELECTRON ANNUAL REPORT 201620

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Financial Review(3) Impact from Research and Development(6) Impact of Intellectual Property Rights(9) Impact from Major Lawsuits or Legal Actions

Through ongoing and proactive R&D investment and activi-

In order to distinguish its products and make them more

Tokyo Electron is not currently involved in any lawsuits or

The following risks may have a material impact on Tokyo

ties in cutting-edge technologies—miniaturization, vacuum,competitive, Tokyo Electron has promoted its R&D strategy

other legal actions that are likely to signiﬁcantly inﬂuence its

Electron’s business performance, stock price, or ﬁnancial

plasma, thermal processing, coating/developing, cleaning,for the early development of cutting-edge technologies

business results. However, in the event that the Company’s

position.

wafer-transfer and clean technologies—Tokyo Electron has

together with its business and intellectual property strate-business or other activities become the subject of a major

created advanced technologies. At the same time, by quickly

gies. This approach has enabled Tokyo Electron to obtain solelawsuit or other legal action, depending on the outcome of(1) Impact from Changes in the Semiconductor Market

bringing to market new products incorporating these tech-possession of many proprietary technologies that have beensuch action, Tokyo Electron’s business results could beTokyo Electron has achieved a high proﬁt margin by concen-

nologies, Tokyo Electron has successfully captured a highinstrumental to the Company’s ability to capture a high mar-adversely affected.

trating resources in high-tech ﬁelds, including semiconductor

market share in each of the product ﬁelds it has entered andket share and generate high proﬁt margins in each of its

production equipment, where technological innovation is

generated a high proﬁt margin. However, delays in the launch

product ﬁelds. Tokyo Electron’s products incorporate and(10) Other Risks

rapid but Tokyo Electron can effectively use its strengths.

of new products and other factors could adversely affectoptimize many of these proprietary cutting-edge technolo-

Tokyo Electron is actively engaged in reforming its corporate

Although technological change is responsible for the semi-

Tokyo Electron’s business performance.

gies. There may be cases in which, by avoiding the use ofstructure so that it can generate proﬁts even when markets

third-party technologies and intellectual property rights,

contract. These reforms have entailed creating new high-Business-related and Other Risks

conductor market’s rapid growth, Tokyo Electron has actively
undertaken structural reforms to be able to generate proﬁts(4) Safety-related Impact

Tokyo Electron’s business performance could be adversely

growth and high-return businesses and pursuing higher

under any circumstances, including when the market con-Tokyo Electron’s basic philosophy is to always bear in mind

affected.

earnings from existing businesses. At the same time, Tokyo

tracts temporarily due to imbalance of supply and demand.

safety and health in the execution of business activities,

However, order cancellations, excess capacity and personnel

including development, manufacturing, sales, services and(7) Impact of Fluctuating Foreign Exchange Rates

ment and worked to restructure its compliance, risk manage-and increased inventories resulting from an unexpectedly

management. In accordance with this philosophy, Tokyo

Success in the development of overseas operations has

ment and information security management systems.

large market contraction, losses from bad debts resulting

Electron works actively and continuously to improve theincreased the share of sales generated overseas. As a rule,

However, as long as it conducts business activities, as withfrom the worsening of a customer’s ﬁnancial position, andsafety of its products and to eliminate any harmful impact onTokyo Electron conducts export transactions on a yen basis

peer companies or companies in different industries, Tokyo

supply shortages resulting from the worsening of a supplier’s

health. However, harm to customers, order cancellations or

to avert exposure to foreign currency risks. However, someElectron is subject to the effect of many other factors. These

management situation, could adversely affect Tokyo

other circumstances resulting from safety or other problems

exports are denominated in foreign currencies. In these cases,

include the world and regional economic environments, nat-

Electron’s business performance considerably.

related to Tokyo Electron’s products could adversely affect

Tokyo Electron hedges foreign currency risk by using a for-ural disasters, war, terrorism, infectious diseases and otherTokyo Electron’s business performance.

ward foreign exchange contract when an order is received or

unavoidable occurrences, ﬁnancial or stock markets, govern-by other means. However, foreign exchange rate risks canment or other regulations, supply chains, market conditions(5) Impact from Quality Issues

arise from ﬂuctuations in prices due to sudden foreignfor products and real estate, the ability to recruit personnel inTokyo Electron has been successful at increasing transactions

Tokyo Electron actively develops outstanding, cutting-edge

exchange movements, which could have an indirect adverse

Japan and overseas, competition over standardization, andwith the leading semiconductor manufacturers worldwide,

technologies for incorporation in new products that are

effect on Tokyo Electron’s business performance.

loss of key personnel. Any of these factors could adversely

including those in Japan, through the provision of productsbrought quickly to market. At the same time, Tokyo Electronfeaturing outstanding, cutting-edge technology and of ser-works to establish a quality assurance system, efforts that(8) Inﬂuence of Corporate Acquisitions

vices offering a high level of customer satisfaction. However,include obtaining ISO 9001 certiﬁcation, as well as to estab-

As part of its business strategy, Tokyo Electron conducts cor-Tokyo Electron’s sales may from time to time be temporarily

lish a world-class service system. These actions have resulted

porate acquisitions in order to expand into new businessconcentrated on particular customers due to the timing ofin a large number of customers adopting Tokyo Electron’sareas, secure new technologies and business platforms, andlarge capital investments of major semiconductor manufac-

products. However, because Tokyo Electron’s products arestrengthen the competitiveness of existing businesses. The

turers. The resulting escalation in sales competition could

based on cutting-edge technologies, and due to other fac-

Company conducts due diligence and carefully deliberates

adversely affect Tokyo Electron’s business performance.

tors, many of the technologies developed are in unfamiliar

each speciﬁc acquisition. However, in the event that theﬁelds. The occurrence of unforeseen defects or other issues

results following an acquisition do not meet expectations,

could adversely affect Tokyo Electron’s business performance.

Tokyo Electron’s business performance could be adversely(2) Impact from Concentration of Transactions on
Particular Customers

Electron has promoted activities to preserve the environ-

affect Tokyo Electron’s business performance.

affected.

PAGETOKYO ELECTRON ANNUAL REPORT 201621

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Balance Sheets

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Sustainability

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Eleven-Year SummaryTokyo Electron Limited and Subsidiaries
As of and for the years ended March 31
Thousands of
U.S. dollars

Millions of yen

2016

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

Net sales 1
Semiconductor production equipment
FPD production equipment
PV production equipment
Computer networks
Electronic components and computer networks
Other
Operating income (loss)
Income (loss) before income taxes
Net income (loss) attributable to owners of parent
Comprehensive income (loss) 2$5,892,341
5,440,477
396,583———
55,281
1,036,466
944,862691,267
541,214¥663,949
613,033
44,687———
6,229
116,789
106,467
77,89260,984¥613,125
576,242
32,710
3,618
—
—
555
88,11386,82871,88880,295¥612,170
478,842
28,317
3,806—
100,726
479
32,205(11,756)(19,409)(10,889)¥ 497,300
392,027
20,077
83—
84,665448
12,54917,767
6,076
15,826¥ 633,091
477,873
69,889——84,868461
60,44360,602
36,72636,954¥ 668,722
511,332
66,721——
90,216453
97,87099,57971,92469,598¥ 418,637
262,392
71,361——
84,473411(2,181)(7,768)(9,033)(4,751)¥ 508,082
325,383
88,107——
94,207385
14,711
9,637
7,543
—

¥ 906,092
726,440
68,016——111,181455
168,498
169,220
106,271—¥ 851,975
642,625
100,766—
19,16988,294
1,121
143,979
144,414
91,263—¥ 673,686
486,883
81,176—
17,49786,881
1,249
75,70375,32848,006—

Domestic sales
Overseas sales

1,081,008
4,811,333

121,808
542,141

95,046
518,079

161,631450,539

118,504
378,796

171,364
461,727

182,165
486,557

162,609
256,028

208,871299,211

323,946
582,146

313,816
538,159

262,532
411,154

170,900
118,397
677,023

19,257
13,341
76,287

20,87813,18471,35024,888
12,79978,664

26,631
21,77473,24924,19839,541
81,506

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

18,82027,12956,962

19,17013,33549,1827,040,895
5,007,446

793,368
564,239

876,154641,163828,592
590,614775,528
605,127

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

792,818
545,245

770,514469,811663,243
376,900

10,62910,844

12,304

12,201

10,684

10,343

10,068

10,391

10,429

9,528

8,901

42.15
42.07
2,896.55
24.00
180,61142,509¥ 594.01
592.71
2,989.70
125.00180,611
43,324¥ 511.27
509.84
2,573.72
103.00180,61141,289¥ 267.61
267.32
2,112.30
55.00
180,611
46,272

(1.8)
(0.5)
73.5
0.61

1.4
2.9
77.5
0.70

21.4
18.6
67.5
1.16

21.8
16.9
59.7
1.19

13.5
11.2
56.8
1.03

¥ 41,581¥ 48,896¥ 86,882¥ 89,418¥ 75,687

Depreciation and amortization 3
Capital expenditures 4
R&D expenses
Total assets
Total net assets 5
Number of employees

U.S. dollars

Net income (loss) per share of common stock:
Basic
Diluted 6
Net assets per share of common stock
Cash dividends per share of common stock
Number of shares outstanding (thousands)
Number of shareholders

$

4.09
4.08
30.43
2.10

Yen

¥ 461.10
460.003,428.37
237.00165,211
24,664¥ 401.08
400.153,567.23
143.00180,611
20,829¥ (108.31)—
3,225.92
50.00
180,61130,563

13.0
17.6
70.9
0.80

11.8
14.4
73.0
0.72

¥ 62,466¥ 56,540

¥

33.91
33.85
3,309.58
51.00
180,61141,287¥ 205.04
204.723,275.14
80.00
180,61142,414

(3.3)
5.3
69.8
0.76

1.0
2.5
76.5
0.64

6.3
9.5
74.9
0.79

¥ 49,754¥ 40,759¥ 59,256¥ 401.73
401.103,198.66
114.00180,61144,896¥(50.47)—2,859.37
12.00
180,61139,285¥%

ROE
Operating margin
Equity ratio
Asset turnover (times)

13.3
14.6
70.8
0.89
Thousands of yen

Net sales per employee$ 554,366

1 From ﬁscal 2008 to 2014, Computer networks was included in Electronic components and computer networks. Electronic components and computer networks were excluded
from ﬁscal 2015 because Tokyo Electron Device Limited, a former consolidated subsidiary, become an equity method affiliate. Photovoltaic panel (PV) production equipment was
included in FPD production equipment until ﬁscal 2012. From ﬁscal 2016, PV production equipment is included in Other.
2 From ﬁscal 2011, the Company applied “Accounting Standards for Presentation of Comprehensive Income” (Statement No. 25) released by the Accounting Standards Board ofJapan (ASBJ). Accordingly, comprehensive income (loss) has been disclosed from ﬁscal 2010.
3 Depreciation and amortization does not include amortization and loss on impairment of goodwill.
4 Capital expenditures only represent the gross increase in property, plant and equipment.
5 From ﬁscal 2007, “Total net assets” has been disclosed in accordance with “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Statement No. 5) and“Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No. 8) released by the ASBJ. “Total net assets” through ﬁscal 2006 represents“Total shareholders’ equity” under the former accounting standards.
6 From ﬁscal 2011, The Company calculated net income per share of common stock (diluted) in accourdance with “Accounting Standard for Earning Per Share” (Statement No. 2)
and “Guidance on Accounting Standard for Earnings Per Share” (Guidance No. 4) released by the ASBJ. Dilution is not assumed for the years ended March 31, 2014 and 2010.

¥ 64,655

PAGETOKYO ELECTRON ANNUAL REPORT 201622

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Balance Sheets
Tokyo Electron Limited and Subsidiaries
As of March 31, 2016 and 2015
Thousands of
U.S. dollars

Millions of yen

ASSETS

2016

2015

2016

Current assets:

Thousands of
U.S. dollars

Millions of yen

LIABILITIES AND NET ASSETS

2016

2015

2016

¥ 55,050¥ 56,479$ 488,552

Current liabilities:

Cash and cash equivalents¥ 95,638¥317,632$ 848,757

Trade notes and accounts payable

Short-term investments

141,035283

1,251,642

Income taxes payable

22,461

6,197

199,334

Trade notes and accounts receivable

116,503110,845

1,033,928

Accrued employees’ bonuses

11,624

12,111

103,159

(48)

(379)

(426)

Accrued warranty expenses

8,687

10,442

77,095Inventories

195,080

175,588

1,731,274

Other accrued expenses and other current liabilities

68,23987,583605,600

Deferred income taxes

31,204

27,672276,926

166,061

172,8121,473,740

Prepaid expenses and other current assets

38,004

39,242337,274

617,416

670,883

5,479,375

Net liablitiy for deﬁned beneﬁts

55,67751,480494,116

Other liabilities

7,391

10,69965,59363,06862,179559,709229,129

234,991

2,033,449

Common stock
Authorized: 300,000,000 shares
Issued: 165,210,911 and 180,610,911 shares
as of March 31, 2016 and 2015, respectively

54,961

54,961

487,762

Capital surplus

78,02378,023

692,430

Retained earnings

427,618

488,816

3,794,977(8,051)(9,064)(71,450)

Allowance for doubtful accounts

Total current assets

Total current liabilities

Non-current liablities:

Total non-current liabilities
Property, plant and equipment:

Total liabilities

Land

23,86825,022211,821

Buildings

147,653

152,979

1,310,375

Machinery and equipment

129,169

132,411

1,146,335

Construction in progress

3,774

2,424

33,493

304,464

312,836

2,702,024

208,147

205,940

1,847,240

96,317

106,896854,784

Total property, plant and equipment
Less: Accumulated depreciation
Net property, plant and equipment

Net assets:
Shareholders’ equity

Treasury stock, at cost
1,176,800 and 1,344,892 shares
as of March 31, 2016 and 2015, respectively
Accumulated other comprehensive income

Investments and other assets:
Investment securities

19,91423,935

176,730

Net unrealized gains on investment securities

7,903

9,463

70,137

Deferred income taxes

20,782

18,348

184,434

Net deferred gains on hedging instruments

50

122

444

Net asset for deﬁned beneﬁts

1,623

8,817

14,404Foreign currency translation adjustments

6,743

12,481

59,842Intangible assets

17,60327,567156,221

Accumulated remeasurements of deﬁned beneﬁt plans(4,878)4,682(43,291)

Other assets

21,53821,592

191,143

Share subscription rights

1,641

1,421

14,563

Allowance for doubtful accounts(1,825)(1,884)(16,196)

Non-controlling interests

229

258

2,032

79,63598,375

706,736564,239641,163

5,007,446¥793,368¥876,154$7,040,895¥793,368¥876,154$7,040,895

Total investments and other assets
Total assets
See accompanying Notes to Consolidated Financial Statements.

Total net assets
Total liabilities and net assets

PAGE

TOKYO ELECTRON ANNUAL REPORT 201623

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2016 and 2015

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2016 and 2015
Thousands of
U.S. dollars

Millions of yen

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

2016

2015

2016

¥663,949
396,739
267,210
150,421116,789¥613,125
370,351
242,774
154,661
88,113$5,892,341
3,520,935
2,371,406
1,334,940
1,036,466

Other income (expenses):
Interest and dividend income
Foreign exchange gain, net
Revenue from grants
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Commission for purchases of treasury stocks
Maintenance cost for domestic closed facilities
Loss on impairment of property, plant and equipment,
goodwill and other assets
Loss on business restructuring
Loss on liquidation for subsidiaries
Restructuring expenses on facilities
Additional payment of customs tax
Other, net
Income before income taxes

856
886
400
1,025
446
(662)
(147)

1,281
1,575
629
1,840
55
—
(48)

7,597
7,863
3,550
9,097
3,958
(5,875)(1,305)(9,727)(2,235)———(1,164)
106,467(2,506)—(1,070)(1,046)(1,003)(992)
86,828(86,324)(19,835)———(10,330)
944,862

Income taxes:
Current
Deferred
Net income

32,560(4,029)77,936

14,726
173
71,929288,960(35,756)
691,65844¥ 77,892

41¥ 71,888

391$ 691,267

Net income attributable to non-controlling interests
Net income attributable to owners of parent

Yen

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

¥ 461.10
460.003,428.37
237.00U.S. dollars¥ 401.08
400.153,567.23
143.00$ 4.09
4.08
30.43
2.10

Corporate Data

Financial Section

Thousands of
U.S. dollars

Millions of yen

Net income
Other comprehensive income (loss):
Net unrealized gains (losses) on investment securities
Net deferred gains (losses) on hedging instruments
Foreign currency translation adjustments
Remeasurements of deﬁned beneﬁt plans
Share of other comprehensive income of associates accounted
for using equity method
Total other comprehensive income (loss)
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See accompanying Notes to Consolidated Financial Statements.

2016

2015

2016

¥77,936¥71,929$691,658(1,556)(112)(5,706)(9,233)

3,868
69
6,643
(2,270)(13,809)(994)(50,639)(81,940)(345)(16,952)
60,98456
8,366
80,295(3,062)(150,444)
541,21460,96222

80,22471

541,019195

PAGETOKYO ELECTRON ANNUAL REPORT 201624

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2016 and 2015

Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2016 and 2015
Millions of yen

Shareholders’ equity

Balance as of March 31, 2014
Cumulative effect of changes
in accounting policies

Commonstock

Capitalsurplus¥54,961¥78,023

Retainedearnings

Treasurystock¥436,174 ¥ (9,479)

Net unrealized Net deferred
Foreign
Accumulated
gains ongains oncurrency
remeasurements
Shareinvestment
hedgingtranslation of deﬁned beneﬁt subscription
securities
instruments adjustments
plansrights¥5,593¥ 60¥ 5,777¥ 6,982¥1,644

Noncontrollinginterests

Total
net assets¥10,879¥590,614——(1,102)

—

—

—

—

—

—

(211)

(1,313)54,961

78,023435,072(9,479)

5,593

60

5,777

6,982

1,644

10,668589,301

Cash dividends——(17,923)

—

—

—

—

—

—

—

(17,923)

Net income attributable toowners of parent——

71,888

—

—

—

—

—

—

—

71,888

Repurchase of treasury
stocks

—

—

—

(183)

—

—

—

—

—

—

(183)

Disposal of treasury stocks

—

—

(221)

598

—

—

—

—

—

—

377

Other, net

—

—

—

—

3,870

62

6,704

(2,300)(223)(10,410)(2,297)

Restated balance

Balance as of March 31, 2015

¥54,961¥78,023¥488,816¥(9,064)¥9,463¥122¥12,481¥ 4,682¥1,421258¥641,163

Cash dividends——(33,013)

—

—

—

—

—

—

—

(33,013)

Net income attributable toowners of parent——

77,892

—

—

—

—

—

—

—

77,892

Repurchase of treasury
stocks——

Disposal of treasury stocks——

Cancellation of treasury
stocks——Other, net——¥54,961¥78,023

Balance as of March 31, 2016

— (105,810)
(726)

1,472

(105,351) 105,351

¥

—

—

—

—

—

—

(105,810)

—

—

—

—

—

—

746

—

—

—

—

—

—

—

—

(1,560)(72)(5,738)(9,560)220(29)(16,739)¥427,618 ¥ (8,051)¥7,903¥ 50¥ 6,743¥(4,878)¥1,641229¥564,239—¥

Thousands of U.S. dollars
Shareholders’ equity

Commonstock

Balance as of March 31, 2015

Capitalsurplus

Accumulated other comprehensive income

Retainedearnings

Treasurystock

Net unrealized Net deferred
Foreign
Accumulated
gains ongains oncurrency
remeasurements
Shareinvestment
hedgingtranslation of deﬁned beneﬁt subscription
securities
instruments adjustments
plansrights

Noncontrollinginterests

Total
net assets$1,083$110,765$ 41,551$12,611$2,290$5,690,123

Cash dividends——(292,980)

—

—

—

—

—

—

—

(292,980)

Net income attributable toowners of parent——

691,267

—

—

—

—

—

—

—

691,267

Repurchase of treasury
stocks——— (939,031)

—

—

—

—

—

—

(939,031)

Disposal of treasury stocks

—

—

—

—

—

—

—

—

6,621

Cancellation of treasury
stocks——Other, net——

Balance as of March 31, 2016

$487,762 $692,430 $4,338,090 $ (80,440) $ 83,981(6,443)13,064

—

—

—

—

—

—

—

(13,844)(639)(50,923)(84,842)

1,952

(258)

(148,554)$487,762 $692,430 $3,794,977 $ (71,450) $70,137$ 444$ 59,842$(43,291)$14,563$2,032$5,007,446

See accompanying Notes to Consolidated Financial Statements.

(934,957) 934,957——

Thousands of
U.S. dollars

Millions of yen

Accumulated other comprehensive income

Cash ﬂows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on impairment of property, plant and equipment,
goodwill and other assets
Amortization of goodwill
Increase (decrease) in accrued warranty expenses
Interest and dividend income
Gain on sales of property, plant and equipment
Loss on sales of affiliates’ shares
Increase in trade notes and accounts receivable
Increase in inventories
Increase in trade notes and accounts payable
Increase in prepaid consumption tax
Increase (decrease) in accrued consumption tax
Increase (decrease) in customer advances
Other, net
Subtotal
Receipts from interest and dividends
Income taxes paid
Net cash provided by operating activities
Cash ﬂows from investing activities:
Payment for purchases of short-term investments
Proceeds from maturities of short-term investments
Payment for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payment for acquisition of intangible assets
Proceeds from sales of investment securities
Proceeds from sales of affiliates’ shares
Other, net
Net cash provided by (used in) investing activities
Cash ﬂows from ﬁnancing activities:
Payment for purchases of treasury stock
Dividends paid
Other, net
Net cash used in ﬁnancing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.

2016

2015

2016

¥106,467
19,257¥ 86,828
20,878$ 944,862
170,900

9,727
970(1,686)
(856)
(899)
1,111
(8,650)(23,535)
31(1,910)(1,022)(15,004)(203)
83,798957(15,357)
69,398

2,506
1,150
259
(1,281)(1,820)1,609(1,318)(26,850)
9,432(11,384)
2,707
12,912(1,203)
94,425
1,621(24,240)
71,80686,324
8,608(14,963)(7,597)(7,978)
9,860(76,766)(208,866)275(16,951)(9,070)(133,156)(1,801)
743,681
8,493(136,288)
615,886(209,491)
68,505(11,294)
2,151
(708)
1,330
—
(507)
(150,014)(24,997)
188,302(11,899)
2,549
(422)
1,093
1,726
(614)
155,738(1,859,168)
607,961(100,231)
19,089(6,283)
11,803—(4,499)(1,331,328)(105,532)(33,013)(56)(138,601)(2,777)(221,994)
317,632¥ 95,638(183)(17,923)(108)(18,214)3,505
212,835
104,797¥317,632(936,564)(292,980)(497)(1,230,041)(24,645)(1,970,128)
2,818,885$ 848,757

PAGETOKYO ELECTRON ANNUAL REPORT 201625

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2016 and 2015

1. Basis of Presentation of Consolidated Financial
Statements
The accompanying consolidated ﬁnancial statements ofTokyo Electron Limited (hereinafter “the Company”) and its
subsidiaries (hereinafter collectively referred to as “Tokyo
Electron”) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act
of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to applicationand disclosure requirements of International Financial
Reporting Standards.
The Company uses ﬁnancial statements prepared by foreign subsidiaries in accordance with International Financial
Reporting Standards or U.S. generally accepted accounting
principles for the preparation of the consolidated ﬁnancial
statements, together with adjustment for certain items which
are required to be adjusted in the consolidation process.
The accompanying consolidated ﬁnancial statements havebeen restructured and translated into English from the statutory Japanese language consolidated ﬁnancial statements. Some
supplementary information included in the statutory Japanese
language consolidated ﬁnancial statements is not presented in
the accompanying consolidated ﬁnancial statements.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥112.68
to $1.00, the approximate rate as of March 31, 2016. The
translation should not be construed as a representation that
the Japanese yen amounts shown could be converted into
U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated ﬁnancial statements include theaccounts of the Company and its 37 and 46 subsidiaries as ofMarch 31, 2016 and 2015, respectively.
All signiﬁcant inter-company accounts, transactions andunrealized proﬁts or losses have been eliminated throughconsolidation procedures.
The Company transferred a portion of its shares of Tokyo
Electron Device Limited on April 1, April 15 and May 9, 2014.
As a result, effective on April 1, 2014, the classiﬁcation ofTokyo Electron Device Limited changed from a consolidated
subsidiary to an equity method affiliate. In accordance withthis change, 8 affiliates apply equity method as of March 31,
2016. The ﬁscal year-end of all entities is March 31, except for

5 consolidated foreign subsidiaries. Financial statements provisionally closed for the period ending March 31 are used for
those subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies
are translated into Japanese yen at the year-end rates, except
for those hedged by forward exchange contracts, which aretranslated at the contracted rates. Resulting exchange gains
and losses are included in earnings for the year.
Revenue and expense items are translated at the rates thatapproximate those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries aretranslated into Japanese yen at the rates of exchange in
effect at the balance sheet date, except for shareholders’equity accounts, which are translated at the historical rates.
Revenue and expense accounts of foreign subsidiaries aretranslated at average rates of exchange in effect during theyear. Resulting translation adjustments are presented in net
assets as a component of accumulated other comprehensive
income in the consolidated balance sheets.
(c) Cash equivalents
Tokyo Electron considers all highly-liquid instruments purchased with original maturities of three months or less to be
cash equivalents.
(d) Short-term investments
Short-term investments consist of short term deposits
and low-risk ﬁnancial instruments with original maturities ofmore than three months.
(e) Investment securities
Tokyo Electron examines the intent of holding each security
and classiﬁes those securities as trading securities, held-tomaturity debt securities or other securities. Tokyo Electron has
no trading securities. Held-to-maturity debt securities arestated mainly at amortized cost. Other securities with market
prices are valued at fair value at the balance sheet date. The
differences between the book value and fair value of othersecurities, net of applicable income taxes, are presented in
net assets as a component of accumulated other comprehensive income. Other securities without market prices arevalued at cost using the weighted-average method.
The cost of sold securities is calculated using the weighted
average method.
(f) Inventories
Inventories other than raw materials are stated at thelower of cost, determined by principally the speciﬁc identiﬁcation method, or net realizable value, which is deﬁned as
selling price less estimated additional manufacturing costs
and estimated direct selling expenses. Raw materials arestated at the lower of cost, determined principally by themoving-average method, or replacement cost.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation of buildings, machinery and equipment of theCompany and its domestic subsidiaries is computed using
the declining balance method, except for buildings acquired
subsequent to March 31, 1998 which are depreciated using
the straight-line method, based on the estimated useful livesof assets. Foreign subsidiaries mainly apply the straight-line
method over the estimated useful lives of assets.
Estimated useful lives of property, plant and equipment are as
follows:
Buildings
2 to 60 years
Machinery and equipment
2 to 17 years(h) Intangible assets (excluding goodwill)
Intangible assets are amortized by the straight-line method over their estimated useful lives.
(i) Goodwill
Goodwill is evaluated on an individual basis and amortizedby the straight-line method over a period not exceeding 20
years.
(j) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of ﬁxed assets
held for use in the business.
If the carrying value of a ﬁxed asset is impaired, a loss isrecognized based on the amount by which the carrying value
exceeds its recoverable amount, being the higher of the net
selling price or the value in use of the assets. Net selling priceis determined using the fair value less disposal costs andvalue in use is based on the total amount of discounted cash
ﬂows estimated to be generated from the continuing use of
the individual assets or the asset group and the disposal of
the assets.
(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an
amount determined based on the historical experience ofbad debts with respect to ordinary receivables, and an estimate of uncollectible amounts determined by reference tospeciﬁc doubtful receivables from customers which are experiencing ﬁnancial difficulties.
(l) Employee benefits
The Company and its domestic subsidiaries provide
deﬁned beneﬁt plans for their employees. Expected beneﬁts
are attributed to accounting periods by the beneﬁt formulabasis. Prior service costs are charged to earnings on astraight-line basis, beginning from the ﬁscal year in which
they are incurred, over a ﬁxed number of years (4 years)
within the average remaining years of service of employees

when the changes occur. Actuarial differences are charged toearnings on a straight-line basis, beginning from the following ﬁscal year after they are incurred, over a ﬁxed number ofyears (4 years) within the average remaining years of serviceof employees when the differences occur.
The provision for accrued pension and severance costs for
directors and audit & supervisory board members of theCompany and its domestic subsidiaries is calculated in accordance with internal regulations.
The Company and certain domestic subsidiaries decided to
discontinue the payment of severance pay for directors andaudit & supervisory board members after April 1, 2005, and at
the general shareholders’ meeting in June 2005, it was
resolved that the severance pay for directors and audit &supervisory board members until March 31, 2005 would be
paid at the termination of their service and the decision
regarding the payment amount for each director and audit &supervisory board member was delegated to the board of
directors and audit & supervisory board members. The accruals for severance costs for directors and audit & supervisoryboard members are included in Net liability for deﬁned beneﬁts in the consolidated balance sheets.
(m) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty, and Tokyo Electron accrues estimated warranty costs
when product revenue is recognized. Estimated after-salerepair expenses over warranty periods are accrued based on
the historical ratio of actual repair expenses to corresponding
sales.
(n) Derivatives and hedge accounting
The Company and certain subsidiaries make use of derivatives in order to manage certain risks arising from adverse
ﬂuctuations in foreign currency exchange rates. The amountof derivatives is limited to the extent of foreign currency
assets, liabilities and actual orders, and Tokyo Electron does
not trade in derivatives for speculative purposes.
Derivatives are carried at fair value in the consolidated balance sheet with changes in unrealized gain or loss charged or
credited to earnings, except for those which meet the criteria
for hedge accounting. Unrealized gains or losses on hedging
instruments, net of taxes, are reported in net assets as acomponent of accumulated other comprehensive income.
Receivables and payables hedged by qualiﬁed forward foreign exchange contracts are translated at the corresponding
foreign exchange contract rates.
(o) Income taxes
Tokyo Electron records deferred tax assets and liabilities on
temporary differences between the carrying amounts ofassets and liabilities for ﬁnancial reporting purposes and thePAGETOKYO ELECTRON ANNUAL REPORT 201626

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

amounts used for income tax purposes and net operating
loss carryforwards. Deferred tax assets and liabilities aremeasured using the enacted tax rates and laws which are
expected to be in effect when net operating loss carryforwards and temporary differences are expected to realized.
(p) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)production equipment is principally recognized at the time of
the customer conﬁrmation of set-up and testing of products.
Revenue from such equipment not requiring substantial
installation is recognized at the time of shipment. Service
revenue maintenance is recognized ratably over the term of
the maintenance contract.
(q) Per share information
Net income per share and net assets per share are computed based on the weighted-average number of shares ofcommon stock outstanding during each year. Net income diluted per share is computed based on the weighted-average
number of shares of common stock outstanding during eachyear after incorporating the dilutive potential effect of sharesof common stock to be issued upon the exercise ofstock options.
Dividends per share has been presented on an accruals
basis and include, in each ﬁscal year ended March 31, dividends
approved or to be approved after March 31 but applicable tothe year then ended.
The basis for the calculation of net income per share forthe ﬁscal years ended March 31, 2016 and 2015 is as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Net income attributable toowners of parent
Less components not pertaining
to holders of common stock
Net income pertaining toholders of common stock
Weighted-average number ofshares of common stock
outstanding (thousands)¥77,892—¥77,892

168,924

2015¥71,888—¥71,8882016$691,267—$691,267

179,238(r) Research and development expenses
Research and development expenses are charged to earnings as incurred and amounted to ¥76,287 million ($677,023
thousand) and ¥71,350 million for the years ended March 31,
2016 and 2015, respectively.

(s) Reclassifications
Certain reclassiﬁcations have been made to the prior year’s
consolidated ﬁnancial statements to conform with the presentation used for the year ended March 31, 2016.

3. Change in Accounting Policies and Adoption of
New Accounting Standards
Year ended March 31, 2016
The Company and its domestic subsidiaries adopted“Revised Accounting Standard for Business Combinations”(ASBJ Statement No.21, September 13, 2013 (hereinafter,“Statement No.21”)), “Revised Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No.22,
September 13, 2013 (hereinafter, “Statement No.22”)) and“Revised Accounting Standard for Business Divestitures”(ASBJ Statement No.7, September 13, 2013 (hereinafter,“Statement No.7”)) (together, the “Business Combination
Accounting Standards”), from the current ﬁscal year. As aresult, the Company changed its accounting policies to recognize in capital surplus the differences arising from thechanges in the Company’s ownership interest of subsidiaries
over which the Company continues to maintain control andto record acquisition related costs as expenses in the ﬁscal
year in which the costs are incurred. In addition, theCompany changed its accounting policy for the reallocationof acquisition costs due to the completion following provisional accounting to reﬂect such reallocation in the consolidated ﬁnancial statements for the ﬁscal year in which thebusiness combination took place. The Company also changed
the presentation of net income and the term “non-controllinginterests” is used instead of “minority interests”. Certain
amounts in the prior year comparative information werereclassiﬁed to conform to such changes in the current year
presentation.
In the consolidated statement of cash ﬂows, cash ﬂows
from acquisition or disposal of shares of subsidiaries with nochanges in the scope of consolidation are included in “Cashﬂows from ﬁnancing activities” and cash ﬂows from acquisition related costs for shares of subsidiaries with changes inthe scope of consolidation or costs related to acquisition or
disposal of shares of subsidiaries with no changes in thescope of consolidation are included in “Cash ﬂows from operating activities”.

With regard to the application of the Business
Combination Accounting Standards, the Company followed
the provisional treatments in article 58-2 (4) of Statement
No.21, article 44-5 (4) of Statement No.22 and article 57-4 (4)of Statement No.7 with application from the beginning of
the current ﬁscal year prospectively.
There is no effect on the consolidated ﬁnancial statementsof the current ﬁscal year.
Year ended March 31, 2015
Effective from the year ended March 31, 2015, theCompany and its consolidated domestic subsidiaries adopted
article 35 of the “Accounting Standard for Retirement
Beneﬁts” (ASBJ Statement No.26, May 17, 2012 (hereinafter,“Statement No.26”)) and article 67 of the “Guidance on
Accounting Standard for Retirement Beneﬁts” (ASBJ
Guidance No.25, May 17, 2012 (hereinafter, “Guidance
No.25”)), and have changed the determination of retirement
beneﬁt obligations and current service costs. In addition, theCompany and its consolidated domestic subsidiaries havechanged the method of attributing expected beneﬁt to periods from straight-line attribution to a beneﬁt formula basis
and determining the discount rates.
In accordance with article 37 of Statement No.26, theeffect of changing the determination of retirement beneﬁt
obligations and current service costs were recognized inretained earnings at the beginning of the year ended March
31, 2015.
The effect of the adoption of the accounting standards on
the Company’s consolidated ﬁnancial statements for the year
ended March 31, 2015 was immaterial.

4. Accounting Standards issued but not yet adopted“Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016
(hereinafter, “Guidance No.26”))

1. Treatment for an entity that does not meet any of thecriteria in types 1 to 5;
2. Criteria for types 2 and 3;
3. Treatment for deductible temporary differences which
an entity classiﬁed as type 2 is unable to schedule;
4. Treatment for the period which an entity classiﬁed as
type 3 is able to reasonably estimate with respect tofuture taxable income before consideration of taxable
or deductible temporary differences that exist at theend of the current ﬁscal year; and5. Treatment when an entity classiﬁed as type 4 also
meets the criteria for types 2 or 3.
(2) Effective date
Effective from the beginning of the ﬁscal year ending
March 31, 2017(3) Effects of application of the Guidance
The Company and its domestic subsidiaries are currently inthe process of determining the effects of these revised standards on the consolidated ﬁnancial statements.

5. Supplemental Information on the Consolidated
Statements of Cash Flows
Information of assets and liabilities of a deconsolidated
subsidiary and the relationship between the sales price ofshares and the net proceeds from the sales transaction forthe year ended March 31, 2015 are as follows:
Millions of yen

2015

Current assets
Non-current assets

6,333

Current liabilities(25,311)

Non-current liabilities(9,222)

Non-controlling interests(10,420)

Equity investment interest after sale of shares(7,983)

Accumulated other comprehensive income(1) Overview
Following the framework in Auditing Committee Report
No. 66 “Audit Treatment regarding the Judgment ofRecoverability of Deferred Tax Assets”, which prescribes estimation of deferred tax assets according to the classiﬁcationof the entity by one of ﬁve types, the following treatments
were changed as necessary:¥51,578

Loss on sale of affiliates’ shares(113)(1,609)Loss on change in equity(242)

Sales price of shares

3,011

Cash and cash equivalents
Net proceeds from sales of affiliates’ shares(1,285)¥ 1,726

PAGE

TOKYO ELECTRON ANNUAL REPORT 201627

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

6. Securities
Other securities as of March 31, 2016 and 2015 are as follows:

For the year ended March 31, 2016, the Company soldavailable-for-sale securities and recognized the following
gain and loss on sale:
Millions of yen

Millions of yen

2016:

Cost

Securities with market prices
Equity securities

Amount of sale

Gain on sale

Loss on sale

Equity securities¥1,275

¥446

¥247

Total

¥1,275¥446¥247

Carrying value

Non-current¥7,204¥18,580

Thousands of US dollars

Securities without market prices
Unlisted stock
Total

1,318

1,334

¥8,522¥19,914

Millions of yen

2015:

Cost

Carrying value

Non-current

Amount of sale

Gain on sale

Loss on sale

Equity securities$11,315$3,958$2,192

Total$11,315$3,958$2,192For the year ended March 31, 2015, the amount of gain andloss on sale of available-for-sale securities was immaterial.

Equity securities¥8,282¥22,230

Year ended March 31, 2015
(1) Non-current assets of Tokyo Electron (Kunshan) Limited

7. Inventories

Securities without market prices
Unlisted stock

Inventories as of March 31, 2016 and 2015 are as follows:

1,621

1,645

60

60

Total

¥9,963¥23,935

Thousands of U.S. dollars

Finished products

2016:

Cost

Work in process, raw materials
and supplies

Other

Carrying value

Non-current
Equity securities$63,933$164,891

11,697

11,839$75,630$176,730

Securities without market prices
Unlisted stock
Total

Held-to-maturity securities classiﬁed as current assets are¥160,999 million ($1,428,816 thousand) and ¥238,300 million
as of March 31, 2016 and 2015, respectively.
Reconciliation of held-to-maturity securities as of March
31, 2016 and 2015 to the amounts of short-term investmentsin the consolidated balance sheets are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

¥160,999 ¥238,300

Thousands of
U.S. dollars

Millions of yen

2016

2015

¥130,479 ¥112,301

Total

Securities with market prices

64,601$1,157,961

63,287573,313¥195,080 ¥175,588$1,731,274

The amounts of change in inventory provision included incost of sales in the consolidated statements of income forthe years ended March 31, 2016 and 2015 were an increase of¥758 million ($6,723 thousand) and a decrease of ¥582 million, respectively

8. Other Income (Expenses)
Loss on impairment of property, plant and equipment,
goodwill and other assets
For the years ended March 31, 2016 and 2015, the following
loss on impairment has been recognized:
Year ended March 31, 2016
(1) Goodwill and non-current assets of TEL FSI, Inc.

(45,000) (238,068)(399,361)

Deposits with original maturities
of more than three months

25,03651

222,187¥141,035 ¥283$1,251,642

Net loss on devaluation of investment securities was ¥331
million ($2,938 thousand) and ¥0 million for the years ended
March 31, 2016 and 2015, respectively.

Loss on impairment
Location

Chaska,Minnesota,
U.S.A.

Use

Type of Asset

Goodwill
Buildings
Business
Other intangible
assetsassets
Total

Loss onimpairment
Location

Use

Type of Asset

Millions of yen

Plant

Buildings,
machinery andequipment, andother assets¥2,1192016$1,428,816

Deposits and low-risk ﬁnancial
instruments with original
maturities of three months
or less

Short-term investments(2) Others
Loss on impairment of ¥266 million ($2,360 thousand) was
recognized for other asset groups of Tokyo Electron.

9. Pledged Assets
Tokyo Electron did not hold any assets pledged as collateral as of March 31, 2016 and 2015.

10. Short-term Borrowings
There are no short-term borrowings classiﬁed as current
liabilities as of March 31, 2016 and 2015.
As of March 31, 2016 and 2015, Tokyo Electron has unusedlines of credit amounting to ¥114,960 million ($1,020,234
thousand) and ¥114,990 million, respectively.

11. Employee Benefits

Securities with market prices

Held-to-maturity (current)Tokyo Electron performed an impairment test and recognized loss on impairment of assets of TEL FSI, Inc., a subsidiary
manufacturing semiconductor production equipment, due to
TEL FSI, Inc.’s reconsideration of its business plan. Tokyo Electron
recognized the difference between the book value and therecoverable amount of goodwill, buildings, and other intangible assets as loss on impairment. The recoverable amount
was measured as value in use, and was calculated by discounting future cash ﬂows at a discount rate of 14.0-14.5%.

Millions of yen

Thousands of
U.S. dollars¥3,8252,756$33,946
24,4592,880¥9,461

25,559$83,964

Kunshan, Jiangsu, China

Due to a signiﬁcant downturn in proﬁtability caused by themarked deterioration in operating conditions, Tokyo Electron(Kunshan) Limited, a subsidiary manufacturing FPD production equipment, recognized the difference between bookvalue and recoverable amount of property, plant and equipment as loss on impairment. The recoverable amount wasmeasured as the net selling price calculated based on reasonable estimates, such as real estate appraisals performed bythird party valuation experts.
(2) Others
Loss on impairment of ¥387 million was recognized forother asset groups of Tokyo Electron.
Loss on business restructuring
Loss on business restructuring of ¥2,235 million ($19,835
thousand) for the year ended March 31, 2016 represents losses relating to the business restructuring in U.S. subsidiaries,
which mainly consists of inventory disposal costs.

The Company and its domestic subsidiaries provide for
their employees a cash balance plan and a non-contributory
retirement and severance beneﬁt plan as deﬁned beneﬁtplans for their employees. Further, certain consolidated overseas subsidiaries provide deﬁned beneﬁt plans for theiremployees.
Deﬁned beneﬁt plans(1) Movement of deﬁned beneﬁt obligations
Thousands of
U.S. dollars

Millions of yen

2016

Balance at April 1, 2015
and 2014
Cumulative effect of changes
in accounting policies

2015¥112,272 ¥113,221

2016$ 996,379

—

2,034

—

112,272

115,255

996,379

Service cost

5,677

5,697

50,382

Interest cost

1,273

1,608

11,297

Actuarial loss

9,690

4,793

85,996

Beneﬁts paid

(7,748)(5,138)(68,761)

Effect of change in scope of
consolidation(4,548)(11,095)(40,362)

Foreign currency exchange
rate changes

(475)

969

(4,215)

87

183

771

¥116,228 ¥112,272$1,031,487

Restated balance

Other
Balance at March 31, 2016
and 2015

PAGE

TOKYO ELECTRON ANNUAL REPORT 201628

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(4) Deﬁned beneﬁt costs(2) Movement of plan assets
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

¥70,905¥69,540$629,260

Expected return on plan assets

1,271

1,332

Actuarial gain (loss)(2,304)

Employer contributions

2,997

Balance at April 1, 2015
and 2014

11,297

11,280

Expected return on plan assets(1,271)(1,332)(11,280)

3,997(20,447)

Net actuarial gain amortization(2,268)(2,570)(20,126)

3,406

26,597

Other

243

528

2,155

¥3,654¥3,931$32,428(5,542)(39,590)

(380)

952

27

273
¥70,905

Total deﬁned beneﬁt costs
for the ﬁscal years ended
March 31, 2016 and 2015

(3,372)239(5) Remeasurements of deﬁned beneﬁt plants$555,103

Millions of yen

Actuarial losses(3) Reconciliation from deﬁned beneﬁt obligations and plan
assets to liability (asset) for deﬁned beneﬁts
Thousands of
U.S. dollars

Millions of yen

2015$550,257

Plan assets(62,549)(70,905)(555,103)

Funded status(546)(8,692)(4,846)54,22550,059481,230

—

921

—

2016

$(120,643)(6) Accumulated remeasurements of deﬁned beneﬁt plants

Net actuarial gain (loss) that is
yet to be recognized (before tax) ¥(6,582)¥53,679
55,302

Net asset for deﬁned beneﬁts(1,623)¥53,679¥42,288

Thousands of
U.S. dollars

2015

2016

¥7,180$(58,413)(7) Plan assets
1. Plan assets comprise2016

Net liability for deﬁned beneﬁts(note 2)Net liability for deﬁned beneﬁts
at March 31, 2016 and 20152015¥(3,572)

Millions of yen¥62,213

Net liability for deﬁned beneﬁts
at March 31, 2016 and 2015

2016

2016

¥62,003

Thousands of
U.S. dollars¥(13,594)

2016

Funded deﬁned beneﬁt
obligations

Asset ceiling adjustments (note 1)$50,382

1,608(4,461)

Unfunded deﬁned beneﬁt
obligations

2016¥5,697(48,864)

2016

2015

1,273

(3,053)¥62,549

2016¥5,677(5,506)

Balance at March 31, 2016
and 2015

Thousands of
U.S. dollars

Service cost

Beneﬁts paid

Other

Millions of yen

Interest cost

Effect of change in scope of
consolidation
Foreign currency exchange
rate changes

12. Income Taxes

2015$476,384

Bonds

51,105490,788

Life insurance company generalaccount

26

20(8,817)(14,404)

Equity securities

17

22

Cash and cash equivalents

2

2

Other

9

10

Total

100%

100%

¥42,288$476,384

Notes: 1. The asset ceiling adjustment represents plan assets exceeding theasset ceiling for overseas subsidiaries that apply International
Accounting Standard 19 Employee Beneﬁts.
2. The provision for accrued pension and severance costs for directors
and audit & supervisory board members of ¥375 million ($3,328
thousand) as of March 31, 2016 and 2015 is not included.

46%

46%

Signiﬁcant components of the deferred tax assets and liabilities of Tokyo Electron as of March 31, 2016 and 2015 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Net liability for deﬁned beneﬁts¥17,717¥17,913$157,233

Net operating loss carryforwards

17,061

19,842

151,411

Elimination of unrealized
proﬁt in inventories

14,100

11,582

125,133

Devaluation of inventories

4,913

4,149

43,601

Deferred tax assets

Loss on impairment of property,
plant and equipment andother assets

3,037

3,026

26,952

Accrued employees’ bonuses

2,831

3,210

25,124

Accrued warranty expenses

2,395

2,734

21,255

Other

12,366

10,003

109,745

Total gross deferred tax assets

74,42072,459660,454

Less valuation allowance(11,995)(13,506)(106,452)

Total deferred tax assets

62,42558,953554,002

Undistributed earningsof subsidiaries(5,383)(5,620)(47,772)

Intangible assets identiﬁed
through business combination(3,741)(5,255)(33,200)

Net unrealized gains on
investment securities(3,487)(4,510)(30,946)

Other(3,146)(5,863)(27,920)

Deferred tax liabilities

Total deferred tax liabilities(15,757)(21,248)(139,838)

Net deferred tax assets¥46,668¥37,705$414,164

Net deferred tax assets are included in the consolidatedbalance sheets as of March 31, 2016 and 2015 as follows:
Thousands of
U.S. dollars

Millions of yen

2. Long-term expected rate of return
Current and target asset allocations, and historical andexpected returns on the various categories of plan assets
have been considered in determining the long-term
expected rate of return.
(8) Actuarial assumptions
The principal actuarial assumptions at and for the years
ended March 31, 2016 and 2015 are as follows:
2016

2015

Discount rate

0.59%

1.15%

Long-term expected rate of return

2.00%

2.00%

2016

2015

2016

Current assets¥31,204¥27,672$276,926

Investments and other assets

20,782

18,348

184,434

Other current liabilities
Other non-current liabilities

—

(1)

—

(5,318)(8,314)(47,196)

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during
the period in which temporary differences become deductible. For assessment of the realizability of deferred tax assets,management considers the scheduled reversal of deferred
tax liabilities, future estimated taxable income, tax planning
strategies and level of net operating loss carryforwards, ifany, in accordance with accounting principles generally
accepted in Japan.

Based on the level of historical taxable income and future
estimated taxable income over the periods which the temporary differences are deductible, management believes Tokyo
Electron will realize the beneﬁts of deferred tax assets, net ofvaluation allowance, as of March 31, 2016 and 2015.
The Company and its wholly-owned domestic subsidiaries
apply a consolidated tax ﬁling system for corporate tax purposes.
On March 31, 2016, amendments to the Japanese tax regulations were enacted into law. Based on the amendments,
the statutory income tax rates utilized for the measurementof deferred tax assets and liabilities expected to be settled orrealized from April 1, 2016 to March 31, 2018 and on or after
April 1, 2018 were changed from 32.34% to 30.86% and30.62%, respectively, as of March 31, 2016.
Due to these changes in statutory income tax rates, netdeferred tax assets (after deducting the deferred tax liabilities) decreased by ¥1,781 million ($15,806 thousand), anddeferred income tax expense increased by ¥1,893 million($16,800 thousand) for the ﬁscal year ended March 31, 2016.
Signiﬁcant components of the difference between thestatutory and effective tax rates for the years ended March
31, 2016 and 2015 are as follows:
2016

2015

33.06%

35.64%Tax credits(7.49)(4.35)

Effect of enacted changes in Japanese
tax rates on net deferred tax assets

1.78

3.39

Statutory tax rate in Japan
Adjustments:

Amortization and impairment of
goodwill

1.49

0.45

Effect of elimination of unrealized proﬁt(1.30)

0.70

Change in valuation allowance(0.83)(17.51)Others, net

0.09(1.16)

Effective tax rate

26.80%

17.16%

13. Net Assets
Net assets comprises four subsections, which are shareholders’ equity, accumulated other comprehensive income,share subscription rights and non-controlling interests.
Under Japanese laws and regulations, the entire amount
paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the boardof directors, designate an amount not exceeding one half ofthe price of the new shares as additional paid-in capitalwhich is included in capital surplus.

PAGE

TOKYO ELECTRON ANNUAL REPORT 201629

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of
additional paid-in capital and legal reserve must be set aside
as additional paid-in capital or legal reserve. Legal reserve is
included in retained earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in
capital used to eliminate or reduce a deﬁcit generally requirea resolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be distributed as dividends. All additional paid-in capital and legal reserve
may be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.

The Company is subject to restriction of dividends basedon the Japanese Corporate Act, which restricts the amount ofdividends to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings to shareholders on dates other than the mid-term andyear-end, by a resolution of the board of directors in accordance with Japanese laws and regulations.
At the board of directors’ meeting held on May 12, 2016, thedistribution of cash dividends amounting to ¥18,372 million($163,046 thousand) was resolved. Such appropriations havenot been accrued in the consolidated ﬁnancial statements asof March 31, 2016 since they are recognized in the period inwhich they are resolved at the board of directors’ meeting.

Other comprehensive income for the years ended March 31, 2016 and 2015 is as follows:
Thousands of
U.S. dollars

2016

2015

2016

¥ (2,379)¥5,281$ (21,113)

Net unrealized gains on investment securities
Reclassiﬁcation adjustments

(201)

0

(1,784)(2,580)5,281(22,897)

Tax expense

1,024(1,413)

9,088

Sub-total, net of tax(1,556)

3,868(13,809)

Net deferred gains (losses) arising during the year
Reclassiﬁcation adjustments
Sub-total, before tax
Tax expense
Sub-total, net of tax

2016

(168)

95

(1,491)

—

3

—

(168)

98

(1,491)

56

(29)

497

(112)

69

(994)

(5,705)

6,664(50,630)

Reclassiﬁcation adjustments

(1)

(21)

(9)

(5,706)

6,643(50,639)———

Sub-total, before tax
Tax expense
Sub-total, net of tax(5,706)

6,643(50,639)

Remeasurements of deﬁned beneﬁt plans

Yen

U.S. dollars

¥1

$0.01

479,300¥1

Granted135,700

1

0.01

—

—

Exercised

207,400

1

0.01

88,900

1

1,000

1

0.01

12,2001

Outstanding at the end of year

305,500

1

0.01

378,200

1

169,800

1

0.01

252,100

1

Amounts expensed related to stock options
The amounts expensed related to stock options for the years
ended March 31, 2016 and 2015, are as follows:
Millions of yen

Thousands of
U.S. dollars

2016

2015

2016

¥967

¥153

$8,582

Valuation method of fair value per unit of stock options
Fair value as of the grant date for stock options granted forthe year ended March 31, 2016 was ¥6,909 ($61.32) per unit,
which was evaluated as follows:(1) Valuation method used : Black-Scholes model(2) Major underlying assumptions and estimates:
11th Stock Acquisition Rights

Volatility (Note 1)
Expected residual periods (Note 2)

11.5 years

Expected dividends (Note 3)¥96.5 ($0.86) per share
0.52%

(907)

(100,515)

Risk-free interest rate (Note 4)(2,268)(2,665)(20,128)

Sub-total, before tax(13,594)(3,572)(120,643)

Notes: 1. Calculated based on the stock price performance for 11.5 years (fromDecember 2003 to June 2015).
2. Calculated on the assumption that the share subscription rights
would be exercised at the middle point of the exercise period.
3. Based on the dividends paid for the year ended March 31, 2015
and 2014.
4. Based on Japanese government bond yield corresponding to the
expected residual periods.

4,361

1,302

38,703(2,270)(81,940)

(345)

56

(3,062)¥(16,952)¥8,366$(150,444)

Share of other comprehensive income of associates accounted for using equity method
Adjustments during the year
Total other comprehensive income(3) Method of estimating the number of vested stock options
As it is difficult to reasonably estimate the number of stock
options to be forfeited in the future, the Company adopts
a method that reﬂects the actual number of forfeitures.

16. Leases
Future minimum lease payments on non-cancelable operating leases are as follows:
Millions of yen

Due within one year

Thousands of
U.S. dollars

2016

2015

2016

¥2,397¥3,249$21,273

Due over one year

4,756

3,660

42,208

Total¥7,153¥6,909$63,481

17. Fair Value of Financial Instruments

39.21%(11,326)(9,233)Yen

Exercisable at the end of year

Adjustments during the year

Tax expense

Weighted-average
exercise price378,200

Reclassiﬁcation adjustments

Sub-total, net of tax

Weighted-average exercise price

Outstanding at the beginning of year

Foreign currency translation adjustments
Adjustments during the year

2015
Number ofsharesSelling, general andadministrative expenses

Net deferred gains (losses) on hedging instruments

exercise period of seventeen years from the date on which theoptions become exercisable.
Options to purchase 135,700 shares of the Company wereauthorized and granted at an exercise price of ¥1 ($0.01) for theyear ended March 31, 2016.

A summary of stock options outstanding and exercisable as of March 31, 2016 and 2015 is as follows:

Expired (forfeited)

Millions of yen

Sub-total, before tax

Stock option plan
The Company’s shareholders have approved annual stock
option plans for directors and selected employees since theyear ended March 31, 1999. The options under the plans vest
immediately or over three-year period with restriction on
exercise up to three years after the date of grant, and have an

Number ofshares

14. Other Comprehensive Income

Net unrealized gains (losses) arising during the year

15. Share Subscription Rights

Policy for financial instruments
Tokyo Electron limits its fund management to short-termbank deposits and low-risk ﬁnancial instruments.
Trade receivables, which consist of notes and accounts
receivable, are exposed to credit risk in the event of non-performance by the counterparties. Execution and managementof credit risk, maturity and receivable balance are conductedpursuant to the internal management rules for credit control.
Credit risk of major customers is assessed on a regular basis.

PAGETOKYO ELECTRON ANNUAL REPORT 201630

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Short-term investments consist of time deposits and low
risk ﬁnancial instruments and Tokyo Electron trade withhighly-rated ﬁnancial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests inlisted companies exposed to equity market risks. Conditions,
including market prices, for these investment securities aremonitored on a regular basis.
Trade payables, which consist of notes and accounts payable, mainly mature within one year. Trade payables are
exposed to liquidity risks which are managed through activities such as implementing cash management plans.
See note 18 for detailed discussion on derivative ﬁnancial
instruments.
Fair value of financial instruments
Carrying amount and estimated fair value of ﬁnancial
instruments as of March 31, 2016 and 2015 are set out below.
Fair value of ﬁnancial instruments which is practically difficult
to estimate are excluded (see note 6).
Millions of yen
Carrying
amountEstimated
fair value1

Cash and cash equivalents¥ 95,638¥ 95,638

Short-term investments

141,035

140,785

2016:

AssetsTrade notes and accounts
receivable, net of allowance for
doubtful accounts (¥48 million)
Investment securities

116,455

2016:

Cash and cash equivalents$ 848,757$ 848,757

Short-term investments

1,251,642

1,249,423

Trade notes and accounts
receivable, net of allowance for
doubtful accounts ($426 thousand)
Investment securities

Hedge accounting applied

164,891

164,891
488,552

Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied

10,49010,490293

293

Notes: 1. Fair value calculation of ﬁnancial instruments
Cash and cash equivalents, short-term investments, trade notes andaccounts receivable and trade notes and accounts payable
The carrying amounts approximate fair value because of the shortmaturity of these instruments.
Investment securities
The fair values of marketable securities are based on quoted market prices.
See note 6 for further information by classiﬁcation of investment
securities.
Derivatives
See note 18 for detailed discussion on derivative ﬁnancial
instruments.
2. The following unlisted equity securities are not included in the above
as they do not have quoted market prices and therefore it is considered extremely difficult to measure their fair value.
Millions of yen

18,5802016

55,05055,050

1,182

1,182

33

33

Unlisted stocks¥1,334¥1,645

Tokyo Electron is subject to risk from adverse ﬂuctuations
in foreign currency exchange rates in its operating andﬁnancing activities. The Company and certain subsidiaries
enter into forward foreign exchange contracts in order tohedge such risks, but do not enter into such transactions for
speculative purposes. The Company implements a ratio analysis of the total cumulative cash ﬂow ﬂuctuations to assess
effectiveness of hedging for all derivative transactions,
except for transactions where the critical terms of the hedging instrument and hedged item match and the Company
could conclude that changes in fair value or cash ﬂows are
expected to completely offset. Execution and managementof all derivative transactions are conducted pursuant to theinternal management rule.
The estimated fair values of the derivative ﬁnancial instruments as of March 31, 2016 and 2015 are as follows:
1. Derivative ﬁnancial instruments not designated as hedging
instruments
Millions of yen

2016:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars¥51,173¥1,773¥1,773

Sell Korean won

1,068

(612)

(612)
(0)

Sell Singapore dollars

58

(0)

Buy Korean won

879

2

2

2016

Buy U.S. dollars

834

(1)

(1)

Buy Taiwan dollars

431

10

10

Buy EURO

359

9

9

2015

$11,839

Other

—

292

—

Total

¥1,334¥1,937$11,839

Buy Swiss francs

95

1

1

Buy Singapore dollars

33

(0)

(0)

Total

¥54,930¥1,182¥1,182

2015:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars¥55,664¥(1,448)¥(1,448)

Sell Swiss francs

6,346

34

34

Sell Korean won

1,068

(757)

(757)

3. Maturities of ﬁnancial assets and securities are as follows:
Millions of yen

2015:

Carrying
amountEstimated
fair value1

AssetsCash and cash equivalents
Short-term investments¥317,632
283¥317,632
283

Within 1 year

Cash and cash equivalents¥ 95,638¥—

Short-term investments

141,035—

2016:

Trade notes and accounts receivable

110,466

110,466

Investment securities

22,23022,230Liabilities

2015:

Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable

56,479Hedge accounting applied—

Within 1 year

After 1 through5 years(2,125)

202

202

61

(0)

(0)

Sell Chinese yuan

13

(3)

(3)

Buy U.S. dollars

843

1

1

394

(1)

(1)

¥317,632

¥—

283

—

Buy Chinese yuan

338

50

50

110,845—

Buy EURO

135

(1)

(1)

Buy Singapore dollars

33

0

0

¥64,895¥(2,125)¥(2,125)

Thousands of U.S. dollars(2,125)Sell Singapore dollars

Buy Taiwan dollars

56,479Derivatives (see note 18)
Hedge accounting not applied

116,503
Millions of yen

Trade notes and accounts
receivable, net of allowance for
doubtful accounts (¥379 million)

Trade notes and accounts payable

Millions of yen

Millions of yen
After 1 through5 years

2016:

Within 1 year

After 1 through5 years

Cash and cash equivalents$ 848,757$—

Short-term investments

1,251,642—

Trade notes and accounts receivable

1,033,928—

Contract
amountFair value

Gains(losses)

Sell U.S. dollars$454,145$15,734$15,734

Sell Korean won

9,478(5,431)(5,431)

515

(0)

(0)

Buy Korean won

7,801

18

18

Buy U.S. dollars

7,401

(9)

(9)

Buy Taiwan dollars

3,825

89

89

Buy EURO

80

2016:

Thousands of
U.S. dollars

Reported amount In balance sheet

Derivatives (see note 18)
Hedge accounting not applied

1,033,502

488,552

Liabilities
Trade notes and accounts payable

1,033,502

Liabilities
Trade notes and accounts payable

Thousands of U.S. dollars

Estimated
fair value1

Assets

116,455

18,58018. Derivative Financial Instruments

Thousands of U.S. dollars
Carrying
amount

Total

Sell Singapore dollars

3,186

80

Buy Swiss francs

843

9

9

Buy Singapore dollars

293

(0)

(0)

$487,487$10,490$10,490

Total

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

2. Derivative ﬁnancial instruments designated as hedging
instruments
Alternative method
The contract amounts of forward foreign exchange contracts, entered into to hedge future transactions and receivables and payables denominated in foreign currencies thathave been translated by the corresponding contracted rates,
are as follows:
Millions of yen

Thousands of U.S. dollars

Contract
amountFair value

Contract
amountFair value

Sell U.S. dollars¥1,371¥63$12,167$559

Sell Korean won

33

(18)

293

(160)

Buy EURO

361

(8)

3,204

(71)

Buy GBP

19

(3)

169

(26)

Buy U.S. dollars

13

(0)

115

(0)

Sell U.S. dollars

162

—

1,438

—

Buy U.S. dollars

200

—

1,775

—

Buy Singapore dollars

21

—

186

—

2016:

Future transactions
denominated ina foreign currency

Monetary assets andliabilities in foreign
currency (Note)

Buy EURO
Total

12

—

106

—

¥2,192¥34$19,453

$302

PAGE

TOKYO ELECTRON ANNUAL REPORT 201631

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Millions of yen

2015:

Contract
amountFair value

Future transactions denominated ina foreign currency
Sell U.S. dollars¥ 638¥ (37)

Sell Korean won

74

(51)

Buy Chinese yuan

1,808

326

Buy EURO

406

(45)

Buy U.S. dollars

50

9

Buy U.S. dollars
Total(3) Share transfer date
April 1, 2014, April 15, 2014 and May 9, 2014(4) Share transfer information
Legal form

Monetary assets and liabilities in foreign
currency (Note)
Sell U.S. dollars

components and computer network related products
while becoming even more independent and building its
own growth strategies for the future.

Share transfer

Number of shares transferred

2,342,600 shares—

Sales amount of the shares¥3,011 million

268—

Ownership ratio after the share transfer¥4,335

¥202

1,091

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

35.45%

2. Summary of accounting treatment(1) Carrying value of assets and liabilities and primary information related to the transferred business

19. Business Combinations

Millions of yen

2015

Years ended March 31, 2015
Business Divestitures
Share transfer of a subsidiary
1. Outline of the share transfer(1) Name of the company and business description
Name of the company: Tokyo Electron Device Limited
Business description: Sale of electronic components andcomputer networks(2) Reason of the share transfer
In the midst of a rapidly changing business environment, Tokyo Electron has spent a considerable effort
investigating future growth strategies for both Tokyo
Electron and Tokyo Electron Device Limited as both companies look to develop the businesses going forward. As aresult, the Company sold a portion of its shares in Tokyo
Electron Device Limited in order to improve the value ofboth enterprises. This will enable Tokyo Electron andTokyo Electron Device Limited to plan for a greater concentration of management resources in our core equipment business, and for Tokyo Electron Device Limited toactively drive its development business and overseas
expansion in addition to existing sales of electronic

Current assets
Non-current assets¥51,578
6,333

Total assets¥57,911

Current liabilities¥25,311

Non-current liabilities
Total liabilities

9,222¥34,533(2) Accounting treatment
Responding to treasury stock repurchase announced by
Tokyo Electron Device Limited, Tokyo Electron recognized
loss on change in equity in the amount of ¥242 million forthe difference between the decrease in equity interest ofTokyo Electron Devise Limited and cash receipt, while
Tokyo Electron recognized loss on sale of affiliates’ sharesin the amount of ¥1,609 million for the share transfer.

20. Segment Information
General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo Electron. For each of the components, discrete
ﬁnancial information is available and the operating result is regularly reviewed by management to make decisions about resources to be allocated to the segment and assess its performance.
The operation of Tokyo Electron consists of segments by products and services based on business units (BUs), and Tokyo Electron
identiﬁes as a reportable segment, “semiconductor production equipment (SPE)” and “ﬂat panel display (FPD) production equipment”.
Products of the SPE segment consist of coater/developers, plasma etch systems, thermal processing systems, single wafer
deposition systems, cleaning systems used in wafer processing, wafer probers used in the wafer testing process and other semiconductor production equipment. The SPE segment principally develops, manufactures, sells and distributes such products.
Products of the FPD production equipment segment consist of coater/developers and etch/ash systems used in the manufacture of ﬂat panel displays. The FPD production equipment segment principally develops, manufactures, sells and distributes suchproducts.
Changes in reportable segment
The photovoltaic panel (PV) production equipment segment is included in “Other” for the year ended March 31, 2016 due tothe decrease in its ﬁnancial signiﬁcance, whereas it was presented as a separate reportable segment for the year ended March 31,
2015. The segment information for the year ended March 31, 2015 has been reclassiﬁed to conform to the presentation for thecurrent year, and is presented in the “Information about reportable segment net sales, segment proﬁt (loss), segment assets andother items” section below.
Basis of measurement of reportable segment net sales, segment profit (loss), segment assets and other items
The accounting policies applied in each reportable segment are generally consistent with those applied for the preparation of
the consolidated ﬁnancial statements. Intersegment sales or transfers are determined based on current market prices. Assets incommon use have not been allocated to each reportable segment, while costs associated with those assets have been allocatedto reportable segments on a systematic basis.
Information about reportable segment net sales, segment profit (loss), segment assets and other items
Reportable segment information as of and for the years ended March 31, 2016 and 2015 is as follows:
Millions of yen
Reportable Segment
Semiconductor
production
equipment

FPD
production
equipment

Other

Total

¥613,033¥44,687¥ 6,229¥663,949——

11,592

11,592(11,592)—

Total

613,033

44,687

17,821

675,541(11,592)

663,949

Segment proﬁt

123,163

4,747

2,036

129,946(23,479)

106,467

Segment assets

321,100

25,1862,134

348,420444,948

793,368

8,792

424

45

9,261

9,996

19,257

970

—

—

970

—

970

Loss on impairment

9,711

—

—

9,711

16

9,727

Capital expenditures, including intangible assets

8,500

285

13

8,798

5,952

14,7502016:

3. Business segment of the company transferredElectronic components and computer networks

Consolidated¥¥663,949

Net sales
Sales to external customers
Intersegment sales or transfers

4. Approximate income recorded in the consolidated statement of operations for the ﬁscal year ended March 31, 2015
Income before income taxes and non-controlling interests¥250 million

Eliminations
andCorporate

Depreciation and amortization
Amortization of goodwill

—

PAGE

TOKYO ELECTRON ANNUAL REPORT 201632

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Other information(1) Domestic and overseas net sales by destination for the years ended March 31, 2016 and 2015 are as follows:

Millions of yen
Reportable Segment

2015:

Semiconductor
production
equipment

FPD
production
equipment

Other

Total

Eliminations
andCorporate

Consolidated

Net sales
Sales to external customers¥576,242¥32,710¥ 4,173¥613,125¥—¥613,125——

11,443

11,443(11,443)—

Total

576,242

32,71015,616

624,568(11,443)

613,125

Segment proﬁt (loss)

135,992(1,312)(7,620)127,060(40,232)

86,828Intersegment sales or transfers

Millions of yen

2016:

Net sales

Korea

U.S.A

China

Europe

Other

Total

¥170,095¥121,808¥107,273¥103,574¥87,325¥56,659¥17,215¥663,949

Millions of yen

2015:

305,583

23,751

3,622

332,956

543,198

876,154

Depreciation and amortization

10,018427

48

10,493

10,38520,878

Amortization of goodwill

1,150

—

—

1,150

—

1,150

388

509

—

897

1,609

2,506

2016:

8,530

197

23

8,750

5,530

14,280Net sales

Capital expenditures, including intangible assets

Japan

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

Segment assets

Loss on impairment

TaiwanNet sales

TaiwanU.S.A.

Korea

Japan

Europe

China

Other

Total

¥141,620¥135,425¥101,962¥95,046¥62,466¥58,380¥18,226¥613,125

Note: Sales are classiﬁed in countries or regions based on location of customers.
Thousands of U.S. dollars
TaiwanJapan$1,509,540 $1,081,008

Korea

U.S.A

China

Europe

Other

Total

$952,015$919,187$774,982$502,831$152,778$5,892,341

Thousands of U.S. dollars
Reportable Segment

2016:

Semiconductor
production
equipment

FPD
production
equipment

Other

Total

Eliminations
andCorporate(2) Net property, plant and equipment by location as of March 31, 2016 and 2015 are as follows:
Consolidated
Millions of yen

Net sales
Sales to external customers
Intersegment sales or transfers$5,440,477$396,583$ 55,281 $5,892,341 $— $5,892,341——

102,875

102,875

Total

5,440,477

396,583

158,156

5,995,216(102,875)(102,875) 5,892,341—

Segment proﬁt

1,093,033

42,12818,0691,153,230(208,368)

944,862

Segment assets

2,849,663

223,518

18,9393,092,120

3,948,775

7,040,895

Depreciation and amortization

78,026

3,763

399

82,18888,712

170,900

Amortization of goodwill

8,608

—

—

8,608

—

8,608

Loss on impairment

86,182——

86,182

142

86,324

Capital expenditures, including intangible assets

75,4352,529

116

78,08052,822130,902

Notes: 1. “Other” includes all other operating segments which are not included in the reportable segments, including PV Production Equipment business, group-wide
logistic services, facility maintenance and insurance.
2. (1) For the year-ended March 31, 2015, as described in “”Change in reportable segment””, sales to external customers of ¥3,618 million, segment loss of¥8,789 million, segment assets of ¥1,731 million and depreciation and amortization of ¥6 million reported as “”PV production equipment”” were included
in “”Other””.
(2) “Eliminations and Corporate” segment loss totaling ¥23,479 million ($208,368 thousand) and ¥40,232 million for the years ended March 31, 2016 and2015, respectively, includes corporate expenses not allocated to any reportable segments. The corporate expenses consist of research and development
costs of ¥13,583 million ($120,545 thousand) and ¥17,109 for the years ended March 31, 2016 and 2015, respectively, pertaining to fundamental researchand element research, not allocated to any of the reportable segments. In addition, for the year ended March 31, 2015, expenses related to businesscombination of ¥8,530 million is included.
(3) “Eliminations and Corporate” segment assets totaling ¥444,948 million ($3,948,775 thousand) and ¥543,198 million as of March 31, 2016 and 2015,
respectively, consist mainly of cash and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
(4) “Eliminations and Corporate” loss on impairment of ¥16 million ($142 thousand) and ¥1,609 million for the years ended March 31, 2016 and 2015, respectively, are attributable to corporate assets not allocated to any of the reportable segments.
(5) “Eliminations and Corporate” capital expenditures totaling ¥5,952 ($52,822 thousand) and ¥5,530 million for the years ended March 31, 2016 and 2015,
respectively, consist mainly of capital expenditures for buildings, machinery and equipment not allocated to any of the reportable segments.

2016:

Property, plant and equipment

Japan

U.S.A.

Other

Total

¥75,580¥9,724¥11,013¥96,317Japan

U.S.A.

Other

Total

¥78,492¥15,496¥12,908¥106,896

Millions of yen

2015:

Property, plant and equipment

Thousands of U.S. dollars

2016:

Property, plant and equipment

Japan

U.S.A.

Other

Total

$670,749$86,298$97,737$854,784(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:

Millions of yen

Related reportable segment

Name of customer

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

Intel Corporation

Semiconductor production equipment

Taiwan Semiconductor
Manufacturing Company Ltd.

Semiconductor production equipment

2016

2016

¥100,672$893,433

83,795

743,655

71,938638,427

Millions of yen

Related reportable segment

Name of customer

Intel Corporation

Semiconductor production equipment

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

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

Thousands of
U.S. dollars

2015¥123,154
97,943

PAGE

TOKYO ELECTRON ANNUAL REPORT 201633

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 970

¥—

¥ 970

Goodwill

4,095

—

4,095

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill¥1,150¥—¥1,150Goodwill

9,067

—

9,067

2015:

Thousands of U.S. dollars
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill$ 8,608$—$ 8,608

Goodwill

36,342—

36,342

2016:

Consolidated Statements of Income

21. Subsequent events
Regarding the Kumamoto earthquakes in April 2016, Tokyo Electron Kyushu Limited, one of our main plants, suffered damage toits buildings and production facilities. Tokyo Electron is taking necessary steps to return the plant operation to its normal state.
In the ﬁscal year ending March 31, 2017, Tokyo Electron expects to record restoration cost, inventory disposal cost andother losses related to the Kumamoto earthquakes, and currently estimates the total amount of loss to be approximately¥10,000 million ($88,747 thousand).

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the years ended March 31, 2016 and 2015, and unamortized balances as of March 31, 2016 and 2015 are as follows:

2016:

Sustainability

Independent Auditor’s Report

Corporate DataPAGETOKYO ELECTRON ANNUAL REPORT 201634

CONTENTS

To Our Stakeholders

Business Overview

Medium-term Management Plan
Interview with the CEO

Review of Operations
and Business Outlook

Sustainability

Financial Section

Corporate Data

Consolidated Subsidiaries / Investor Information

Consolidated Subsidiaries (As of March 31, 2016)

Investor Information (As of March 31, 2016)

JAPAN

Corporate Name and Head Office:Common Stock Listed on:

For Further Information, Contact:• Tokyo Electron Yamanashi Limited

The Tokyo Stock Exchange 1st Section(Stock code: 8035)• Tokyo Electron Tohoku Limited

Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan• Tokyo Electron Miyagi Limited

Established:• Tokyo Electron FE Limited

November 11, 1963

Investor Relations
Tokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, Japan
Tel: +81-3-5561-7000• Tokyo Electron BP Limited

Annual General Meeting of
Shareholders:• Tokyo Electron Kyushu Limited• Tokyo Electron Agency Limited

U.S.
• Tokyo Electron U.S. Holdings, Inc.
• Tokyo Electron America, Inc.
• TEL Technology Center, America, LLC• TEL Venture Capital, Inc.

Independent Auditors:
KPMG AZSA LLC

Administrator of Shareholders’Register:June

Common Stock:
Stock trading unit
Authorized
Issued*Number of shareholders

100 shares
300,000,000 shares
165,210,911 shares
24,664* Due to the cancellation of treasury stock, the number of shares
has decreased 15,400,000 from March 31, 2015.

URL:

Sumitomo Mitsui Trust Bank, Limited
4-1 Marunouchi 1-chome, Chiyoda-ku,
Tokyo Japan
Direct mail and inquiries to:
Sumitomo Mitsui Trust Bank, Limited
8-4 Izumi 2-chome, Suginami-ku,
Tokyo 168-0063, Japan
Tel (toll free): 0120-782-031 (available
only in Japan)

http://www.tel.com/• TEL Epion Inc.
• TEL NEXX, Inc.
• TEL FSI, Inc.

EUROPE• Tokyo Electron Europe Limited• Tokyo Electron Israel Limited• TEL Magnetic Solutions Limited

ASIA• Tokyo Electron Korea Limited• Tokyo Electron Taiwan Limited• Tokyo Electron (Shanghai) Limited• Tokyo Electron (Kunshan) Limited

Principal Shareholders:Number ofshares held
(thousands)

Votingshare ratio(%)

The Master Trust Bank of Japan Limited (trust account)
Japan Trustee Services Bank Limited (trust account)
Tokyo Broadcasting System Holdings, Inc.
State Street Bank and Trust Company
Trust & Custody Services Bank, Ltd.
(securities investment trust account)
Japan Trustee Services Bank Limited (trust account 4)
BNP Paribas Securities (Japan) Limited
State Street Bank and Trust Company 505225
State Street Bank West Client Treaty 505234
Goldman Sachs Japan Co. Ltd.

24,15817,385
7,727
4,346

14.72
10.59
4.71
2.64

3,583

2.18

3,282
2,645
2,634
2,450
2,329

2.00
1.61
1.60
1.49
1.42

Notes: 1. Shares of less than one thousand have been rounded down in the “Number of shares held.”
2. Voting share ratio is calculated excluding treasury stock (1,176,800 shares). Figures are truncatedafter the second decimal place.

• Tokyo Electron Singapore Pte. Limited

Distribution of Ownership among
Shareholders:
Treasury stock
0.71%

Japanese ﬁnancial institutions
and securities companies
48.61%

Other Japanese
corporations
5.46%

Foreign institutions
and others
39.07%

Japanese individuals
and others
6.15%

Stock Price and Trading Volume
37 consolidated subsidiaries in total, including the above 22 companies(Thousands of shares)(Yen)
10,0008,000

Stock price
6,000

4,000

2,000

0

100,000

Trading volume

50,0000

CY2011CY2012

CY2013

CY2014

CY2015

CY2016